Today Herb Greenberg wrote: "What's in a name? Commentary: The curious past of an adviser to emerging Chinese companies"

The financial services industry (ie, the sell-side) is, by necessity, based on the all-important "Know Your Customer" (KYC) rule. The owners and managers of capital (ie, the buy-side) have a need for their own rules.

When it comes to market timing decisions, one of my rules is, as you know, based on Relative Strength. To me, it's a big world out there and everything's relative. RSI anchors me to the ground, and keeps me off the treadmill.

When it comes to deciding on "special situations", one of my rules is "Know Your Promoter" (KYP). Ignore it to your peril.

More honest capital has died and gone to money heaven over the ignorance or avoidance of this rule than probably any other " certainly the case in the small-cap and micro-cap segment of the market.

When I first glanced at the headline of Herb Greenberg's article, I thought back to this week's Toronto Resource Investment Forum where unquestionably there was the China dynamic at work.

One issue " and I have had an unfortunate personal experience in this matter " is that Chinese names (or Arabic names, ie, names from non-Western cultures) often hide one's background when translated into their English names. In fact, there is often more than one English name.

This issue is complex in that the 95 pct of "good apples" may have built up a solid track record in their own culture, which is lost in the attempt to transfer the goodwill to the Western culture. But the "bad apples" know this, and exploit it, thereby making the building of new relationships a challenging task.

We all have to know the party on the sell-side before we start listening to the sales pitch. When the seller's umbrella is Citi or UBS or HSBC or Deutsche Bank we assume that representative is going to be rock solid, regardless of the individual's race, religion, etc.

Otherwise, we need to look for clues, and this is where the tricks begin.

In the case of Benjamin Wey or Benjamin Wei, Herb Greenberg has uncovered some information that shows us to be wary of the obvious. For example, is an MBA legit or really a Master Bull Administrator? Are names changed slightly to hide the past?

I won't get into my experience in this area " it's too painful " but I'll tell you about an elaborate scheme used to fool a well-known real estate lawyer I happened to meet over dinner he was hosting for a Chinese-American developer in a major Chinese restaurant in Toronto. I found the developer's story interesting " apparently he had purchased a landmark resort property in South Florida, one that I had been to " but I could find no proof of that so I soon lost interest.

The lawyer, though, soon became known among the Italian "boys" " the lawyer was not Italian " as "Pie in the Sky".

You know, I never discovered the nickname those people called me, but that's not important here.

This lawyer, however, took the bait and flew for the day to New York where he went to the promoter's office in a Manhattan skyscraper. When he arrived, he found in the elevator lobby a large portable sign board that read: "ABC Global Enterprises (or whatever) welcomes Mr. X from Toronto". Was he impressed!

He was still thinking of that when he got off the elevator and didn't notice the "portable" offices he was visiting. But he fell for the pitch, hook, line and sinker. He bought that pie in the sky without really knowing a thing about the promoter.

This was a sting. I figure that sign was placed there by the promoter's assistant as soon as Mr. X walked into the lobby and it was removed within seconds after the elevator door closed. Upstairs, the real estate lawyer was handed a portfolio of documents large enough to choke an elephant, and with not enough substance to feed a mouse. But it all looked impressive and the lawyer signed over the funds.

Gone to money heaven.

Globalization has scary potential. It puts buyers together with sellers who don't know much about the other. In the case of "Pie in the Sky" the seller did not want to know, and the buyer had a need to know. The seller went into that deal with all the experience and no cash; the buyer had more cash than experience. At the end of the day, the seller got the cash and the buyer bought the experience.

In every stock cycle that reaches a peak " like 1969, 1973, 1980, 1987, 1990, 1999, and today " these "bad apple" promoters spread their worms into the bushel. It's happening as you read this " only this time around, there are many, many promoters with dubious, but particularly hard to check, credentials you need to figure out before turning over honest capital.

Otherwise, you are going to join the lines of those who walk away with nothing but experience.

I'm writing this today because I'm getting rather annoyed at the flood of investment scams that are coming across the Internet. In North America, there is no excuse for the SEC and the Canadian Securities Administrators to permit this because these are public companies.

Every e-mail has to be sent from a server, and the regulators can shut down those servers " from any source in any country. And every public company has a registration filing that identifies the Responbible Persons.

That the regulators are apparently doing nothing on this score shows me they are like the typical police force " waiting for the crime to be a fact before taking action. So it's up to people like Herb Greenberg to alert you to red flags, and it's up to you to learn the golden KYP rule.