SEC Fires Warning Shot Against 'Short And Distort' Schemes

By Perrie Weiner, Edward Totino and Aaron Goodman ( September 26, 2018, 2:19 PM EDT) -- Enter any company name into your favored internet search engine and look up financial "news." The result, more often than not, will yield the current stock price and recent articles, blogs and posts featuring related so-called financial analysis. Updated daily or even hourly, these posts come from a variety of sources, some reputable and others unknown "analysts" posting under fictitious names. Amid the digital press in search results, inboxes and social media platforms, primacy and recency have become more important than credibility and reliability. A small handful of savvy short sellers and possible fraudsters, posing as "analysts," have taken advantage of this relatively unregulated digital frontier to reap hefty profits at the expense of companies and other shareholders. To be sure, the majority of short selling, including by bona fide market analysts who inject true and correct information into the marketplace based on diligent research, and properly disclose their own short positions, serves an important market function, helping to create an efficient marketplace. Still, there remain some unscrupulous traders who will take a short position in a company, then post, and repost, false or distorted news (e.g., BuzzFeed-style headlines based on some badly abused crumb of truth or allegation) under the guise of "financial analysis," in the hope that it will trigger a market sell-off. It sometimes works....

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