SEC targets misleading stock news on financial websites
The U.S. Securities and Exchange Commission (SEC) headquarters in Washington. (REUTERS)
The U.S. Securities and Exchange Commission on Monday announced a crackdown on alleged stock promotion schemes in which writers were secretly paid to post hundreds of bullish articles about public companies on financial websites.
Twenty-seven individuals and entities, including a Hollywood actress, were charged with misleading investors into believing they were reading “independent, unbiased analyzes” on websites such as Seeking Alpha, Benzinga and Wall Street Cheat Sheet.
The SEC said many writers used pseudonyms such as Equity Options Guru, The Swiss Trader, Trading Maven and Wonderful Wizard to hype stocks.
It said it found more than 450 problem articles, of which more than 250 falsely said the writers were not being paid.
“This is different from the fraud cases that you usually see us bring,” Stephanie Avakian, acting director of the SEC enforcement division, said on a conference call.
“Here, we allege that the fraud was in presenting the analysis as impartial,” she said. “It was bought and paid for.”
Seventeen defendants, including Galena Biopharma Inc , ImmunoCellular Therapeutics Ltd and Lion Biotechnologies Inc, agreed to pay more than $4.8-million, including fines, to settle, and to refrain from further wrongdoing.
Not all defendants are making payments, and Galena, ImmunoCellular and Lion did not admit wrongdoing. None of the websites was charged.
The other 10 defendants face SEC lawsuits in Manhattan federal court.
The SEC said they include Lidingo Holdings LLC, run by Kamilla Bjorlin, 46, an actress from Encino, California, who performs under the name Milla Bjorn; and CSIR Group LLC, a New York firm overseen by Christine Petraglia, 49.
It is unclear whether those defendants have hired lawyers. A lawyer representing Lidingo and Bjorlin in separate litigation had no immediate comment. CSIR and Petraglia did not immediately respond to requests for comment.
The SEC also issued an alert warning investors that articles on investment research websites may not be objective and independent, and that they should never invest based solely on information published there.
Mike Taylor, a Seeking Alpha managing editor, said in an e-mail that its policies “act as a strong deterrent against potential promotions,” including documenting “all authors’ claims to not having been compensated by third parties.”
Benzinga said in an e-mail that it uses a disclaimer to identify articles from outside contributors, and that each “does not represent the opinion of Benzinga and has not been edited.”
The operator of Wall Street Cheat Sheet did not respond to a request for comment.