Latin American Capital Markets

84 GEORG WITTICH, ETHIOPIS TAFARA, AND ROBERT J. PETERSONself-regulatory requirements. In jurisdictions explicitly exempting IDSs from such regulation,IDSs frequently must still disclose to persons viewing or making a posting thatneither the IDS nor persons making postings are registered or licensed investmentadvisers. Regulators also frequently require warnings that persons viewing postingsshould consider consulting a licensed adviser before investing in a security discussedat the site and a statement encouraging investors to contact the securities regulatorif the person viewing postings suspects that any posting is inaccurate, based on insideinformation, or likely to mislead or deceive viewers.In addition, regulators may require IDS operators to do the following:• Monitor for misleading or deceptive postings or postings likely to be part ofa scheme to defraud investors or manipulate the market• Withdraw immediately the rights of access of a person making postings thatappear to be part of a scheme to defraud investors or manipulate the market• Notify the regulator within a reasonable time of any suspicious posting, complaintsabout suspicious postings, and the identity of persons making suchpostings• Confirm and maintain for a certain period of time the identity of personsmaking postings• Archive and maintain postings for a certain period of time.In those jurisdictions where securities-related IDSs do not fall under the definitionof investment advisers, some jurisdictions rely on Internet surveillance andenforcement actions to protect investors against the types of fraud and market manipulationthat sometimes occur on electronic bulletin boards and chat rooms. Theelements of such Internet surveillance and enforcement programs frequently includethe following (IOSCO 2001):• Teams of investigators who regularly surf the Internet and visit IDSs to identifyfraudulent or misleading postings• Automated search engines that review postings for fraudulent or misleadingIDSs and electronic complaint centers to which IDS users may forward concernsregarding suspicious postings• Prominent and successful enforcement actions focusing on securities fraud ormarket manipulation via IDSs• Dialogue with the IDS industry to assist law enforcement.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub