Cease and Desist Order Sought Against Internet Investor Relations Firm and its President
On February 24, 1999 the SEC issued an order to institute cease-and-desist proceedings against a Minnesota-based investor relations company, alleging that it and its president violated the anti-touting provision of the Securities Act of 1933 by publishing profiles of publicly-traded companies on an Internet website, and by e-mail, without disclosing fully that the firm had received cash or stock from the issuers in exchange for the publications.
In the same order, the Commission authorized an administrative proceeding to determine whether any remedial sanction against the president is appropriate and in the public interest based on his recent conviction for federal securities fraud.
The Commissions order alleges that the president, whose May 1998 securities fraud conviction stemmed from matters unrelated to the Commissions current allegations, and his company, promoted the stock of ten different publicly-traded companies on its website in exchange for over $180,000 in cash and a total of 322,500 shares of stock from issuers profiled on the website.
One of the firms featured companies, was touted on the website as a “strong speculative buy.” The order further alleges that the president, through the firm broadcasted the firm’s “Low Price Stock Alerts” to 500,000 potential investors through unsolicited Internet e-mail.
The order alleges that as a result of the conduct described, the firm and its president violated Section 17(b) of the Securities Act of 1933 by touting issuers securities on the Internet website and by e-mail without disclosing fully the nature and amount of compensation received from the issuers.
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Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article.