SEC Hunts for Fraud in Social Media Posts
The SEC is reviewing social media posts and message board posts for signs of potential fraud in frenzied trading of GameStop and other companies, according to a new report. The agency’s investigation is happening alongside scrutiny of trading data to evaluate whether such posts were part of a manipulative effort to drive up share prices. The agency is specifically searching for evidence that fraud was committed.
Acting chair Allison Herren Lee said in a statement earlier this week that the agency was looking at, “compliance with regulatory obligations, adequate and consistent risk disclosure, and determining if any fraudulent or manipulative behavior has occurred.”
While the SEC doesn’t regulate social media or message boards, the agency has brought cases against firms for social media pitfalls. Two robo-advisers were previously charged with violating rules on recordkeeping, antifraud, advertising and compliance. But pressure is growing for regulators to address the ramifications of the recent trading saga.
As a result, firms should ensure that social media channels approved for business purposes are included in their recordkeeping and supervisory processes.
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