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San Diego SEC Lawyers: Securities and Exchange Focuses On “Fake” Financial News

By Erwin J. Shustak, Esq. of Shustak Reynolds & Partners, P.C. posted on Monday, April 24, 2017.

Erwin J. Shustak, Esq.
619.696.9500 ex. 109
[email protected] 

The White House is not the only place where “fake news” is the big problem. The Securities and Exchange Commission (“SEC”) is focusing on its own fake news problem. The SEC has announced a crackdown on individuals purporting to report legitimate news and analysis on stocks who are actually being paid as “shills” to push and promote the stocks in exchange for undisclosed cash payments and other compensation.

According to the SEC, several biotech companies hired public relations firms to promote their stocks and those PR firms, in turn, hired paid writers to post bullish articles and blogs about the stocks which appeared to be unbiased but which were, in reality, paid advertisements for the stocks written for the sole purpose of hyping the stock and inflating the market prices of those stocks.

According to Stephanie Avakian, the acting director of the SEC’s Division of Enforcement, “if a company pays someone to publish or publicize an article about its stock, it must be disclosed to the investing public.” She added, “These companies, promoters, and writers allegedly misled investors by disguising paid promotions as objective and independent analyses.”

The SEC filed fraud charges against three public companies and seven stock promotion or communications firms, along with two CEO’s, six individuals, and nine writers. The publications involved, which include several highly-respected sites- haven’t been charged, or named and may have been victims of the scams themselves since the writers receiving the payments apparently did not disclose those payments to the publications. So far, 17 of those charged have settled with the SEC, paying fines between $2,200.00 to nearly $3 million.

The SEC released an investor alert warning that investor research websites are not necessarily to be trusted, particularly those focusing on micro-cap stocks, which the SEC says are particularly susceptible to stock promotion schemes and other forms of market manipulation.

 Shustak Reynolds & Partners, p.c. focuses in the areas of securities, financial services and complex business disputes. For more information, contact our managing partner, Erwin Shustak. More information is available at www.shufirm.com.

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