Web site raises question of conflict
CHARLES WILSON is a Massachusetts father of three who considers himself a savvy investor. He’s made several hundred online trades in recent years. But earlier this month, he says, he got burned Wilson began visiting a Web site called fast-trades.com. The site recommended a new stock each week – usually one trading at a very low price. Fast-trades.com hyped the upcoming announcement of its picks all week. Then, as soon as they released the name of the stock, the price took off. The spike was usually short-lived, but Wilson decided to give it a try.
“I thought if I come in at two bucks or even four,” he said, “if you double your money and get out quick, it looks like you could do that.”
One stock was American Education Corp. (Symbol: AEDU) selling for about $2 a share. Wilson says he jumped in to buy 2,000 shares. But because trades on the Internet are not instantaneous, as he waited for a confirmation of the market order from his on-line broker, he says, the stock price took off.
“A couple of minutes go by and I’m still getting real time quotes,” he said.” And I’m seeing the stock in the sevens. And I get an execution at 10. Which means I spent $20,000.”
Wilson had expected to spend only $4,000.
“I figured right away, sell it right back,” he said.
But it wasn’t that easy. By the time the sell order was executed, the price had dropped to $5 a share. His total loss: $10,000.
That costly mistake got Wilson to wondering: who was making these picks? On what basis? And were they making money at his expense?