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Investing forums take off
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January 8, 1998: 6:47 p.m. ET
Online message boards offer advice, but watch what you read -- and write
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NEW YORK (CNNfn) - Barbara Andre started buying stock on the Internet after her broker lost $25,000 of her retirement savings through poor investments.
The 50-year-old Ohio housewife figured she could make smarter trades herself by reading electronic message threads on Silicon Investor, a website for individual investors.
"I can type in the name of a stock and find threads that tell me everything I need to know about a company," Andre said. "It's another tool to help in my stock selections."
Online trading message forums are growing more popular as investors switch from traditional brokerages to electronic services. Discussion groups on Silicon Investor and Motley Fool -- and in investing forums on services like America Online and CompuServe -- attract millions of people.
Investors can post questions to other participants to find out if they should buy a certain tech stock or get tips on playing options. They also share opinions on whether the market is turning bearish.
But threads are raising questions the U.S. court system and Congress are trying to answer: Do Internet discussions need more policing? How do websites prevent people from trying to manipulate stock prices through their comments for personal gain? And who is responsible if a company is libeled?
Recent legislation and court cases suggest that the authors of the messages -- rather than the websites -- will be held accountable, industry pros say.
"A lot of this will be played out in 1998," said Jill Frankel, a senior analyst with International Data Corp. in New York. "I would not be surprised if more court cases are filed."
The Communications Decency Act of 1996 allows websites to regulate comments without being held liable, said Lawrence Greenberg, general counsel at Motley Fool.
Before the law took effect, websites couldn't make any rules about the content without being held responsible for all of the comments, Greenberg said. Now, sites can establish guidelines without fear of liability. The new law was intended to crack down on indecent or criminal comments, he said.
"If you didn't have the freedom of the Communications Decency Act, it would be very difficult for providers of cyberspace forums to provide good discussion," Greenberg said. "The way the law seems to be developing is that individuals are going to be held responsible for their own expression."
In one closely-watched case, Zeran vs. America Online, an Ohio man sued AOL because a posted message -- advertising offensive T-shirts about the bombing of the Alfred P. Murrah Federal Building in Oklahoma City -- was falsely attributed to him.
Kenneth Zeran was swamped with hate mail and threatening phone calls -- even though he didn't write the message. An appeals court in 1997 ruled AOL wasn't responsible.
"The First Amendment is based on the idea that more discussion is better than less," Greenberg said.
In another recent case filed in September 1997, Presstek Inc. (PRST), a Hudson, N.H. firm, sued three men for allegedly writing libelous comments in discussion threads to profit from "short-selling" of the company's stock. In a short sale, an investor bets the price will fall. If the price falls below the betting price, the investor makes a profit.
Presstek claimed unfair business practices and defamation. The suit is pending. One of the defendants contacted by CNNfn declined comment. Efforts to reach the other two men for comment were unsuccessful.
One posted message accused Presstek of hiding Nazi gold, the lawsuit said. Another claimed that the company was the subject of a grand jury probe. Both were false.
Bob McDaniel, general counsel at Presstek, said the company fielded many inquiries from worried investors as a result of the messages.
"I don't think Internet discussions should be regulated any more than a discussion in a restaurant or on an elevator," McDaniel said. "It wasn't our intention to have a quieting effect on discussions as much as it was to clean up the discussions so they were fair."
Both Silicon Investor and Motley Fool have tightened their guidelines.
Silicon Investor, for example, prohibits vulgar words, harassing notes, personal attacks, and copyright infringement, said Jill McKinney, the site's webmaster.
Each Silicon Investor user has to register and give his e-mail address, McKinney said. The site staff isn't able to read the 8,500 new messages posted every day, but it encourages users to police the discussions and make complaints when they see a problem, she said.
"We're in constant touch with our Internet content attorneys in San Francisco," McKinney said. "There are case-by-case issues that we have to double-check. It's still being fine-tuned in the courts."
Investors should use common sense to protect themselves when they read threads, McKinney said. People shouldn't believe everything they read and should do their own research.
"The theory on which Silicon Investor was founded is that individual investors, when given the tools they need, can make decisions better than a broker can," McKinney said.
For Andre, the Ohio housewife, making her own decisions has paid off. She's recouped half of the losses caused by her broker.
"My broker bought stock in three companies that went bankrupt," Andre said. "Because I find postings on Silicon Investor, I save money. If I see a stock that looks interesting, I'll do my own research and then buy it. I think the Internet is growing up."
-- By staff writer Martine Costello
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