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Hot Stock Tips Are Not

Aug 17, 2007
It's safe to say that anything that seems to be too good to be true probably isn't, but that doesn't stop scam artists from trying out their ploys on unsuspecting cell phone users. Many more people are finding unsolicited text messages on their phones, offering stock tips that will make them rich, but are these messages really designed to help the phone user out?

While email messaging can be filtered with junk mail filters, text messaging isn't able to do so. Scam artists are finding this mode of communication most effective in getting their scam to someone who might think that it's well-intentioned. Because the cell phone user believes that their number can only be used by those that they have sanctioned, they initially believe that the information is coming from a truthful source.

The scam is known as the 'pump and dump' whereby the scam artist gives the victim misleading information about a stock (this is the pump part). When enough people have taken this information and used it, the demand for the stock then goes up and thus so does the price. The scam artists will then sell the shares that they purchased in this same company, lessening the price and leaving the victims with worthless stocks.

A stock tip scam is easily identified when a person takes the time to use their common sense. If a person should receive a tip about a stock that will rise in price and value significantly, that may be an indication of a scam. The text message may also include a low priced stock (often fifty cents or less) that can be more easily targeted. These identifiers along with a pressure filled message and approach are almost definite signs of a scam on stocks. 

It's always smart not to take the advice of anyone that you have not requested information from. Unsolicited advice is something that can be misleading in an attempt to fraud the recipient of the message.
 
While it might seem simple enough to ignore the message, a person can also report the source in order to possibly stop the text messages to everyone else. These messages can be forwarded to the NASD via email. Other possible ways to block the transmission of such messages is via the government's Do Not Call list. More than one number can be registered so long as the person has a working email address.

Some text messages may include options to opt out of further messages, so a person can also complete those forms to be left out of the next round of stock tips. Other people find that avoiding chances to opt into third party offers on websites that they have visited is a great way to cut back on the unsolicited messages. Leaving a false phone number is another way to avoid receiving these kinds of annoyances.

There are laws that are in place to prohibit this kind of scam, but vigilance is the best defense as is using common sense.
About the Author
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
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