Searching the Internet for hot stock tips? Be very skeptical of everything you read. Be aware that the analyst who claims she's discovered the next Starbucks may be a paid publicist for the stock she's endorsing. Touts-for-hire thrive in the shadow world of stock-tip web pages, where they can write whatever they want, and you can't look them square in the eye to assess their character.

It's tempting to listen to apparently objective financial analysis from a source that seems reputable, especially if she says all the right things and asks nothing in exchange for the hot tip she's giving you. All you have to do is click your mouse a few times to buy the stock, then you can sit back and await a big payday — which will probably never come. By the time you realize that you've been had, your investment dollars have already vanished — and so has the “financial professional” who gave you the tip and is now enjoying her big payday from the executives who cashed in on your investment naiveté. This happens so often that there are names for it, like “pump and dump” (where “analysts” talk up a lackluster stock that they own, then sell it off when the price hits a peak and leave you with a worthless security).

Did You Hear the One About … ?

The SEC takes investment fraud very seriously. On its website (www.sec.gov), you can find plenty of stories about their successful investigations. Check out the case of Matthew Bowin, for example. According to the SEC, Bowin raised $190,000 solely from online investors. He solicited Internet investments for his company (“Interactive Products and Services”), then turned around and spent the money on himself. The SEC got wind of the scam and had Bowin prosecuted. He was found guilty on fifty-four felony accounts, and sentenced to ten years in jail.

That's just one example, and there are many more. That's why you have to be especially vigilant when you're investing online, especially when someone comes to you looking for money. In addition, the SEC warns online investors about the growing threat of identity theft, particularly through the act of phishing. Phishing happens when a thief uses a copycat website to steal your personal information. For example, the thief creates a fake Bank of America website that looks very similar to the real one and entices you to log on with your account and password information. He then takes that information to access your real account — and steal all your money.

What You Can Do

You are not helpless here; you have the resources to fight back. Investors can help the SEC track and catch securities scam artists. If you've been duped or if you've visited a suspicious investment advice website, take the following steps to make sure Internet criminals are stopped right away: