Stock Spam Promotion - Part II: Forbes and IBD Respond

I just had to get this quick update out before I head to the airport this morning. Davis Freeberg and I, as you may know, have been following this issue of major financial publications running full page ads for a penny stock - Global Telecom (GZGT).

Just the running of ads for penny stocks is bad enough, but considering the players involved in running GZGT have a bit of a shady past, it makes the running of these ads highly unethical. Kiplinger's originially broke this story and I followed after seeing the ad in Investors Business Daily (note this is the online version of the ad, I first saw it in the Friday, June 1st edition of the newspaper). This story has been getting more attention of late (hear Chuck Jaffe of MarketWatch's Stupid Investment of the Week last week) and following an inquiry from Davis Freeberg, Forbes mentioned that the ads are being discontinued. They stated:

Thanks for your note- we obviously take this very seriously given our reputation in the industry. Just so you know, Forbes.com and Forbes magazine are separate organizations with separate sales teams. I had some people here at Forbes.com run a check and it appears that we’ve never shown those ads online. I can confirm that there had been ads run in the print mag in the past but from what I’m told those are going to
be discontinued.

Thank you Forbes for doing the right thing! How about you, Investors Business Daily? Here is their response:

Thank you for your email regarding the advertising from GrowthStockGuru. Investor’s Business Daily does have a policy in of rejecting display advertising that promotes penny stocks. Display advertising refers to the ads that are placed throughout the newspaper.

The ad you referred to ran in our Corporate News section. This is classified advertising section designed as a forum for public companies to increase awareness of their stock. Most of the ads that run in Corporate News are penny stocks. Many of our readers regularly read this advertising feature searching for new and interesting investment opportunities. The section is labeled as advertising and in no way is an endorsement by Investor’s Business Daily. We also run a small disclaimer in the section stating that we can not guarantee the accuracy of the information in the ads.

Thank you for taking the time to share your concerns with us. We value your input and take all suggestions and comments very seriously.

It appears IBD doesn't want to let go so easily of those penny stock promotion profits . . . hmm. They get around the issue by distinguishing between display ads and their Corporate News (er, advertising), which is different. Whether you call it Corporate News or whether it appears on one page or several pages, does it really matter? An ad is and is an ad, and it may hurt your readers financially not to mention your reputation and credibility. Do the right thing, IBD, and quit providing an avenue for penny stock companies to pump and dump. If you're going to provide an avenue for companies to promote themselves, why not at least stick to companies listed on the major exchanges which must adhere to certain standards?

You can read the entire story about these responses to the GZGT stock scam over at Freeberg's blog.

What do you think?