The Securities and Exchange Commission today announced enforcement actions against 27 individuals and entities behind 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.
SEC 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.
Basrai and Stirton also agreed to be barred from trading penny stocks and from working in the securities industry, with Stirton having the right to reapply after five years. LBMZ Securities separately agreed to be censured and pay a $240,000 penalty without admitting or denying the SEC’s findings that the firm failed to enforce policies and procedures designed to prevent its employees from misusing nonpublic information.
According to the SEC’s order, LBMZ failed to obtain or review complete trading records of many employees, including Basrai, and conducted only a minimal review of employee communications to monitor potential misuse.
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“If a company pays someone to publish or publicize articles about its stock, it must be disclosed to the investing public.
These companies, promoters, and writers allegedly misled investors by disguising paid promotions as objective and independent analyses,” said Stephanie Avakian, Acting Director of the SEC’s Division of Enforcement.
The Securities and Exchange Commission today charged a stock market analyst with insider trading prior to the publication of research reports and articles he authored with the false disclaimer that he wasn’t trading in the companies being covered.
He agreed to settle the charges and be barred from trading in penny stocks for the rest of his life.