SEC Investor Alert: Beware of Stock Recommendations on Investment Research Websites
On Monday, the SEC issued an investor alert relating to recent enforcement action against companies and individuals for generating deceptive articles on investment research websites.
The SEC Alert says; “When you read an article on an investment research website, be aware that the article may not be objective and independent. For example, the writer may have been paid directly or indirectly by a company to promote that company’s stock. In some cases, the writer may not disclose compensation received or may go so far as to claim falsely that compensation was not received. Keep in mind that fraudsters may generate articles promoting a company’s stock to drive up the stock price and to profit at your expense.“
The alert also points out that “Microcap stocks, some of which are penny stocks and/or nanocap stocks, may be particularly susceptible to stock promotion schemes and other forms of market manipulation.“
The recent SEC action charged 27 parties – including public companies, firms, and writers – with fraud for generating articles that promoted certain stocks when some or all of the writers allegedly:
– Failed to disclose that they received payment, even though they had been paid directly or indirectly by the companies;
– Used different pseudonyms to publish multiple articles that promoted the same stock; and/or
– Used fake credentials (for example, misrepresenting that the writer was an accountant, fund manager, or research analyst who had certain academic degrees).
Additionally, the SEC alleged that some writers engaged in scalping (recommending a stock to drive up the stock price and then selling shares of the stock at inflated prices to generate profits).
Learn more HERE.