The Securities and Exchange Commission said Monday that it has brought enforcement actions against 27 individuals and entities for carrying out various alleged stock promotion schemes that left investors with the impression they were reading independent, unbiased analyses on investing websites while writers were being secretly compensated for touting company stocks.
The SEC said that it 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, according to the agency. The SEC’s litigation continues against 10 others.
The same day, the securities regulator issued an Investor Alert warning that independent commentary on investment research websites may in fact be part of paid stock promotion campaigns.
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The SEC noted that agency investigations “uncovered scenarios in which public companies 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 articles about the companies on the internet under the guise of impartiality when in reality they were nothing more than paid advertisements.
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.