Investing: Cracking down on fake stock news
Looks like Wall Street “has its own fake news problem,” said Dan Primack in Axios.com. The Securities and Exchange Commission said in early April that hundreds of articles published on some of the web’s biggest financial news sites were written by authors who were secretly paid to promote specific biotech stocks, often under pseudonyms. Twenty-seven companies and individuals were charged with posting “bullish” articles disguised as unbiased analysis to sites like Seeking Alpha, Forbes, Yahoo Finance, TheStreet, Benzinga, and The Motley Fool. None of the publications involved has been accused of any wrongdoing, but many of them take submissions “with little editorial oversight.”
“The internet has been used for this type of market manipulation since its early days,” said Jeremy Owens in MarketWatch.com. Unscrupulous investors buy a stock cheap and then circulate misleading information about it, hoping to push up its value long enough for them to sell their shares at a profit. This classic “pump and dump” scheme is even more dangerous now that traders are using computer algorithms to constantly scour the internet in search of market-moving “news.” But it’s far from the only way “scammers seek to trick traders (and their algorithms) into doing their bidding.” In recent years, “bad actors” have also impersonated financial journalists on Twitter and even built fake versions of real financial news sites in order to spread stock rumors.
“You know to be careful with what you read and share online, but that’s especially true if you have money on the line,” said James Dennin in Mic.com. Luckily, bogus stock tips shouldn’t be too hard to spot. Many of the articles identified by the SEC came from questionable bylines like “Trading Maven” and “Wonderful Wizard,” pseudonymous authors claiming to be experienced traders. Most websites also publish disclosures that make it clear when content has come from a third-party source. Better yet, though, “don’t act on stock tips at all—and instead stick with what most financial planners suggest: holding diversified, well-vetted index funds.”
The SEC “has a steep climb ahead” if it really wants to get rid of phony stock news, said John Kimelman in Barrons.com. It’s illegal for companies to circulate fraudulent stories about their stock, but there’s no law against news sites running them. It also doesn’t help that many financial websites rely on armies of unpaid contributors to generate traffic. Many publications require that contributors disclose any conflicts of interest, but there’s nothing to stop paid stock manipulators from simply lying. “In other words, news sites have the right to be duped, just as long as they aren’t part of the conspiracy.”