Fake news! SEC warns that some investment research is a sham

The SEC has warned investors that information purporting to be unbiased investment research actually may be undisclosed paid stock promotion.

In an investor alert, the Securities and Exchange Commission advised investors to use many sources and never to make an investment based solely on information published on a single investment research website.

“Stock promotion schemes may be conducted through investment research websites,” said Lori Schock, director of the SEC’s Office of Investor Education and Advocacy. “Investors looking for objective investment information should be aware that fraudsters may use these websites to profit at investors’ expense.”

In connection with the alert, the SEC announced enforcement actions against 27 individuals and companies behind various alleged stock promotion schemes the agency uncovered. It said its investigations learned that public companies had hired promoters or communications firms to generate publicity for their stocks, and the firms subsequently hired writers to publish articles that did not publicly disclose the payments from the companies. The writers allegedly posted bullish, but seemingly impartial, articles about the companies “when in reality they were nothing more than paid advertisements,” the SEC said in a press release.

More than 250 articles specifically included false statements that the writers had not been compensated by the companies they were writing about, the SEC alleges.

The SEC filed fraud charges against three public companies and seven stock promotion or communications firms as well as two company CEOs, six individuals at the firms, and nine writers. Of those charged, 17 have agreed to settlements that include disgorgement or penalties ranging from approximately $2,200 to nearly $3 million based on frequency and severity of their actions. The SEC’s litigation continues against 10 others.

Related Topics: Securities and Exchange Commission