Social media influencers should take note that in December 2022, the US Securities and Exchange Commission (the “SEC”) laid charges against several social media influencers for securities fraud. In an age where CEOs juggle their personal brand as the leader of their company and social media lends an immediacy of communication and a democratization of fame, governments are increasingly regulating and enforcing against social media influencers.
What were the Charges Laid?
The SEC charged social media influencers for “pump and dump schemes”, which is a deceptive marketing practice whereby the company or its controlling persons publicly announce that they will inflate the price of the company’s shares and then liquidate their shares at the inflated price, thereby profiting from their own announcement. The SEC penalized influencers who are not controlling persons but are incentivized to participate in pump and dump schemes, contrary to securities laws. Although this is a US legal issue, Ontario’s securities laws also guard against deceptive marketing practices.
What is the Take Away?
Influencers and public leading figures of companies need to be careful in their public discourse. Over the last few years, governments have been increasingly confirming that social media influencers fall squarely under the law through issuance of white papers, new legislation, and regulations. Dishonesty, fraud, and deceptiveness will not be tolerated.
If you would like assistance complying with social media influencer laws, contact us at Froese Law.