SEC Moves to Stop Social Media Marketing Scheme

The SEC has commenced an enforcement action against the principals behind a high yield offering scheme utilizing social media including a website, Facebook, Twitter, and GooglePlus.  The respondents, software engineers in India, promised U.S. retail investors high returns for low risk by investing in forex, stocks, and commodities.  The SEC alleges that the respondents actually engaged in a complete fraud through social media marketing that used on-line aliases and dummy accounts to perpetrate their scheme.  In an effort to warn investors, the SEC’s Office of Investor Education and Advocacy issued an Investor Alert titled:  “Social Media and Investing – Avoiding Fraud.”

OUR TAKE: Social media marketing carries the same securities law liability as traditional marketing.  Also, firms should know that the SEC monitors social media to discover misleading materials and uncover fraud.

http://www.sec.gov/litigation/admin/2014/33-9679.pdf

http://investor.gov/news-alerts/investor-alerts/investor-alert-social-media-investing-avoiding-fraud