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No. of Recommendations: 10
Last week, I wrote a post asking why the Motley Fool was advertising penny stocks to their readers. In the post, I took a closer look at one of the recent pump and dumps that the the Fool introduced to their readers and questioned the appropriateness of the ad. I also asked the Fool to clarify their advertising policy, so that I would have a better idea of what was and wasn't allowed.

In the Fool's defense, they did take the time to respond to part of my inquiry, by pointing out that the fool has a no penny stock and no adult content advertising policy for the Fool.

http://boards.fool.com/Message.asp?mid=25724883

They also asked me (and other readers) to be vigilant in watching their ads for them, so that we can report when abuse occurs.

In response to their post, I've asked the Fool (in several private emails) to clarify the response and to provide me with an email address for where I can report abuse.

In my emails, I've asked them to specifically address what the policy was towards penny stock newsletters.

So far, the Motley Fool hasn't provided me an email with what is and isn't appropriate, nor an answer on whether pennystock newsletter were allowed. Since the Fool doesn't seem to want to comment on the newsletters, I decided to be proactive and take a closer look at some of the ads that are still running on the site.

This morning they are running an ad for ChinaInvestorReport.com. The "report" is issued by the same company that owns SmallCapInvestor.com and GrowthReport.com (two other newsletters that I've seen advertised on the Fool)

In order to analyze how successful their report has been, I went back and took a look at some of China IR's June newsletters.

In the last month, the company has advertised three penny stocks in the subject lines of their emails. After their PLKT recommendation ran, the stock surged to as high as $1.60. Currently it's $0.89. After they ran their analysis on UVSE, the stock ran to $2.00 (today it's at $1.57). After they ran a breakdown on UPBS, it finished at $1.10, today it's at 0.71.

Now I didn't take the time to dig through the SEC filings on these companies, but I'd be willing to bet dollars for doughnuts that all three companies have either a going concern letter on file or an accountant who has complaints filed with them at the PCAOB.

In just looking at the returns on these three stocks, I have to question the wisdom of the advice that is being given out by the newsletter. Since the Motley Fool has always emphasized their unbiased research, something seems inappropriate about directing readers to a less than stellar financial publication.

In my emails, asking for clarification on the Fool's advertising policies, I've proposed that they don't run newsletters where companies or individuals are allowed to pay, in order for coverage. If the Fool wants to link to a legitimate stock newsletter that is fine, but when a company accepts shares of stock, in exchange for writing about a company, it raises some serious questions about how unbiased the recommendation is. Since the Fool places so much emphasis on full disclosure and unbiased research, it only seems fair that they'd have the same requirements for their business partners.

I'm still waiting for an email back from the Fool, that outlines which newsletters are OK and which ones are inappropriate, but so far I have yet to see a copy of the Fool's ad policy. I understand the difficulty of researching third party ads, but considering that I was able to get this information in less than ten minutes, it seems pretty foolish for the site to run these.

It's easy to say, it's not our problem it's an affiliate that is accepting these ads, but when I can figure out that something is bogus with minimal Google searching, it makes me wonder why the Fool isn't at least doing some haphazard due diligence on their ad partners.

If the Fool wants to have a no DD policy and leave it to their readers to report the bad ads, than they at least owe us an explanation of what ads are acceptable and what violates their policy, as well as an easy way to report offensive ads.

It's one thing to say that you don't know that this is going on, but it's another thing to not provide clarification on what is and isn't allowed.
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