FSA to investigate online forums accused of ‘talking down’ shares

The Financial Services Authority (FSA) is examining the regulation of online discussion boards after a string of oil & gas firms handed over files claiming market manipulation and personal threats.

It is believed that up to half-a-dozen firms listed on the lightly regulated Alternative Investment Market (AIM) have complained to the FSA. They believe that anonymous individuals are talking down the stock on the forums, so that the price falls and they can make money by short selling the shares.

Short selling is when an investor borrows a share and sells it in the hope that the price will fall, then buys it back and pockets the difference when returning the stock to the original owner. There have even been claims made about a boss's criminal record, which was in fact clean, and related threatening telephone calls to a director's home.

Nostra Terra Oil & Gas and Nighthawk Energy, which went public over their anger this summer, are two of the firms to have handed over files. They have already forced websites to release the real names of posters through the courts.

Nighthawk recently decided against going to the courts again, but Nostra Terra's chief executive, Matt Lofgran, said he would continue to seek legal recourse if the FSA does not introduce improved regulation. This might prove unnecessary as FSA officials have spoken to at least one oil executive saying they are taking the claims seriously. A source said that the FSA is undertaking a "scoping exercise", which would be a prelude to an investigation. FSA sources suggest that the situation is not so advanced. A spokesman said: "We do look into allegations, but we can't comment on the specifics."

AIM-listed companies tend to trade lower volumes of shares than their main exchange peers. This means that information promoting or denigrating a company can more easily move the share price – one big sell or buy could make all the difference.

The FSA does have some regulation in place and even fined an individual £15,000 for spreading inaccurate information on a bulletin board five years ago. Tightening the regulations could prove impossible, however, as the sheer number of posts on discussion boards would require constant monitoring and evaluation. "A number of oil & gas companies have put forward complaints," said a market source. "But discussion boards are a difficult, massive thing to police."