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Alternative Market Briefing

SEC warns investors on social media and stocks in investor alert

Monday, July 28, 2014

Bailey McCann, Opalesque New York:

The Securities and Exchange Commission has issued a new investor alert cautioning investors on stock rumors spreading through social media. The regulator says that players wishing to manipulate the market for a particular equity can spread rumors and even post misleading articles through social media.

The alert appears to have emerged out of the SEC v. McKeown and Ryan case.

In that case, "the SEC obtained judgments against a Canadian couple who used their website (PennyStockChaser), Facebook, and Twitter to pump up the stock of microcap companies, and then profited by selling shares of those companies. The couple allegedly received millions of shares of these companies as compensation and sold the shares around the time that their website predicted the stock price would massively increase (a practice known as "scalping"). The SEC’s complaint alleged that the couple did not fully disclose the compensation they received for touting the stocks. The court ordered the couple and their companies to pay more than $3.7 million in disgorgement for profits gained as a result of the alleged conduct, and ordered the couple to pay $300,000 in civil penalties," the alert notes.

In terms of advice, the SEC suggests doing an added layer of due diligence on information sources including looking at how long a source has been posting articles. New sour......................

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