http://www.bergen.com/biz/fraud2489903247.htm Finding cyber criminals is a big job Wednesday, March 24, 1999 By MARCY GORDON (AP) WASHINGTON -- To fight Internet investment scams, state regulators are going undercover on line and federal authorities have a "Cyberforce" that does electronic surveillance. Both sides, however, face a daunting task in combating growing instances of Internet fraud with limited resources, top officials said Tuesday at a hearing of the Senate Governmental Affairs subcommittee on investigations. "We're going to continue to be vigilant," promised Richard Walker, the Securities and Exchange Commission enforcement director. He acknowledged, though, that with 850 attorneys and other enforcement employees nationwide to pursue all types of financial fraud, "We are certainly challenged, if not strained." The mushrooming use of the Internet by financial con artists has forced the SEC to take resources away from other fraud areas, Walker said, including conventional stock manipulations and insider trading. In addition, the SEC director said the commission is examining the advertisements of electronic day-trading firms to see if they make unrealistic promises to investors. The firms sell training courses and special software programs to ordinary investors who want to try the risky, lightning-speed practice of day trading, exploiting small price movements in stocks to make a profit. The agency last July set up a Cyberforce of 125 people who pore through the Internet on the lookout for fraud. Because the Internet is everywhere, unscrupulous stock promoters anywhere in the world can cloak themselves in anonymity and entice thousands of investors "with the click of a mouse," noted Sen. Susan Collins, R-Maine, chairwoman of the investigative panel. Collins said she would consider drafting legislation designed to help securities regulators in fighting on-line fraud. Stocks now can be promoted fraudulently in Internet junk mail, on-line newsletters, electronic "chat rooms" and Web sites. Promoters don't have to give potential investors the hard sell over the telephone in unsolicited calls. The rapid growth in on-line securities fraud "could ultimately place a significant burden on the regulators' limited investigative staff resources and thereby limit the agencies' capacity to respond effectively," congressional investigators concluded in a new report released by the subcommittee. Compounding the problem, the SEC has lost many of its enforcement attorneys in recent years to the more lucrative private sector. State securities regulators also are feeling the pinch. "There will never be enough regulators to keep the on-line world free from fraud and abuse," testified Peter Hildreth, president of the North American Securities Administrators Association, which represents the state authorities. State regulators, unlike their federal counterparts, have the authority to go undercover to detect fraud on the Internet. They can establish e-mail addresses to go "shopping" for fraudulent stock solicitations in pursuing enforcement cases. SEC attorneys and aides are required by federal privacy laws to identify themselves on the Internet. That's a "limitation," Walker said. He added, however, that a great deal of fraudulent activity had been discovered through electronic surveillance as opposed to participation. -o- Subscribe: mail majordomoat_private with "subscribe isn". Today's ISN Sponsor: Hacker News Network [www.hackernews.com]
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