Hundreds of articles published on top financial news sites were authored by individuals being paid to promote certain biotech stocks, according to enforcement actions announced today by the U.S. Securities and Exchange Commission. Such payments were not disclosed to readers, nor apparently to the sites themselves.
The charges: The SEC alleges that 27 individuals and entities "posted bullish articles about [publicly-traded] companies on the Internet under the guise of impartiality when in reality they were nothing more than paid advertisements." So far the SEC has settled with 17 of those charged ― with disgorgement and penalties ranging from $2,200 to nearly $3 million ― while it remains in litigation with the other 10.
What sites? Seeking Alpha, Forbes, TheStreet, Yahoo Finance, The Motley Fool, Benzinga, Minyanville, WallStCheatSheet, Small Cap Network, Investor Village and Market Playground. None of the sites are named in the charges.
Why it matters: Many financial sites publish contributed articles with little editorial oversight, as a way to increase volume. That makes it incumbent on readers to do their own research on authors, particularly if using the posts as the basis for stock trading decisions.