SEC: Online Stock Analysts are Often on the Take
The Securities and Exchange Commission issued enforcement actions against 27 individuals and entities behind various alleged stock promotion schemes where public companies hired communications firms to generate publicity for their stocks by hiring writers who were being secretly compensated to publish favorable articles. 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.
Many of the paid articles were published on investment website, Seeking Alpha, by authors allegedly using multiple pseudonyms. Seeking Alpha previously allowed writers to publish articles on their website for which they received compensation, if it was disclosed. However, the website changed its policy in June 2012 and stopped allowing such articles to be published.
“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.
According to the SEC’s orders as well as a pair of complaints filed in federal district court, deceptive measures were often used to hide the true sources of the articles from investors. For example, one writer wrote under his own name as well as at least nine pseudonyms, including a persona he invented who claimed to be “an analyst and fund manager with almost 20 years of investment experience.” One of the stock promotion firms asked the writers it hired to sign non-disclosure agreements specifically preventing them from disclosing compensation they received.
The SEC 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. The SEC’s litigation continues against 10 others.
The defendants include:
- Biopharmaceutical company Galena Biopharma (NASDAQ: GALE) and its then-CEO Mark Ahn
- ImmunoCellular Therapeutics (NYSE: IMUC), and its former chief executive officer, Manish Singh
- Lion Biotechnologies (NASDAQ: LBIO) and its former chief executive officer, Manish Singh
- Stock promotion firm, Lidingo Holdings, with owner Kamilla Bjorlin and her associate Andrew Hodge
- Stock promotion firm, CSIR Group, with owner Christine Petraglia and her associate Herina Ayot
- Stock promotional firm, Lavos
- Michael McCarthy, through three entities he owns: The DreamTeam Group, Mission Investor Relations, and QualityStocks
- Investor relations firm, Dunedin, and its sole principal Edward Borrelli
- Writer Thomas Meyer
- Writer John Mylant
- Writer Ciaran Thornton
- Writer Brian Nichols
- Writer Vincent Cassano
- Writer Stephen Ramey
- Writer Joel Corenman
- Writer Craig Keolanui
- Writer Christopher French
