02, 2017 09.57AM / SEC Division of Enforcement and SEC Office of
Compliance Inspections and Examinations
and others are using social media networks to encourage the public to purchase
stocks and other investments.
endorsements may be unlawful if they do not disclose the nature, source, and
amount of any compensation paid, directly or indirectly, by the company in
exchange for the endorsement. The SEC’s Enforcement Division and Office
of Compliance Inspections and Examinations encourage investors to be wary of
investment opportunities that sound too good to be true. We encourage
investors to research potential investments rather than rely on paid
endorsements from artists, sports figures, or other icons. Celebrities
and others have recently promoted investments in Initial Coin Offerings
(ICOs). In the SEC’s Report of
Investigation concerning The DAO, the Commission warned that virtual tokens
or coins sold in ICOs may be securities, and those who offer and sell
securities in the United States must comply with the federal securities
celebrity or other individual who promotes a virtual token or coin that is a
security must disclose the nature, scope, and amount of compensation received
in exchange for the promotion. A failure to disclose this information is
a violation of the anti-touting provisions of the federal securities
making these endorsements may also be liable for potential violations of the
anti-fraud provisions of the federal securities laws, for participating in an
unregistered offer and sale of securities, and for acting as unregistered
brokers. The SEC will continue to focus on these types of promotions to
protect investors and to ensure compliance with the securities laws.
should note that celebrity endorsements may appear unbiased, but instead may be
part of a paid promotion. Investment decisions should not be based solely
on an endorsement by a promoter or other individual. Celebrities who
endorse an investment often do not have sufficient expertise to ensure that the
investment is appropriate and in compliance with federal securities laws.
Conduct research before making investments, including in ICOs.
you are relying on a particular endorsement or recommendation, learn more
regarding the relationship between the promoter and the company and consider
whether the recommendation is truly independent or a paid promotion.
more information, see an Investor
Alert that the SEC’s Office of Investor Education and Advocacy issued today
regarding celebrity endorsements.