IN THEORY, all 5,400 listed firms on America’s equity markets are always for sale. In reality, bids rarely come out of the blue. That may explain why a notice posted on May 14th on the website of America’s main stockmarket regulator, the Securities and Exchange Commission (SEC), of a ludicrously high bid for Avon Products, a beleaguered door-to-door cosmetics company, prompted investors to buy first and ask questions later.

By the time the soaring share price had forced three trading halts on the New York Stock Exchange, those who had bothered to read the relevant filings closely were ready for Avon’s shares to plunge, as they duly did. The bidder, whose announcement the SEC posted automatically, claimed to be incorporated in the British Indian Ocean Territory, home to more long-range bombers than corporate raiders. Its name, PTG, was a play on TPG, a big private-equity firm.

Eventually, Avon announced that it had not heard from any would-be buyer, and that it was not even sure PTG existed. (Curiously, after the hoax was exposed, Avon’s share price came to rest above its starting-point. The thought that even a fictitious investor was interested seems to have encouraged investors.)

The FBI is on the hunt for those responsible, who are assumed to have instigated the deception to profit from the subsequent gyrations in Avon’s share price. The episode inflicted genuine losses on any entity that bought Avon’s stock as it bubbled. High-speed traders, for whom checking information is inevitably an after-thought, if a thought at all, presumably suffered most. The hoax “undermines confidence in the accuracy of trading prices which everyone relies upon,” says Joseph Frumkin of Sullivan & Cromwell, a law firm.

Yet the SEC is blasé. “Filers are responsible for the truthfulness of their filings,” it explained. That need not be so, of course: access to the SEC’s website could be limited to those who prove their identity. Bankers, brokers and lawyers, after all, are required to know their customers.

But if the SEC were to adopt an elaborate system to screen filers, it would be adding to the cost and hassle of participating in the capital markets. A radical alternative would be to remove safety nets instead of adding them. If the circuit-breakers limiting price movements were scrapped, all investors would have to be more wary. And if the SEC stopped distributing information altogether, a private firm could emerge whose fortunes depended on the quality of its wares.