VeriSign Inc. is offering new software, set to be announced today, that it says can stop pump-and-dump trading schemes.
The software, an add-on to VeriSign's fraud detection system, employs the same basic principles as the authentication and fraud detection systems VeriSign offers for monitoring bank accounts: it looks at trades that may be uncharacteristic and can initiate a phone call to verify that an account is still in its owner's control.
"It lets brokerages get a real-time alert of stock-trading scams before the money's gone," Perry Tancredi, the Mountain View, Calif., company's senior product manager for the fraud detection service, said in an interview.
VeriSign added the application to its fraud detection service in response to requests from current bank clients. Though this would help banks that also facilitate stock trades, it would also help companies that are primarily brokerages, Mr. Tancredi said.
"Between banks and brokerages, it's not uncommon that they use the same software," he said.
For those companies that offer both services, the transaction monitoring can be even more useful, Mr. Tancredi said, by detecting the movement of money to fund fraudulent trades.
Some customers have signed up for the new software but none are using it yet, he said.
Avivah Litan, a vice president and research director at Gartner Inc., a market research company in Stamford, Conn., said it is generally harder to detect fraud on brokerage accounts than on bank accounts. "There's not many factors to look at" for bank accounts, she said. "With trading, there's so may different types of activities and it's very difficult to model."