Warning investors to be wary of online investment tips, the Securities and Exchange Commission said Wednesday that it has filed a federal lawsuit accusing a San Clemente man of fraudulently touting over-the-counter stocks on the Internet.
The suit, filed Tuesday in Los Angeles, said Mark Malatesta used investor chat rooms and his own Financial Services Web site to promote stocks without disclosing that he was given thousands of shares and stood to receive thousands more if the stock prices rose.
For the Record
Los Angeles Times Wednesday May 10, 2000 Orange County Edition Business Part C Page 5 Financial Desk 1 inches; 32 words Type of Material: Correction
Web fraud suit-- A story Thursday used an incorrect company name provided by the Securities and Exchange Commission. The firm sued by the SEC over alleged stock fraud on the Internet is Financial Solutions Web in San Clemente.
Malatesta couldn't be reached for comment.
The SEC accuses Malatesta of numerous lies, including falsely stating that two of FSW's clients were the California State Teachers Retirement System and the California Public Employee Retirement System.
The suit contains two claims of securities fraud and one of accepting undisclosed compensation for stock promotion. It seeks civil fines and an order forbidding Malatesta from violating securities law in the future.
The civil fines could reach $50,000, said Harold F. Degenhardt, the SEC's district administrator in Fort Worth, where the agency's investigation was centered.
Malatesta's site contained a disclaimer saying he was "paid to promote" companies listed on it, but the SEC said he never discussed the nature or the amount of his compensation.
"One who makes an investment decision based solely on what they read on a Web site or in a chat room is a victim waiting to be victimized," Degenhardt said.