With the advent of the Internet, there's a new type of investor in the markets: the info-dupe. From high-stakes day traders to retirees maintaining their savings online, the Internet has given rise to legions of new investors who are bringing the gullibility threshold to new lows. In a volatile market with unprecedented public involvement in equities, the SEC has uncovered a variety of creative scams that individuals and companies have tried to foist on amateur traders. But the most potent of these schemes have often proven the hardest to identify. One of the least recognized methods of stock manipulation is the press release. Now a staple source of investing information particularly for lesser-known stocks, companies are issuing press releases in record numbers, and the rising tide of spin is opening new dimensions to the abuse of investor trust. Because of the increasing volume of trade they command and the limit of their information resources, online investors are subject to some of the most creative tactics of PR manipulation. No matter how skeptical these investors may be of company-generated news, press releases increasingly have the power to move the investing masses. ÊProof of this abuse is becoming increasingly evident.The influence of press releases is becoming more complex. As their name implies, press releases have been traditionally directed to the press. Reporters and editors still choose which deserve attention, and compile analytical reports based on their supposedly informed perspective of the market. However, thanks to online trading, investors now have direct access to company news without an editorial filter. While this is both a boon to transparency and a new standard of accountability for the press, the Internet also gives company PR agents a direct line to large numbers of their investing audience. The effect is of turbocharging trifling and often untrustworthy news with headline-style impact. In particular, the hot area of IPOs is proving to be equally hot for PR managers. Because news activity is increasingly perceived as value in a market increasingly driven by spin, companies are bombarding their investors with press releases.ÊThis is particularly true in the hype-heavy sector of technology IPOs. In the case of 1999's top ten IPOs, the number of press releases issued by all of the companies increased an average of 290 percent from the past year. During the IPO year, full 50 percent of press releases prior to the IPO came out within two months before the date. And the hype paid off: the average increase in the stock price on the first day rocketed 954 percent. These numbers are staggering, and their implication about the power of PR is especially ominous. A Securities Industry Association survey, reported in the Industry Standard on November 4, claims that one-fifth of US investors now use the Internet to trade stocks. Along with the report, SIA president Marc Lackritz revealed that online trades now account for 37 percent of all retail, or small investor trades in the first half of the year. Figures such as these indicate that the investment landscape is changing radically. But not everybody's boat is floating.In the past two years, the number of complaints the SEC receives daily by e-mail has exploded by 2,000 percent. Yet in their efforts with state and federal enforcement agencies, the SEC has brought fewer than 70 securities fraud cases since it started monitoring the Internet in 1995 -- and among those it made only two criminal convictions. There is no hiding the fact that the SEC is completely overwhelmed. In a May announcement, the SEC went as far as to advise consumers to regard every investment opportunity on the Internet as a scam until due diligence can prove otherwise. Clearly, the scope of Internet fraud is growing far beyond the potential of a few scam artists. We already see technology companies inflating their valuations by selling "vaporware" far into the future. Now that the Internet can deliver these long promises to its 150 million users directly via press releases, the dimensions of publicity fraud are more than the typical shell game.However, many legal professionals and government officials contend that PR fraud doesn't exist. They claim that the abuse of publicity is only an element of the wider category of securities fraud. While it's true that the recipe for fraud usually involves the same simple ingredients, the ease of publicity abuse is becoming the justification for securities fraud and therefore deserves its own category of investigation.The Internet is a revolution in communication, and its impact on investing strikes at the heart of market activity -- information. As investors turn to the Internet for free and detailed investing information including company press releases, the potential for publicity fraud takes on vast new proportions. Now that companies are able to release their own news directly to investors without first being edited by the press, the opportunities for companies to manipulate investors are just beginning to unfold.In an October speech to the Economic Club of New York, SEC Chairman Levitt admitted this much in response to the Internet naysayers. But his warning was stymied by the inherent contradictions between freedom of speech and market regulations. "Quality information is the lifeblood of strong, vibrant markets," Levitt said. "Without it, investor confidence erodes. Liquidity dries up. Fair and efficient markets simply cease to exist. As the quantity of information increases exponentially through the Internet and other technologies, the quality of that information must be our signal priority." Let the information flow, but let's be especially diligent about its source.