SENATE LOOKS INTO STOCK FRAUD ALLEGATIONS; SEC ISSUES WARNING AGAINST ROGUE BROKERS.

Byline: Marcy Gordon Associated Press 

As a Senate panel examined fraud in the penny-stock market estimated to rob ordinary investors of $6 billion a year, the government's top securities regulator Monday promised improved enforcement efforts.

At the same time, the Securities and Exchange Commission and state securities regulators issued a ``cold-calling alert,'' warning consumers to hang up on aggressive brokers selling investments over the telephone.

The bull market has drawn multitudes of eager new investors but also has created more victims of stock schemes, securities regulators say.

In May, regulators in 20 states began a crackdown against 14 brokerage firms accused of fraudulent sales practices. And the FBI has been working with securities regulators to investigate stocks of 19 small companies allegedly manipulated by organized crime.

A Senate investigative subcommittee is looking into the problem and also is trying to put a human face on stock fraud, which often involves low-priced shares of high-risk stocks that are thinly traded. Besides taking testimony from top regulators at a hearing Monday, senators also heard first-hand from some small investors who allegedly were bilked.

Many victims of such fraud are elderly.

``In a market like this, parasites crowd in to feast on the bull's success,'' SEC Chairman Arthur Levitt Jr. told the Senate permanent subcommittee on investigations.

``We have stepped up both our civil and criminal enforcement efforts - we are working with criminal (law enforcement) authorities as never before to lock up bad brokers and deter wrongdoers,'' he said.

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Consumers can get a ``cold-calling alert'' brochure by phoning the SEC's toll-free information line at (800) SEC-0330. A version is also available on the SEC's Web site (www.sec.gov).

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