Mama Bear, Thanks for the url to the SEC prosecutions list,
sec.gov which makes interesting reading. It's amazing the scams which people get up to, defrauding hordes of people. Thanks too for the information you've provided, which has been educational.
Interestingly, I noticed Tokyo Joe's and Societe Anonyme which was prosecuted.
He did more than just recommend a stock after positioning himself in it. But just looking at the 'recommending a stock' business and thinking of The Gilder Effect, would it not be questionable that George Gilder [and any other market-moving recommender] can legitimately secretly advise preferred and paying subscribers to their newsletter in advance of telling others the same information? The sellers of stock are placed at a disadvantage compared with other market participants as there is material information which is concealed from all market participants. They sell their stock at prices which would NOT pertain if all information was available.
Comparing the situation to Tokyo Joe, who gained financial advantage by buying stock ahead of releasing his recommendation, GG gains financial advantage by being paid subscriptions ahead of releasing his recommendation. He doesn't buy the stock before the information is public, his subscribers do and pay him for the privilege - the nexus between his tip and payment is obvious.
I'm curious about this and it does seem questionable given the apparent SEC attitude in the Tokyo Joe case. Apart from this pre-trading, Tokyo Joe goes on to do other illegal things, but this in itself was the part I was curious about.
What do you think? Are subscription service tipsters committing some offence knowing that their tips affect the market in a secret way before information is public? The GGMDM certainly can't be put in any category like that. I'm surprised Carrie Lee didn't look closer to home for manipulative actions before defaming me.
Bill, the Californian law enforcement officer, asserted without doubt [if we believe the WSJ.com and Carrie Lee who we know make things up to suit their storyline] that the GGMDM was an illegal manipulation. It seems that a secret, financially paying stock tip which is far more manipulative, would be a glaring case of market manipulation, but with actual profits taken by the participants - both tipster and share buyers.
Of course, in the GGMDM there are no privileged profits to be taken because it's all open and all individuals can take whatever course they prefer at any time. If GGMDM participants sell, they will lose their position in the company and drive the price right down to where it was, nullifying the GGMDM.
All very interesting and the SEC has obviously decided WSJ didn't have a clue about what they were alleging in regard to the GGMDM.
I've been unable to find a case even remotely close to the GGMDM. The great bulk of prosecutions are outright fraud or insider trading. Do you know of any relevant cases?
Mqurice
< S.E.C. v. Yun Soo Oh Park a/k/a Tokyo Joe and Tokyo Joe's Societe Anonyme Corp., (N.D.IL., Case No. 00C 0049, filed January 5, 2000)
On January 5, 2000, the Securities and Exchange Commission (SEC) filed an action charging that Yun Soo Oh Park a/k/a Tokyo Joe (Park), and Tokyo Joe's Societe Anonyme Corp. (Societe Anonyme), a corporation under Park's control, engaged in a scheme to defraud members of his Internet stock recommendation service and the investing public by, among other things, his undisclosed trading ahead of shares he recommended over the Internet for purchase, posting of false performance results, and recommending the stock of an issuer without disclosing that he had indirectly received compensation from that issuer.
Specifically, the Complaint alleges that Park, a resident of New York, New York and the sole shareholder of Societe Anonyme, provides investment advice over the Internet, including stock picks, to his clients, largely members of an Internet day trading community who pay $100 to $200 per month to Societe Anonyme for the privilege of receiving his advice. Park provides such advice via his own web site, known as "Tokyo Joe's", via e-mails to subscribers of his stock recommendations, and via a real time chat room within his web site where he discusses his picks and other investment matters in more detail.
The Complaint alleges that Park has engaged in a scheme to defraud by trading ahead of his recommendations and has obtained substantial profits from such activity. The Complaint alleges that Park regularly buys shares of a stock before recommending that Societe Anonyme members buy the same stock. He then pumps up his members interest in his upcoming recommendations by sending messages typically describing his picks as a sure thing or something he expects to double. When he identifies his pick of the day, many Societe Anonyme members purchase the stock, driving up the stock's price and volume. Park then quickly sells the same stock during this buying flurry at a profit, often entering sell limit orders within minutes of his buy recommendation. Park fails to adequately disclose his prior ownership of a recommended stock, and his intent to sell his shares while he simultaneously recommends the purchase of such shares.
The Complaint further alleges that Park attracts new Societe Anonyme members and recruits current members to follow his recommendations by posting numerous effusive testimonials as well as false and misleading performance data on his web site. Specifically, the Complaint alleges that his performance data includes winning trades he did not actually make, erroneously reports his actual trading profits or losses and fails to include losing trades and other trades necessary to make such performance data not misleading. Finally, the Complaint alleges that, in at least one instance, Park indirectly received compensation from the issuer of a stock he recommended without disclosing his receipt of that compensation.
Based on the foregoing, the SEC filed a Complaint in the United States District Court for the Northern District of Illinois against Park and Societe Anonyme charging violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Section 17(b) of the Securities Act of 1933, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The Complaint seeks the entry of an order of permanent injunction against Park and Societe Anonyme, and ancillary relief in the form of disgorgement of Park's ill gotten gains plus prejudgment interest and the imposition of civil monetary penalties. > |
