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FSA issues stock tips warning

The FSA has issued a warning to investors about the sources of thousand of stock tips that appear daily on internet bulletin boards.

The regulator has been quick to emphasise that the majority of such tips are likely to be genuine in nature.

But it has published an alert on its consumer website pages pointing out that unscrupulous individuals could post false information to take advantage of gullible punters.

The alert says: “There is potential for the unscrupulous to place false or misleading messages in order to make money for themselves”.

“Following such tips blindly can seriously damage your wealth. So the simple message is do not believe everything you read.”

Two kinds of scams specifically dealt with have been dubbed “pumping and dumping” and “trashing and cashing”.

The first involves people using bulletin boards to tout a company&#39s fortunes in the hope of persuading others to buy into the shares helping to raise the price. They then sell their stake in the venture earning a tidy profit in the process.

The second, which is exactly the opposite, involves the posting of false negative news about a company to convince other punters to sell off their shares.

When the stock price falls, the offender scoops them up at a bargain price, fully aware that when the rumours they started are proven false, the value of the stocks will correct themselves.

The warning is the latest of a FSA series aimed at helping the public understand the risks of investing over the internet.


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