Should it become, "Don't write the post if you can't do the time?"
Many of us appreciate how busy the U.S. Securities & Exchange Commission is these days. But we should all hope that the SEC will eventually turn their attention to what is rapidly becoming an epidemic as fast as Ponzi schemes and Swine Flu. I’m referring to the explosion of the foolhardy who think they can profit in the equities markets by spreading erroneous information about publicly-traded companies via the Internet. While this has been an ongoing issue since the days of Web 1.0, the likes of Twitter and other new social networking technologies make it even easier to blast out fake news and unfounded rumors in an attempt to manipulate stock prices. And it’s only going to get worse, IMHO.
When they decide to get tough on enforcement, the SEC usually does a fine job of enacting regulations designed to protect investors. For example, the SEC’s Regulation Fair Disclosure, or Reg FD for short, was designed to ensure that companies were feeding all investors material information on a timely, widely available basis, instead of providing news to a few select investment firms and others. Reg FD profoundly changed investor and public relations, and leveled the playing field for anyone who even owns a single share of common stock.
In the early days of the Web, there were a few celebrated cases of seedy individuals issuing to what amounts to fake news releases in an attempt to drive stock prices and profit illegally. And there’s always the daily chatter in message boards that attempts to do the same thing by spreading rumors about particular companies.
But these may pale by comparison to the potential of stock manipulation through the use of social media. Perhaps we need new securities regulations that address the abuse of social media and other modern forms of electronic communication. But, any new rules will need to have severe economic deterrents and maybe even jail time. Send a fake securities tweet, do the perp walk to the federal pen. Getting caught and convicted of market monkey-do needs to be not worth the risk of attempting to earn a few shekels by shorting a stock after sending bogus info via your thumbs.
