The SEC faces an uphill battle when it comes to fighting online commentary that hypes stocks. Officials must prove that the information posted online was an organized attempt to change stock prices. It is not against the law to discuss stock hunches online, but deliberately posting wrong information about a company to try to manipulate their stock is against the law. In extreme cases, the SEC can stop a company from selling shares of the company.
What are some warning signs to watch for when looking at investment advice on the internet?
The SEC says that there are several warning signs that investors may want to watch for when looking at investment advice on the internet. Fraudsters can create new accounts with the limited purpose of committing the scam while keeping their identity hidden. They often use emotional words to convince you that you must act immediately else will miss out on a good deal.
Use caution if someone you do not know sends you a direct message or posts something to your account. Before finalizing a sale, make sure to check with the SEC to make sure that the seller or buyer is registered.
What are some examples of securities fraud using social media?
In several cases, the SEC has charged someone with committing securities fraud using social media. In some cases, people are given many shares of a company and asked to sell them at the same time to try to drive down the cost of that share.
Posting misleading information about a company in hopes of causing investors to buy or sell stocks is not permitted. If you think that you have been harmed by a fraudster when buying or selling stock, a securities law attorney may be able to help.