June 12, 1996 10:30 AM PDT

SEC fears stock manipulation online

An explosion of stock tips and investment advice posted to the Internet is raising concern among government regulators who fear the spread of false information and the potential for market manipulation.

At the same time, however, authorities are wary of infringing on free speech rights by monitoring newsgroups and other online forums.

Several stocks have seen meteoric rises, or dramatic falls, in their valuation because of information posted to Internet newsgroups and online services, such as America Online's Motley Fool personal finance forum, according to Reuters news service.

But the Securities and Exchange Commission and other federal regulatory agencies are concerned that unscrupulous insiders or stock promoters could disseminate false or misleading information to manipulate securities prices.

While the New York Stock Exchange and NASDAQ's National Association of Securities Dealers have authority to monitor stock tips passed by registered brokers, there is nothing regulators can do about tips passed online, where users often remain anonymous behind their screen identities.

For now, regulators say investors should do their homework before investing in any stocks based on tips obtained online.

 

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