The March 23, 2017 cover of Time magazine posed the disturbing question: “Is Truth Dead?” 

The question was asked in light of allegations by President Trump that “fake news” was disseminated by media outlets to undermine his election, and counterarguments by the media that Trump himself has spread fake news to confuse the public over his true intentions. Although used primarily in a political context, the issue of fake news is increasingly under scrutiny as it relates to financial media.

That’s due to recent revelations that several seemingly legitimate media outlets had been duped into posting articles by fictitious writers purporting to be unbiased analysts, while others have been accused of knowingly going along with the ruse in exchange for financial gain.

According to a July 4 article in The Washington Post, the unethical behavior included one person “secretly paying writers—some of whom used pseudonyms such as the Swiss Trader and falsely claimed to have MBAs—to produce hundreds of positive articles, tweets and Facebook posts that attempted to pump up the stock prices of specific companies.”

The motivation for spreading fake news, good or bad, about stocks is obvious. Penny stock promoters spin fanciful yarns to drive up the price of their shares before dumping them on unwitting investors. Conversely, short sellers warn of impending disaster to drive down the value of stocks that they have already sold and need to buy back at lower prices to make a profit. Either way, the intent is the same: preying on innocent people who are incapable of discerning what is true from what is false.

The stock market has always been subject to unfounded rumors and flat-out lies, but the advent of the Internet and social media has amplified the impact false stories can have on a company. A story that once took days or weeks to circulate through the smoke-filled back rooms of Wall Street restaurants can now travel around the world in nanoseconds and be read by millions of people without being parsed for accuracy by an editor.

That’s a problem since there is no way to go on the Internet and not be subjected to the purveyors of fake news. Simply because articles show up on credible websites such as Yahoo Finance does not necessarily mean they are legitimate; almost all of them are written by unaffiliated parties that may or may not have a hidden agenda. Consequently, before making an investment decision based on a news story, it’s critical that you understand who has written the story and any potential economic interest that party may have in the subject of the article.

I frequently receive Stock Talk questions from Personal Finance subscribers regarding the advisability of buying penny stocks that to my trained eye appear to be on the verge of financial collapse. A few clicks of the mouse often reveal that a glowing article was recently written by a purported expert in the field professing to have nothing more than a purely academic interest in the company. More often than not, those stocks end up becoming worthless shortly after the author of that article has sold his shares and moved on to the next con.

Fortunately, there are steps you can take to protect yourself from fake news. The Securities and Exchange Commission provides several tips for investors when considering investing in micro caps, or “penny stocks”, at its website: www.sec.gov/spotlight/microcap-fraud.shtml. You also can check up on penny stocks via TheStreetSweeper.org.

Of course, feel free to shoot me a Stock Talk question about a company you’re not sure about and I’ll do my best to steer you away from any situation that looks suspicious. You also can reach our experts via mailbag@pfnewsletter.com.

In case you’re wondering, the company that employs our analysts and publishes Personal Finance has a strict policy of only earning revenue through subscription income. We don’t accept any form of financial compensation from the companies we cover, nor do we allow other parties to use our content for any reason other than its original purpose. We may not always be right, but we’re always honest.