Many on-line investment newsletters, websites, "spam" e-mails, discussion groups and chat rooms offer investment advice, some for free and others in return for a subscription fee. Are these sources of information legitimate?

In the past, you may have received investment advice from a registered investment adviser, from print media, or from friends and acquaintances. What all of these traditional sources have in common is that you know the source of the information; hopefully you also know why they are dispensing the advice, and their qualifications for doing so.

Before using on-line sources of information to make investment decisions ask yourself the following questions:

1. Do I know the person giving advice? Is he or she trying to hide their identity? Is there a credible source?
   Verifying information can be as simple as obtaining a telephone number or the name of firm and confirming the identity of the author. Be wary of anonymous authors, people using pseudonyms and/or people using a free e-mail address.
   
   
2. What qualifications does he or she have that makes the advice credible?
   Would you trust your barber or hairdresser to fix your car? Part of knowing who is offering the advice is knowing whether they are qualified to offer it. The OSC oversees proficiency standards for investment advisers in Ontario. Check with the OSC to determine if these individuals and/or companies are properly registered.
   
   
3. Can you be certain that the author of the material has no conflict of interest?
   Many of the mainstream media financial reporters have guidelines preventing them from profiting on the information they gather, but not everyone follows these guidelines. Scam artists sometimes purchase a large block of stock, and use chat rooms and Internet forums to anonymously "pump" up the price of the stock. As the market reacts to this false information and the share price rises, the scam artists "dumps" the stock at a profit. Eventually the share price returns to its normal level leaving those who bought on the hot tip holding the higher priced shares. This "pump and dump" scheme is just one example of conflicts of interest that can exist.
   
   Read carefully as to what the newsletter says about the payments it receives for providing information. Be wary of those that do not contain specific information, for example: "this newsletter may receive compensation from companies we write about"; "this newsletter or its officers, directors or staff may hold stock in some of the companies we write about"; or "we receive fees from the companies we write about in our newsletter".
   
   
4. Does the person offering the advice have a proven track record of accurate information?
   Monitor their advice over time and establish his or her record for accuracy. Don't be deceived by newsletters which list their past successful predictions but don't provide any means to verify that they actually made the predictions in advance.
   
   
5. Are they claiming they have inside information?
   Be wary of offers to share "inside information". Some of the terms that should set off alarm bells include: 'pending announcement,' 'the CEO told me in confidence' and/or 'future earnings.' Any person who offers advice in this form is breaking the law. It is an offence under Ontario securities laws for anyone to trade with the benefit of information that has not been released to the public.
   
   

As always, investment decisions should be made only after proper research using credible and diverse sources. Contact the Ontario Securities Commission toll free at 1-877-785-1555 for further information.