Securities Trading on the Internet
The Internet is a great tool for everyone, including investors due to the response speed, and the amount of information that is exchanged. Transactions are executed very quickly, with the click of a button or a few keystrokes. However, the Internet is also another avenue for fraud. Investors must use caution and common sense when using the Internet for securities activities.
The fact that information appears on the Internet does not render additional credibility to the information. Be especially wary if the identity of the source is not identified.
Over the Internet, investors can purchase securities of a company directly from the company. Treat the online transaction as you would a regular investment, and make sure that the securities are registered or exempted under both federal and state law.
Alternatively, investors can trade securities through online brokers. Study and understand the terms, conditions and costs of these services, before you use them. Brokers must be licensed, and must be registered with the Securities Exchange Commission.
Finally, be very careful with information you gather from a "Chat Room." It is in these "chat rooms" that persons posing as credible sources send out information to "pump" the price of a stock. Once the price of this stock has increased, they "dump", or sell their stock at a great profit. These are called "pump and dump schemes."