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SEC Targets Deceptive Stock News

By George Khoury, Esq. on April 13, 2017 | Last updated on March 21, 2019

The Securities Exchange Commission has announced enforcement actions against 27 different entities and individuals connected to the deceptive dissemination of promotional news about stocks. The actions allege that these entities and individuals promoted stocks or investments without disclosing financial ties to the stock or investment.

Specifically, the individuals and entities were charged with deceiving investors by failing to disclose that published information was not independent, nor unbiased. Under federal securities law, if a company or individual publishes information promoting a stock or investment, the writer or publisher must clearly state whether the information was paid-for, or if the writer or publisher has a self interest in promotion.

Details of the Actions

The SEC brought the actions against various entities and individuals that were hired to promote stocks and investments by generating publicity. The SEC alleged that the writers and firms hired, published "bullish" articles that appeared to be impartial, while the SEC alleged the articles "were nothing more than paid advertisements." The SEC identified over 250 articles that included affirmative false statements about writers not being paid by the companies being promoted.

While many entities and organizations have agreed to pay fines and be subject to penalties, many others have not. The fines range from $2,200 to $3 million, which correlate to the number of deceptive articles, as well as the severity of the fraudulent information.

SEC Warns Investors: Don't Rely on Internet Articles Alone

Most people, and especially sophisticated investors, know that not everything on internet is trustworthy. When it comes to stock and investment tips, the SEC issued a warning to investors to be weary and not rely on articles they may find online, particularly from sources that claim to be impartial, or unbiased.

The warning explains that investors should do independent research and not rely solely on articles promoting an investment. The SEC also warned investors to be particularly cautious when information promoting a stock or investment is promoted more heavily than a company's products or services.

As the SEC is clearly aware that people will likely continue to rely on information they read online, they offered the following piece of advice: Check out the background, including registration or license status, of anyone recommending or selling an investment through the SEC's Investment Adviser Public Disclosure (IAPD) database.

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