SEC Charges 27 Firms and Individuals with Fraudulent Promotion of Stocks

The SEC brought enforcement actions against 27 individuals and companies to send a clear message on stock promotion: payments for bullish articles on stocks must be disclosed to investors.

The alleged stock promotion schemes were designed to give investors the impression that the articles were an independent, non-biased analysis of a given company’s stock. Instead, the articles were written by authors who failed to disclose that they had received compensation in exchange for publishing articles that recommended different types of stocks.

Those charged include: Michael A. McCarthy, The DreamTeam Group, LLC, Mission Investor Relations, LLC, Quality Stocks LLC, Lidingo Holdings, LLC, its owner Kamilla Bjorlin, Bjorlin’s associate Andrew Hodge, and hired writers Brian Nichols and Vincent Cassano, CSIR Group, LLC, its owner Christine Petraglia, Petraglia’s associate Herina Ayot, and hired writers Thomas Meyer, and John Mylant, and twelve others.  

The articles were published on popular investing websites, like Seeking Alpha, that are highly-regarded by many in the finance and investment community. Stephanie Avakian, Acting Director of the SEC’s Division of Enforcement, commented on the enforcement actions, remarking, “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,”

In all, fraud charges were filed against three public companies, seven stock promotion firms, two company CEOs, six individuals at the firms, and nine writers. Seventeen of the 27 have already hammered out a settlement agreement, the details of which involve penalties ranging from a little over $2,000 to $3 million, depending upon the frequency and severity of the stock recommendations. The remaining ten still face litigation against the SEC.

Investors should be wary of all investment research websites, despite whether they believe it to be an unbiased source. Many readers are likely to encounter some form of undisclosed paid stock promotion scheme, and as a result, investors should take care never to make an investment merely off information gleaned from an investment research website.

Stock promotion schemes may be conducted through investment research websites,” said Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy.  “Investors looking for objective investment information should be aware that fraudsters may use these websites to profit at investors’ expense.