With the ever growing number of Ohioans having access to the Internet, Director of Commerce Donna Owens is warning prospective investors to be keenly aware of the potential for fraud in cyberspace.

"While the Internet can be a useful tool for raising investment capital, it can also conceal con-artists who are working overtime to lure their next victims," Director Owens said.

To help protect against the possibility of cyberfraud, the Department of Commerce's Division of Securities has initiated the Internet Monitoring Program to ensure that securities offerings available to Ohio residents on the Internet comply with Ohio securities laws.

According to Commissioner of Securities Thomas E. Geyer, the Division searches the Internet for offerings available to Ohio residents. Upon finding such an offering, the Division checks to see whether a registration or exemptive filing has been made. If no filing has been made, the Division sends a notice letter asking the offeror how they plan to comply with Ohio securities laws. When the offeror responds that it plans to comply, it will be directed to the Division's registration section to discuss applicable registration or exemptive provisions. When the offeror responds that it does not plan to sell in Ohio, the Division will require that a disclaimer be placed on the offering to indicate that it is not available to Ohio residents. If an offeror fails to respond or comply with Ohio's securities laws, a case will be referred to the division's enforcement section.

"No monitoring effort will ever be able to check out every investment scheme or claim made on the Internet," Commissioner Geyer said. "Therefore, it is vitally important that investors in Ohio arm themselves with self-defense tactics to protect against cyberfraud."

Several self-defense tactics are provided below:

• First verify that an investment opportunity is registered and the person promoting it is licensed with the Ohio Department of Commerce's Division of Securities. Call the Ohio Investor Protection Hotline at 1-800-788-1194 to check on a particular offering and the licensing and disciplinary history of the salesperson.

• Don’t expect to get rich quick in cyberspace. Keep your excitement and expectation about the promise of easy money in perspective. Failing to exercise caution and a healthy skepticism can be a serious misstep. Remember, if it sounds too good to be true, it most probably is.

• Don’t assume that your online computer service polices its investment bulletin boards.

• Don’t buy thinly-traded, little-known stocks strictly on the basis of online hype. These are the stocks that are most susceptible to manipulation. Unlike blue chips, low-volume stocks can be moved through relatively small strategic trades. Always take the time to do your own research using reputable print and database resources. Online hype usually involves previously unknown securities, often for companies involved in mining or high technology. Don't be fooled by claims of "inside information," including impending news releases and pending contract announcements.

• Don’t act on the advice of a person who hides his or her identity. Many computer bulletin board services allow people to use aliases and nicknames. As a result, you may end up dealing with an undisclosed broker, investor or company insider who has an interest in driving up the price of a stock through false information or baseless speculation that is difficult or impossible to disprove.

• Don’t assume that just because someone says that they have checked something out that they have done so. Online stock hypesters can make all sorts of claims about visiting companies, inspecting mining operations and having personal conversations with company officials. The identity of the individual and the validity of the claim can be difficult to verify.

• Don’t forget to always be on the look-out for conflicts of interest. A growing number of those who analyze stocks online are receiving cash or stocks in exchange for endorsement of the companies in question. Some of these individuals prominently disclose this fact, while others do not.

• Don’t post your name, address or phone number online. This information will become available to millions of people worldwide. Giving out personal information opens the door to possible harassment. Your name could be placed on a "suckers list" used by con artists for e-mail, regular mail, or boiler-room telemarketing purposes. Protect your privacy online!

“The most important thing for investors to remember is that if an offering sounds too good to be true, it probably is,” Director Owens said. “And if you have been victimized or think that you have spotted a scam, let us know by calling the Investor Protection Hotline at 1-800-788-1194.”

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