Rumors In The Financial Market PDF Download

There are a few things that the United States prides itself on: liberty, democracy, and a free market system. Since its inception, the financial market has defined the financial market has defined the United States' position as a global leader. Therefore, balancing issues involving both the First Amendment and the free market system can be complex. On April 10, 2017, the Securities Exchange Commission ("SEC") filed twenty-seven complaints for fraudulent promotion of stock against stock promotion firms and holding companies. The holding companies paid writers to generate hundreds of optimistic articles about public company clients while concealing from investors that these were paid promotions. Out of the twenty-seven complaints, one company, Lidingo Holdings LLC ("Lidingo Holdings"), has garnered the most publicity. Beginning in 2010, Lidingo Holdings allegedly disseminated fake or hyperbolic information about stock options to either inflate or denigrate buyers' interest. The SEC mandates that stock promoters disclose their relationship with holding companies. Failure to disclose leads stockholders to believe the source was an independent researcher. This is where the First Amendment intersects with the financial markets. This Comment will focus on how market manipulation and the First Amendment could affect how the U.S. District Court for the Southern District of New York will decide SEC v. Lidingo Holdings, LLC "fake news" case. Section II will provide a primer of the history and evolution of market manipulation schemes, describe the SEC and its regulatory powers, look at the historical strength of the First Amendment, and introduce cases that can be used as precedent going forward. Section III will analyze prior cases and apply those rulings to Lidingo Holdings, to argue that the SEC should use a similar justification that the Federal Trade Commission ("FTC") uses for disseminating harmful commercial speech. Finally, Section IV will recommend that the court find the speech in Lidingo Holdings constitutes commercial speech, and further, that the SEC should implement a whistleblower program to regulate fake news, as well as follow the FTC's enforcement actions when dealing with fake news in the commercial speech context.