Saturday, May 30, 2020

SEC Issues Warning on Social Media Influencer Disclosures

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Richard B. Newmanhttp://www.hinchnewman.com
Richard B. Newman is an Internet Lawyer at Hinch Newman LLP focusing on advertising law, Internet marketing compliance, regulatory defense and digital media matters. His practice involves conducting legal compliance reviews of advertising campaigns across all media channels, regularly representing clients in high-profile investigative proceedings and enforcement actions brought by the Federal Trade Commission and state attorneys general throughout the country, advertising and marketing litigation, advising on email and telemarketing best practice protocol implementation, counseling on eCommerce guidelines and promotional marketing programs, and negotiating and drafting legal agreements.

Earlier this month, the U.S. Securities and Exchange Commission issued a statement on the potentially unlawful promotion of initial coin offerings and other investment by celebrities.

Along with the Federal Trade Commission, the SEC’s Enforcement Division and Office of Compliance Inspections and Examinations are keenly aware that celebrities and others are using social media networks to encourage the public to purchase stocks and other investments.  These endorsements may be unlawful if they do not disclose the nature, source and amount of any compensation paid, directly or indirectly, by the company in exchange for the endorsement.

According to the SEC, celebrities and others have recently promoted investments in Initial Coin Offerings (ICOs).  In the SEC’s Report of Investigation, the Commission warned that virtual tokens or coins sold in ICOs may be securities, and those who offer and sell securities in the United States must comply with the federal securities laws.

A failure to make required disclosures is a violation of the anti-touting provisions of the federal securities laws.

Persons making these endorsements may also be liable for potential violations of the anti-fraud provisions of the federal securities laws, for participating in an unregistered offer and sale of securities, and for acting as unregistered brokers.

Alongside the FTC’s efforts to police paid influencer campaigns, the SEC will continue to focus on these types of promotions to protect investors and to ensure compliance with the securities laws.

Contact the author at rnewman@hinchnewman.com if you are interested in learning more about compliant influencer campaign practices or are the subject of a regulatory investigation.

 

ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result. Hinch Newman LLP | 40 Wall St., 35thFloor, New York, NY 10005 | (212) 756-8777

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