News Release

NASD Regulation President Mary L. Schapiro Announces Internet Education Program; Investors Warned to Beware of On-Line Hype

Washington, D.C.--Mary L. Schapiro, President of NASD Regulation, Inc., today announced an educational program to inform investors about the benefits and pitfalls of using the Internet and on-line services as investment tools.

"The Internet is one of the most important communications tools ever developed," Schapiro said. "But it's absolutely critical for investors to understand that information and messages posted anonymously on-line should be viewed with caution and a healthy dose of skepticism."

Schapiro announced the program at a news conference in Washington where she was joined by The Motley Fool, the first on-line investor forum to offer NASD Regulation help in educating the public. "The very thing that makes the on-line medium so fresh and effective, the ability for thousands of people to talk with each other at will, presents a problem as old as speech itself: beware the one who puts the 'con' in conversation," said David Gardner, editor of The Motley Fool.

Motley Fool has posted a warning message on their boards, and set-up an e-mail connection to NASD Regulation that investors can use to get help. CompuServe's Investor's Forum and Prodigy's Money Talk Bulletin Board have also posted warning messages, and other on-line forums will be contacted and asked to help.

NASD Regulation has also printed a brochure available to the public free of charge. The publication, ‌http://‌www‌.invest.carefully, will be distributed free over the Net, and to anyone who calls NASD Regulation at 800-289-9999.

NASD Regulation has posted the brochure on its own Web site which it officially launched today.

Schapiro said many member firms of the National Association of Securities Dealers, Inc. (NASD) will also be helping by including the brochure or a warning message in communications to their customers. The firms include: Merrill Lynch, Charles Schwab & Co., Inc., Alex. Brown & Sons Incorporated, Smith Barney Inc., Prudential Securities, Inc., Van Kasper & Co., Wayne Hummer Investments, LLC., Edgar M. Norris & Co., Inc., Dain Bosworth, Inc., Dean Witter Reynolds Inc., PaineWebber Inc., and Pershing, Division of Donaldson, Lufkin, Jenrette Securities Corporation. Schapiro praised all the firms for their commitment to educating investors about this issue. The American Association of Individual Investors has also posted the brochure on its web page.

All NASD member firms have also received a Notice to Members publication reminding them of their supervisory and regulatory responsibilities, as well as their obligation to customers, when dealing with stocks promoted through electronic media. NASD Regulation is seeking input from its members on their use of the Net and problems they perceive, with an eye toward shaping additional regulatory guidance.

Schapiro said the need for an educational program became clear several months ago, when an informal study of on-line messages promoting Comparator Systems Corp. and several other stocks on The Nasdaq Stock Market's SmallCap Market established a correlation with the price and volume movement of the company's stock.

"We want to raise awareness of the need for the buyer to beware when it comes to trading stocks based on message postings," Schapiro said. "Investors need to understand that while they might be reading honest conversations, they could just as easily be looking at the work of a corporate insider, stock promoter, or short seller using an alias to deceive the unsuspecting or to manipulate the market."

To demonstrate how difficult it is for investors to know who is providing information, Schapiro pointed to one example of a frequent on-line poster known simply as "IPO Man."

Schapiro vowed to pursue cases where fraud or illegal activity has occurred on-line, but noted there are limits to NASD Regulation's jurisdictional reach.

"Our most potent weapon is education," Schapiro said. "While on-line forums do a terrific job of self-policing, scam artists are often a step ahead, and as regulators, our best defense is an educated public," she said.