Stock Spams Are Often Stock Scams

While most people find spam an occasional annoyance, it's also becoming the main way to target individuals and take money from them. With convincing stock tips and market advice, these scams are luring investors into their games and making them feel as though they could make a lot of money for almost no effort. That's why every investor needs to know how to protect themselves.  The definition of spam is an unsolicited piece of information that is sent to the person's email box.

Most spam emails are sent to hundreds and thousands of recipients, hoping that one or more are convinced by the bogus offer and give their money to the scam artist. In terms of stock scams, these are emails that give the reader tips about stocks in an effort to create a high enough demand for the stock that the price goes up. During the process, the scam artist sells their own shares of the stock for a tremendous profit (also known as the pump and dump scam).  Many people already have filters installed on their email boxes that will weed out the junk emails and prevent them from being seen in many cases.

However, some spam can get through even the toughest filters by looking as though it were information that you might have requested.  Another scam that is the 'risk free' scams that might guarantee that the person will reap the benefits of the described information. While there may be some legitimacy in this kind of scam, the investor should realize that things are never guaranteed in the realm of stocks and other financial matters-thus probably a scam.  Inside information is illegal in the investment world, so any spam that might include wording such as that is only trying to create a demand in a particular stock so that they can reap the benefits of that false demand.

This is very similar to the pump and dump as the investor is being 'pumped' full of information that is useless. A more complicated spam that may be received deals with IPOs (initial public offerings). This is when a company approaches an investor with an opportunity to receive free stock credits (with an administrative fee) when the company completes the IPO. However, the scam is that the later transaction never takes place and the fees are kept.  Any spam that might be received offering riches and promises of great stock tips is something that an investor should be wary of.

In most cases, these are spam messages that the investor never requested, and thus the information is probably not in that investor's best interests.  If an investor should be scammed in any stock transaction, they should contact the SEC investor complaint center.

Joel Arberman is the Managing Member of Stock Aware, LLC. We publish a free investment research and analysis newsletter. Learn more at www.StockAware.com