The SEC has recently issued an Investor Alert regarding commentary provided about investors from what appear to be independent sources. It turns out, many of those independent sources are not independent at all. Instead, they are paid shills.
The SEC has instituted enforcement actions against such companies for generating deceptive articles on investment websites. Among other things, these companies:
- Failed to disclose that they received payment even though companies had paid them directly or indirectly.
- Used different pseudonyms to publish multiple articles the promoted the same stock.
24752961 – grunge rubber stamp with text disclosure,vector illustration - Falsified their credentials; misrepresenting themselves as accountants or a fund manager, for example.
So where does that leave firms that rely upon commentaries for the sale of stock. For one, if you pay for it, you had better disclose that you paid for it. If you did no pay for it, do a little digging to make sure that the commenter is legitimate. If not, stay away lest the SEC pay a visit.