Rawstory is reporting that Facebook is treating its user’s posts differently based on their wealth and status, which may cause problems with the SEC.
According to the post, a Wall Street Journal investigation revealed that Facebook’s internal algorithm allows certain users to get around the company’s enforcement procedures, which is contrary to its public statements that all users are treated equally regarding offensive posts.
Whether this translates into securities fraud is a different matter. In order for there to be a securities law violation based on misrepresentations, the misrepresentation needs to be material, and knowingly false. And that misrepresentation must relate to or affect the company’s securities.
Failing to disclose a material fact could be a violation, if it misled investors.
However, it remains to be seen if this allegation, of different standards for different users, rises to a level of a material misrepresentation that misled investors and the value of the stock.
Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.
