Don’t Take the Bait: “Phishing” Tips for Mutual Fund Investors

Pax World Funds has issued six “phishing tips” that mutual fund investors can use to spot and avoid fake mutual fund Web sites, including those that are promoted by what may at first appear to be legitimate E-mail messages.

A typical phishing scheme will use a seemingly legitimate E-mail to deceive the recipient into thinking it is a message from a trusted company. In the case of mutual fund phishing scams, an investor may actually be lured into making phony transactions on a Web site that looks similar to or exactly like the home of a legitimate investment company.

Pax World’s “phishing tips” for mutual fund investors are:

1. Keep a sharp eye out for high-pressure E-mails urging you to divulge personal financial information or to start making transactions at a new Web site page. If you get a suspicious E-mail, do not reply or click on the link in the E-mail. Instead, check out the substance of the E-mail by contacting the mutual fund company by phone or by going directly to its main Web site address.

2. Make sure you only conduct Web-based transactions on a “secure” page from a known secure site.

3. Be on guard for suspicious Web site addresses. Is an E-mail sending you to a mutual fund Web site address that is different from the one that you have used before for your mutual fund account? Does the URL contain the mutual fund’s name (or some variation of it)—along with other words or numbers? These are possible signs of a “cloned” or bogus mutual fund Web site page. Play it safe: Only use mutual fund Web site addresses that you have used before. If you are uncertain about the authenticity of a Web page, contact the company directly by phone, or by closing your browser, opening a new browser window and then going directly to the main mutual fund company Web site address.

4. Review your mutual fund account statement carefully. Are there trades missing? Has someone conducted trades that you did not authorize? Your account should only cover those transactions you have personally authorized and undertaken.

5. Take advantage of the technology available to fight phishing schemes. Ensure that your browser is up-to-date and security patches applied. Consider installing a Web browser tool bar to protect you from known phishing fraud Web sites. EarthLink ScamBlocker is part of a free browser toolbar that alerts you before you visit a Web page that is on EarthLink’s list of known fraudulent phisher Web sites. [It is free and can be downloaded at www.earthlink.net/earthlinktoolbar.]

6. Report any suspicions to your mutual fund company immediately by sending your fund company a copy of the E-mail with the possibly bogus Web site address. It is also a good idea to file a complaint with the FBI’s Internet Fraud Complaint Center at www.IFCCFBI.gov.

Pax World itself was victimized by one such scam. In June 2004, Pax World Funds cooperated with the SEC to shut down an unauthorized version of the Pax World Funds Web site. The look-alike Pax World Fund Web site offered outlandish promises of returns on investments and also charged excessive and impermissible fees. In issuing the tips, the firm said it was sharing what it learned about phishing swindles in the mutual fund context to help mutual fund investors learn more about the dangers posed by phishing.

Full Disclosure: Mutual Funds and Proxy Voting

As of the end of last month, mutual funds are required to reveal how they vote their proxies for shares held by their funds. Mutual funds were required to reveal their proxy voting records no later than August 31, 2004, for the 12 months ending June 30, 2004. Mutual funds are not required to mail proxy voting information to shareholders, but may provide it on their Web sites or by linking to the SEC’s Web site.

The requirement is a result of two new SEC rules that require mutual funds and investment advisers to disclose their guidelines and procedures for casting proxy votes, as well as their actual voting records. The rules took effect in 2003. Since July of last year, funds have been required to disclose their voting guidelines and procedures in the Statement of Additional Information, which is available to investors on request. However, they were not required to disclose their actual votes until August 31, 2004.

The Name Game In Nanotechnology

“[I]f ever there was a time to not judge a book by its cover, it’s when an industry is at the very early stage of development—as nanotechnology is right now. “Nano” in the name is currently an almost perfect contrary indicator to that company having real nanotech operations today.

“For example, Altair Nanotechnology, formerly known as Altair International Gold, is involved in the production of titanium doxide pigments (the powder that makes paint white, among other things). NanoSignal Corp. makes image-processing software and has been a bit of a serial name changer, having been through five corporate monikers since 1987.

“Currently there are about a dozen publicly traded companies with ‘nanotechnology’ in their names, but look for that to change as the hype builds and more companies go public.

“Amid the hype, however, real development goes on into products that may well live up to their revolutionary expectations. Market giants such as IBM and GE wouldn’t be committing as much research to the field if they didn’t see a potential payoff.

“And rather than try to pick the early winners in nanotechnology, investors might be better served watching out for those more-established companies they already own to see how they might be upended by potentially disruptive technologies.”

—Edwin D. Everett, writing in the June 11, 2004, issue of The Babson Staff Letter.