Brokerage regulator NASD on Tuesday warned investors against reacting to stock tips sent in unsolicited mobile phone text messages, as spam schemes aimed at hyping share prices move beyond e-mail and onto cellphones.
The so-called "pump and dump" schemes involve spam messages with false recommendations of a company's stock that lead the share price to rise. Fraudsters can then sell their shares, leaving investors with worthless stock, the regulator said.
There have been relatively few cases of illegal spamming to U.S. cellphones and investor-focused spam schemes have been more common in e-mail to date.
But the number of texts urging recipients to invest immediately in a particular stock has recently increased to the point that there were enough for NASD to take notice, said John Gannon, its vice president of investor education.
"We determined there were sufficient messages coming in that it needed to be brought to investors' attention," said Gannon, who did not reveal the quantity of spam messages or say which stocks had been involved.
Gannon said these schemes do not generally involve brokers, but NASD would refer any fraudulent text messaging cases it identified to the U.S. Securities and Exchange Commission.
Copyright 2005 Reuters Limited.
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