I often get asked the question, and also wonder the same thing, why doesn't the government do something to stop these frauds?

The government does do something, they wrote the web site http://www.fido.asic.gov.au, and have various other publications and initiatives (like ASIC's annual "Gulls" award, given out to gullible people that respond to their April 1 ads for shonky but fictitious investment schemes). If you go to the Fido web site and click on shares, you will immediately find right up the top of the page a warning imploring people not to go out and buy black box trading software. You'll find a lot of other warnings also, about schemes that promise high returns with no risk, dodgy tax schemes and more.

Why don't they actually pass a law against black box software then? They have sufficient confidence in their assertion that black boxes are scams that they are willing to write a scathing article on them, why not put their money where their mouth is and actually close down some of the dozens of black box software vendors?

Unfortunately, there is no law against selling bad products. Promoters can only get in trouble when they make unreasonable promises about their product, such as guaranteeing to turn you into a profitable trader, at which time it is usually a group like the state Ministry of Fair Trading that acts against the promoters - for violations of the Trade Practices Act.

You are allowed to sell an appalling black box program, you just can't make any really definite statements about it while marketing it.

ASIC will never go after someone just because their product is crap, but they can put a halt to a prospectus or stock float if they consider certain matters have not been disclosed properly. You could disclose that the product is not guaranteed to work, while simultaneously trotting out a list of testimonials. There will always be consumers that take the view that the government is just "forcing" them to say this stuff about performance not guaranteeing future results, thinking this is just standard stuff that goes there even if it isn't true and these people will place more emphasis on the testimonials.

Nobody doubts that a black box program could in theory make you a lot of money, luck would have it that even a totally ineffective product would generate a lucky signal from time to time, so it is impossible to prove that Mr John D. of Sydney did not in fact make a killing on his first trade after booting the software up on his computer (even if he subsequently lost it all on the next few trades the ad does not have to disclose that).

So all ASIC and similar authorities can ever do is keep putting out warnings that the only people making money out of black box software are the marketers, while monitoring advertisements and sales presentations to make sure that the claims, while impressive to the layman and obviously deceptive, are not specific enough that they might constitute a misleading or deceptive advertising, as defined in specific legal terms.

You might ask, why do the various magazines and newspapers still publish these ads? If you did ask that I would have to urge you to wizen up a bit, newspapers and magazines almost never refuse advertising revenue, no matter what the product.

I remember one investment magazine I read, who shall remain nameless, where they did an extended wrap-up of the black box market in Australia, giving every single product terrible marks. Only a few pages after this scathing review, one of the same products which had just been debunked had a full page advertisement, complete with testimonials and high praise from other reviewers and journalists. You should definitely not take the presence of any advertiser in any publication to be an indication of some sort that the product is respectable. I don't know any magazine or newspaper that would refuse even a blatant scammer from running a puff piece advertorial of some sort.

Ok, so much for black boxes, what about multi-level marketing, negative gearing seminars that flog you overpriced property etc?

People do sue vendors for some things, like two tiered property marketing, but in reality there are a lot of operators out there that are in business only because they haven't been sued. Just as many have been sued but had better lawyers than their accusers, others hid their assets in a maze of companies, trusts and offshore entities so when they were ordered to pay damages they declared bankruptcy with only a few dollars in their pocket.

Multi level marketing is another thing that probably can't be banned. It may be a very poor business model, it may be true that hardly anyone makes any money out of it except the first promoters. It may also be true that many of the people promoting MLM are committing offenses in misrepresenting the product or service. The trouble is that 1) you can't legislate against bad business models, 2) you can't make something illegal just because it isn't always profitable and of course 3) many of the biggest liars in MLM are the guys at the bottom of the chain, as long as the promoters can concentrate on dream building, motivation and other things that can't possibly be bait for lawsuits then they will get wealthy while letting the guys at the receiving end of the MLM rumour mill tell all the blatant lies.