The Internet and US Financial Markets
| Pages | 129-141 |
| Published date | 01 April 1998 |
| DOI | https://doi.org/10.1108/eb025872 |
| Date | 01 April 1998 |
| Author | G. Philip Rutledge |
| Subject Matter | Accounting & finance |
Journal of Financial Crime — Vol. 6 No. 2 — Analysis
The Internet and US Financial Markets
G.
Philip Rutledge
INTRODUCTION
Information intensive industries such as financial
services are being transformed by the Internet.
Specifically, it is the interactive, multimedia side of
the Internet, known as the World Wide Web
(Web) which is driving this transformation. With-
out the intense graphics, sound bites and other
capabilities provided by the Web, the Internet
would be a pretty dull place to visit.
It is precisely the growing accessibility of the
Web to individual consumers which is causing
many of the changes in the provision of financial
services.1 The Web has simultaneously opened and
democratised the access to tremendous amounts of
information. Unfortunately, the Web also has
afforded vast new opportunities for scam artists
and fraudsters to ply their nefarious trade. These
events have demanded that financial regulators re-
think theories of regulation which have long been
based on firm control of information within
specific geographic boundaries.
CHEAP, EFFICIENT AND CONVENIENT
COMMUNICATION
In the USA, many consumers connect to the Web
through a service provider, often paying a flat
monthly fee for unlimited access. An affordable
access price combined with the fact the Web never
closes appeals to many consumers. The Web
allows them to transact mundane business such as
paying bills, placing orders from an electronic cata-
logue or receiving e-mail, engage in research or
merely seek entertainment by 'surfing the Net' to
visit a favourite Web site, chat room or online
forum.
With respect to financial services, the Web is a
cheap and convenient method of communicating
with brokers, retrieving market information,
searching for investment opportunities and review-
ing personal stock portfolios. The Web is open 24
hours a day when stock markets and brokerage
firms are closed allowing individual investors to
review market and research data that heretofore
was unavailable to them because it was proprietary,
exclusive to rich clients or those willing to pay a
fee or simply unavailable during non-business
hours.
Without leaving their home or interrupting their
business day, ordinary investors can retrieve and
review information at
11:00
pm and e-mail instruc-
tions to brokers to be executed the next business
day. The rising number of personal computers and
the increasing number of individual investors par-
ticipating in a booming US stock market will
undoubtedly contribute to the continued attrac-
tiveness to financial intermediaries of providing
financial services to consumers via the Web.
THE DARKER SIDE
For all the glitz of high speed graphics and instan-
taneous communication, the Web, in certain
respects, remains very much a frontier. Explorers
beware! There are as many thieves, villains and
fraudsters lurking in cyberspace as can be found in
a typical American Western. The Web is not trans-
parent. One cannot see who is behind the Web
page or masterminding the posting of fictitious
information on various bulletin boards in an effort
to push up the price of
a
stock.
One does not know whether the person input-
ting the information on to the Web is sitting in a
house around the corner or in an office block
halfway around the world. Familiar trademarks,
logos and symbols can be migrated or changed
slightly to appear on new Web sites to lend
authenticity and inspire misplaced consumer con-
fidence. Legitimate-looking graphics, glowing rec-
ommendations and laudatory letters can be
fabricated and linked to Web sites creating a very
credible illusion.
Recently, a major US Internet service provider
announced that it had detected that fake e-mail
had been sent to a number of its subscribers in its
name explaining that the service provider was re-
checking its records and needed to re-confirm sub-
scribers' credit card numbers. Those subscribers
who responded with their credit card numbers
were actually sending them to a third party, not
the service provider.2
How good is the service or product being
Page 129
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