Recs

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Stiff-Arm the Stock Spammers

Stock spammers have never had it so good.

That's the conclusion of a number of researchers, including Secure Computing (Nasdaq: SCUR  ) , a Motley Fool Rule Breakers pick that builds products that detect and swat digital pests before they get a chance to bite. As of Aug. 10, stock spam accounted for 10% of all PDF spam, up from just 2% the week prior.

Pink Sheet punks
You know what stock spam is. It's this. And this. Pitches for Pink Sheet wannabes. You're getting the email about this "once in a lifetime opportunity" because some crooks in southern Freedonia hold shares and they're waiting for the scam ... I mean, pitch ... to boost the shares from $0.05 to $0.10. That's when they cash out, and leave you broke.

Recently, these "pump-and-dump" schemes have become more advanced thanks to technology. Spammers are now disguising their pitches as stock reports published as PDF files, hoping to avoid the suspicion typically reserved for miracle drugs and other, um, performance-enhancers.

The strategy seems to be working. "In 2005, less than 1% of spam was pump-and-dump. Last year, it was 25%," said Ron O'Brien, a senior security analyst at antivirus software maker Sophos, in a recent interview with trade magazine Computerworld.

Beat the crooks by not playing their game
Here are three ways to stop spammers from grabbing hold of your portfolio:

  • Ignore Pink Sheet stocks. Stocks that are not traded on markets regulated by the SEC have looser disclosure requirements than, for instance, the SEC-regulated Nasdaq (Nasdaq: NDAQ  ) and NYSE Euronext (NYSE: NYX  ) . That's why it's easy for a Pink Sheeter to get away with reporting very little financial data for years at a time, making them fertile ground for scam artists. (You can tell whether a company trades on the pink sheets because the stock symbol will end in ".PK")
  • Get an aggressive spam filter. Use filters to kill barely-legible pitches ("this one ready to rockit!")  before they reach your inbox, as Secure and its peers advise. It's the very best way to keep clear of scammers.
  • Notify the company and, if necessary, the cops. But let's say you can't help yourself. Fine. Don't buy a share of the stock till you've checked out the company. Write to management. Ask why you're being spammed. Ask for a full set of financial statements from the past three years. Warn them that if the spamming doesn't stop, you'll contact the authorities. And if they don't take heed, make good on your threat. (Here's the email address.)

Follow the money
Investing is a dangerous enough game without stock spammers. Just ask anyone who's invested in Akamai Technologies over the past month.   

But stock spammers make it worse, like the overweight drunk guy who ruins your party by puking on the dance floor. All he does is leave a mess for you to clean up. Yet this guy is a saint compared to your average stock spammer. His mess can be cleaned up in 15 minutes using a mop and a bucket of water. A spammer can leave your portfolio in tatters for years. Don't let him.

For more money ideas, get 30 days of free access to Motley Fool Green Light right now. There's no obligation to subscribe.

Akamai, NYSE Euronext, and Secure Computing are Rule Breakers recommendations.

Fool contributor Tim Beyers writes weekly about personal finance and investing basics. Have a Foolish money tip? Tell him. Tim owned shares of Akamai and Secure Computing at the time of publication. Find his portfolio here and his latest blog commentary here. The Motley Fool's disclosure policy knows a nice, hot resort down south that's just perfect for stock spammers.


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Tim Beyers
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Tim Beyers first began writing for the Fool in 2003. Today, he's an analyst for Motley Fool Rule Breakers and Motley Fool Supernova. At Fool.com, he covers disruptive ideas in technology and entertainment, though you'll most often find him writing and talking about the business of comics. Find him online at timbeyers.me or send email to tbeyers@fool.com. For more insights, follow Tim on Google+ and Twitter.

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