Scams

Have you ever gotten an email touting a penny stock? I get several a week and I always feel that the outfit sending me the emai has probably bought a bunch of stock and is now hyping it so they can sell at a profit after they have driven the price up.

Now we find it is probably common practice amoung the big banking firms as well. As I've said many times, learn to make your own decisions and never trust your broker. Trade by what you see in the charts.

Article from Slate/WSJ follows:
" In the spring of last year, two investment arms of J.P. Morgan Chase & Co. began accumulating shares in Rural Cellular Corp., a small Minnesota provider of mobile-phone service. The bank units, which hadn't previously owned any shares, reported a combined 2.4% stake at the end of June.
The timing turned out to be fortunate for J.P. Morgan. On July 30, Rural Cellular's stock jumped 34% after the company announced it was being acquired by Verizon Wireless. The two sides had been negotiating since at least early May. The investment bank that advised Verizon Wireless in the deal: J.P. Morgan.

Investment banks aren't allowed to trade on their inside information about potential mergers. But sometimes by chance, one arm of a bank will buy a stock without knowing that another arm is advising on a deal. That's what J.P. Morgan says happened with Rural Cellular. "These purchases were made on behalf of our clients and were totally appropriate," says a spokesman.

Regulators are now conducting a broad review of pre-deal trades by investment banks to determine if they were coincidences, or something else. It isn't clear what deals they're looking at.

Their interest was sparked by a new academic study that finds such trading happens much more often than would be expected by chance. The study, which examines statistical patterns, concludes that some banks likely are trading on their inside information about deals.

The Wall Street Journal, by reviewing stock-ownership and deal records, identified dozens of instances in which investment banks appeared to be buying shares in target companies around the same time their bankers were advising the acquirers. The transactions involved most of the major investment banks, including Citigroup Inc., Credit Suisse Group, Goldman Sachs Group Inc., Merrill Lynch & Co. and Morgan Stanley. The firms either declined to comment or said they found no problems with the trading. "

To see full article go to:
http://online.wsj.com/article/SB120027840975287629.html?mod=todays_us_page_one