|Here is one way to control investment adviser deviates:|
While many RIAs are eager to leverage social media to market and communicate with existing clients, and to promote general visibility, RIAs should ensure that they are in compliance with all of the regulatory requirements and be aware of the risks associated with using various forms of social media. The staff hopes that sharing observations from its recent review of RIAs’ use of social media as well as its suggestions regarding factors that firms may wish to consider is helpful to firms in strengthening their compliance and risk management programs. The staff also welcomes comments and suggestions about how the Commission’s examination program can better fulfill its mission to promote compliance, prevent fraud, monitor risk, and inform SEC policy. If you suspect or observe activity that may violate the federal securities laws or otherwise operates to harm investors, please notify us at sec.gov.
Legal Issues Associated with Stock Message Board Posting
It is essential to understand that there really is not “absolute privacy” on the Internet. When posting online, you are not fully anonymous because it does not take long for a Web operator to track down the source of messages and identify your IP address and other traces. However, Web operators are not obligated to share that information. So ordinarily, you are anonymous and your “online speech” is protected by the First Amendment. Other people do not have the right to uncover the identities of anonymous posters. However, with illegal behaviors, Web operators often cooperate with the legal system and hand over personal information of users to law enforcement. And on a daily basis, the SEC and other law enforcement agencies are monitoring stock message boards. Securities law prohibits the posting of messages with intent to manipulate stock prices. Through legal action, the SEC can obtain the identity of anonymous posters and with substantiated evidence, can charge posters with fraud for manipulating stocks. There have been numerous lawsuits filed against message board posters since the first Internet Securities Fraud Sweep by the SEC in 1998. In this chapter, after highlighting several classic examples, I clarify the issue of free speech, anonymity in cyberspace, and the important role that the SEC is playing in preventing online security fraud.
Ten Famous Lawsuits Related to Stock Message Board Posting Online securities fraud is based upon manipulating the price of a security by disseminating false information and subsequently trading Y. Zhang, Stock Message Boards © Ying Zhang 2014 174 Stock Message Boards the security to make money. This is illegal under federal and state laws. Regulators, such as the SEC and FTC, are interested in tracking the activities on online message boards. They scrutinize online talks closely in order to prevent Internet investment scams and protect investors’ interests. There are already numerous cases related to online stock message board securities fraud: