SEC Takes Action Against Fake Financial Articles
The U.S. Securities and Exchange Commission has filed charges against 27 individuals and businesses for having been involved in posting fake financial articles for payment on investment websites in order to hype certain stocks.
The SEC has alleged that these articles were misleading investors as they were thought to be independent and unbiased analyses. These were typically posted on well-known investment websites like Seeking Alpha,The Motley Fool and Benzinga.
In a statement, the SEC said
[The scheme ] left investors with the impression they were reading independent, unbiased analyses on investing websites while writers were being secretly compensated for touting company stocks.
According to the SEC, the companies would hire PR firms to create a buzz around their stocks who would then hire writers to develop and post bullish articles on the stocks. The SEC has noted that the articles were written anonymously under pseudonyms like Equity Options Guru, Trading Maven and Wonderful Wizard. The SEC stated that in its investigation it had found over 450 articles that seemed problematic, with over 250 articles claiming falsely that the writers weren’t paid for writing them.
One writer allegedly used up to nine pseudonyms to write claiming under one that he was an investment analyst with over 20 years’ experience. The widespread nature of the problem has prompted the SEC to issue a formal warning to investors. The SEC has posted an investor alert on its website highlighting the fact that articles on investment and financial sites may not be independent or unbiased. It has urged investors to not fully rely on such sources for their investment decisions.
Stephanie Avakian, acting director of the SEC enforcement division said that the fraudulent action was different in this case as the fraudulent activity was in presenting information as unbiased and independent when it was paid for.
The defendants are seventeen companies including the likes of Immunocellular Therapeutics, Galena Biopharma and Lion Biotechnologies who have agreed to pay $4.8 million towards settling the case without admission of any wrong doing. Not all of the 17 companies have agreed to make the payments with Galena denying misconduct.
None of the websites that hosted the content have been charged and none of the companies involved in the case have issued a comment so far. Mike Taylor, managing editor at Seeking Alpha, said that the website had policies in place that aimed to act as a strong deterrent against promotional material being put up.
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