The Ontario Securities Commission has shut down a World Wide Web site because its author was offering unauthorized investment advice.
The decision, the OSC's first Internet-related action, casts a pall over many other investment Web sites, typically run by individuals who freely offer their investment ideas.
"We looked at this example and will likely look at others," said OSC counsel Melanie Sopinka. "This was just the first one we had the opportunity to pursue."
Ms. Sopinka said the Federal Bureau of Investments site, run by Toronto-based investor Nazir Bayat, was shut down because it contained detailed advice about stocks, including when to buy and sell them.
Mr. Bayat ran the site free of charge. In an interview, he said he is working to become a registered investment adviser and is considering setting up a different sort of Web site that will not run afoul of regulations.
The site was brought to the OSC's attention by a commission employee whose job includes monitoring Internet chat groups and Web sites to ensure promotion and advice do not contravene the Ontario Securities Act, Ms. Sopinka said.
Under the act, no one can offer advice on buying or selling securities without being registered with the OSC. Registered advisers must work for a sponsoring firm, typically a brokerage, and must pass examination requirements.
Writers working for newsletters and other business publications typically are exempted if they meet a set of criteria outlined in the act, including a requirement that the publication is distributed to paid subscribers.
Because Internet-based publications are not circulated to paid subscribers, many would not typically qualify under the exemptions.
Ms. Sopinka said she could not offer specific advice to Internet publishers who are worried that they, too, may be contravening the act. She suggested they consult with a lawyer about the content of their Web sites.
But she said the Federal Bureau of Investments site drew the OSC's attention because its advice was very detailed.
"In this particular case they were giving very specific advice: Buy shares of this stock now, sell them next week," she said.
The OSC chose not to lay charges because it believed the public interest would be adequately served by simply having the site halt publication, she added.
In an interview yesterday, Mr. Bayat said he had no idea his Web site would contravene the securities act. "I was really ignorant," he said.
And he said he was planning to shut it down anyway because it was getting "out of control." Mr. Bayat said he was spending too much time working on the site, for which he earned no money.
The site, launched last August, was initially restricted to a small group of friends and relatives, Mr. Bayat said. But as its stock picks hit the money, he said, word got out and invreasing numbers of subscribers were joining up. Mr. Bayat said the group tried to limit subscribers who were able to log on to the site, but was unsuccessful. Other investment Web locations provided links to Mr. Bayat's site, and his site had its own discussion forum on the popular Silicon Investor chat group.
As of yesterday, the Federal Bureau of Investments site had been removed from the Internet.
The site contained stock quote updates, a daily summary of the author's stock plays and picks, and daily market reports for major exchanges. Investors were encouraged to notify the service about their investments and to send updates whenever trades were conducted.
The Federal Bureau of Investments mission statement said its goal was to "make every speculator insanely rich for them to retire in as short a time as possible." The statement claimed the site was growing wildly out of control as a result of its "enormous popularity" because of its track record for choosing "winners after winners on the speculative stock markets with perfect timing."
The site bragged that its option picks have provided subscribers "with a minimum return of 200 per cent and as high as 600 per cent!" and said FBI daily reports "have been known to litter exchange floors, brokers' desksand even on transit buses."
In his mission statement, Mr. Bayat also said no one is obliged to buy his picks. "Our record has spoken for itself. It's your call."
At the request of the OSC, Mr. Bayat yesterday posted a statement on investment chat groups, including the popular Silicon Investor chat site, explaining why he had disbanded his Web site.
He said the OSC informed him that providing advice without registration constitutes an offence under the securities act and is subject to a fine of up to $1-million, imprisonment up to two years, or both.
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