Japan cracks down on Web stock rumors


Regulators have grown alarmed by credit-risk rumors, and hope the new tracking system improves on their manual one

TOKYO, Japan (CNN) -- Japan's stock watchdog has unveiled a system to monitor the spread of unsubstantiated rumors about stocks over the Internet.

"It covers all Japanese sites and increases the efficiency of our surveillance activities," an official from the Securities and Exchange Surveillance Commission told the Nihon Keizai Shimbun.

The system was activated in April. The SESC has yet to prosecute anyone for spreading online rumors.

But the Nikkei states that it has investigated around 10 companies that saw price fluctuations due to online information.

Concern over rapid price declines

It concentrates on sites showing sudden increases in traffic, as well as those detailing stocks with unnatural movements in price or trading volume.

The SESC then sends a warning to the Web master.

The commission is concerned with the growing number of lower-priced stocks suffering sharp declines on rumors over credit risk spread over the Internet.

In May, unfounded rumors of Toyo Construction Co.'s impending bankruptcy saw it plunge to 30 yen.

One of the reasons behind the system's activation was to help the SESC to further understand the relationship between stock information on the Internet and share prices.

They also plan to increase the number of inspectors handling Internet cases from two to five by the end of the year.

The SESC had been scanning around 150 Internet sites by hand.

Up to the Web user

An executive at a major brokerage told the Nikkei it is also down to users to filter information. People chatting or posting on the Web "do not realize the importance of compliance," the executive noted.

Japanese investors have grown wary of the stock market amid a prolonged stock selloff. Overseas investment banks have scaled down their operations as a result.

Japanese authorities have blamed short selling for market weakness. They have at times questioned the validity of rating-agency and investment-bank research.

But stocks rose on Tuesday in Tokyo (full Asia roundup). The Topix index closed ahead 1.56 percent at 1,050.14. The Nikkei climbed 1.77 percent to 10,960.25.