This Is What a Penny Stock Spam Email Looks Like

Stocks rallied in the first quarter the most they had in 14 years: The Dow Jones Industrial Average was up 8%, and the S&P 500 was up 12%.

Yet the one market that appears to be even more frothy is in sending penny stock email spam. Midway through the first quarter, judging by our email inboxes, we knew stocks were going crazy:


Snapshot of Brian Richards' inbox, taken in early March 2012.

Snapshot of Brian Richards' inbox, taken in early March 2012.

Around the time the market was bottoming out in early 2009, Canada's CBC reported:

There's another business hurting because of the global economic downturn ... stock spamming. ... Stock spam made up just 0.6% of all email spam caught by content filters in the second half of 2008, down from 9.6% in the first half of the year, according to a Microsoft security report . ... "Stock-related spam all but disappeared from the content filters," the report found.

Microsoft's most recent report covers the first half of 2011, and it shows that stock spam was still stuck in a bear market: As a percentage of email spam, penny stock teasers represented just 1.3%. Based on anecdotal experience, we expect that figure to be far higher when Microsoft's first-half 2012 report is released next year.

Legal-seeming spam
Much stock-spam email is illegal because it violates Section 17(b) of the Securities Act of 1933, which bars people from promoting stocks for pay without disclosing their compensation.

Yet much of the new penny stock spam goes to great lengths to comply with the law -- or at least to seem legal. One recent stock-touting email measured a robust 1,204 words, 700 of which were devoted to an ostensible legal disclaimer.

We decided to decode that 700-word disclaimer to help translate the legalese. Note: All offset text is from an actual penny stock email received in mid-February 2012. The "Translations" are our own.

DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment advisor either with the U.S. Securities and Exchange Commission (the "SEC") or with any state securities regulatory authority.

Translation: We're either a couple of guys in a basement running a scam, or we're an upstart publishing company trying to help people make good decisions with their money.

We are neither licensed nor qualified to provide investment advice. The information contained in our report should be viewed as commercial advertisement and is not intended to be investment advice.

Translation: OK, fine -- we're a couple of guys in a basement, and we're not interested in helping you make good decisions. You know how, on TV, you can tell the difference between an episode of The Simpsons and an ad for antiperspirant? You can't really do that here.

The report is not provided to any particular individual with a view toward their individual circumstances. The information contained in our report is not an offer to buy or sell securities.

Translation: Just to be clear, we're not trying to sell you any securities. In fact, as you will see later, we may have sold ours already.

We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.

Translation: We use a loose definition for "individuals who wish to receive them," which includes individuals who do not wish to receive them but who check their spam folder.

Our newsletter have [sic] been prepared for informational purposes only and are not intended to be used as a complete source of information on any particular company. An individual should never invest in the securities of any of the companies profiled based solely on information contained in our report. Individuals should assume that all information contained in the report about profiled companies is not trustworthy unless verified by their own independent research.

Translation: Perhaps we should have done a better job of proofreading here, but any money spent on editing is money that would otherwise go straight to our pockets, and besides, nobody is ever going to read this far. In any event, you'd be a dodo bird to rely on us. Thank goodness for us that kind of dodo is not extinct. [Note from Brian and Lawrence: If someone tells you that you should "assume that all information contained in the report" that they've sent you "is not trustworthy," then you should probably believe them.]

Any individual who chooses to invest in any securities should do so with caution. Investing in securities is speculative and carries a high degree of risk; you may lose some or all of the money that is invested. Always research your own investments and consult with a registered investment advisor or licensed stock broker before investing.

Translation: If you pay attention to us (which we've really told you not to do), you will probably lose all your money.

All direct and third party compensation received has been disclosed within each individual profile in accordance with section 17(b) of the Securities Act of 1933. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled companies.

Translation: People are paying us to publish this publication; they may hold large amounts of stock, or they may be the company itself. We don't mind telling you that, because the law tells us we have to, and we're pretty confident that most people won't read this far. Can you blame us for publishing optimistic things about the stocks that our clients are trying to sell? Wouldn't you?

We can hold, buy, and sell securities in the companies profiled. When compensated in shares, all readers should be aware that is our policy to liquidate all shares immediately. We reserve the right to buy or sell the shares of any the companies mentioned in any materials we produce at any time. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled companies.

Translation: We reserve the right to pump and then dump. At least we're candid about that, except for the fact that this is buried in the 700-word disclaimer at the bottom of this email.

Information contained in our report will contain "forward looking statement" as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934.

Translation: We're now going to make this sound as official as possible by using as much lingo as we can think of. Also, please don't sue us.

Subscribers are cautioned not to place undue reliance upon these forward looking statements. These forward looking statements are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ materially from those anticipated.

Translation: As we've said before, don't rely upon us to be right. Heck, we could be wrong about the future, even if we did our own research and weren't paid to be optimistic.

Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company's most recent reports or registration statements filed with the SEC. You should consider these factors in evaluating the forward looking statements included in the report and not place undue reliance upon such statements.

Translation: Again, we're not a reliable source of information about any company. If you want real facts, go to a company's filings (but we know that many of you won't). [Note: If you're getting spam about a company, you probably don't need to check out its filings -- just stay away.]

We are committed to providing factual information on the companies that are profiled. However, we do not provide any assurance as to the accuracy or completeness of the information provided, including information regarding a profiled company's plans or ability to effect any planned or proposed actions.

Translation: We do our best to provide you with the best information that money can buy (or sell), so long as we don't have to do any actual research.

We have no first-hand knowledge of any profiled company's operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so. Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable.

Translation: It doesn't matter what the company is or does, and that's good, because we certainly don't know. All that matters is that you remember the ticker and place an order for it.

To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information).

Translation: Don't sue us. Please.

We encourage you to invest carefully and read investment information available at the websites of the SEC at and FINRA at

Translation: Look, we're good corporate citizens! Besides, we know that few, if any, of our target audience will follow those links -- or will have even read this far.

When you see a pump and dump
So what should you do when you receive email about a penny stock that includes a disclaimer like this (or, worse, one that doesn't include a disclaimer at all)? Hitting "delete" is a good idea. This study explains why, but look no further than the Fool's TMFStockSpam CAPS account, which tracks the performance of shorting stocks after they've been blasted out via pump-and-dump email campaigns. Out of 74,401 CAPS members, it's ranked 26th, with an accuracy of 90%.


At the time thisarticle was published Brian Richards, managing editor of, owns shares of Microsoft.Lawrence Greenberg, chief legal officer at The Motley Fool, also owns shares of Microsoft.The Motley Fool owns shares of Microsoft.Motley Fool newsletter serviceshave recommended buying shares of Microsoft.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Microsoft. We're telling you all of this because of The Motley Fool'sdisclosure policy.

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