Speech by SEC Staff:
Remarks at "Operation Spamalot" Press Conference
Linda Chatman Thomsen
Director, Division of Enforcement
U.S. Securities and Exchange Commission
March 8, 2007
Good morning. I am sure you are all familiar with the phrase "boiler room," with its images of shady brokers cold calling potential investors to trick them into investing in worthless securities. Today the internet has created electronic boiler rooms, which solicit not by phone but by emails simultaneously touting stocks to millions of people. The names of many of the thirty-five companies whose stock is being suspended today might be familiar to those of you who read your email carefully, because each has been the subject of a spam email campaign. Spam emails such as the ones described by Chairman Cox are the biggest source of fuel for these electronic boiler rooms.
Today's action will disrupt the operations of these boiler rooms and make it harder for the spammers and promoters to dump their stock on an unsuspecting public. Public companies and others touting stocks must tell the truth. They also must have a reasonable basis for the statements they make when they push stocks. Many email spammers distribute false news or old news or old and false news and misleading or stale financial information. It is the lack of accurate and adequate information regarding spammed companies that makes spam emails so dangerous to investors.
Investors can also help us and themselves in this effort by following a simple rule: Never buy stock based on an email from someone you don't know. We urge investors to do their homework before investing in any company. To this end, investors should be aware that finding accurate information about the companies in today's action can be challenging because:
- They are not required to file reports with the Commission setting forth their financial condition and information concerning their operations.
- Their securities trade in the over the counter (OTC) market, rather than on an exchange with listing requirements, which means that the stock of these companies can trade without disclosure of information about the companies that would be required in other markets.
- No broker has had to vouch for these companies by certifying that it has conducted its own due diligence regarding the companies.
Finally, our work here is not done. We are committed to tracking down the people engaged in this conduct and holding them accountable.