Bloggers Need to Understand SEC Disclosure Rules

Blogs are an amazing tool for amassing personal wealth if you have a substantial amount of traffic. You can make money from Adsense, Chitika, Text Link Ads and literally hundreds of other affiliate / advertising programs. Bloggers need to understand though that when they start to recommend purchasing shares of a publicly traded company that there are certain guidelines that they need to follow, or else they risk getting into trouble with the SEC.

The news that Jerome Armstrong, co-founder of the Daily Kos, was being fined about $30k by the SEC led me to write this article. The SEC alleges that Armstrong was touting the stock of Bluepoint Linux Software Corporation in 2003, and pimping the stock quite hard on the Raging Bull message board. Armstrong didn't mention to the people on the message board that he was in fact being compensated by Bluepoint in the form of shares. Armstrong ended up making about $20,000 from Bluepoint, and has just now agreed to pay a $30k penalty.

If you recommend that people purchase shares in a company and you own shares and/or have been otherwise compensated by the company, you need to disclose this. Do you own a small position in the company? You need to disclose. Are you an original equity investor in a now publicly traded company? You need to disclose this. Has the company compensated you in the way of cash or other perks? You need to disclose this.

It is as simply as putting at the bottom of the article "Company XYZ has paid me $2000 to post a review of their company." You may think that it cheapens the review if you have posted that you were paid for it, but tough: it's better than paying a hefty fine down the road. If a company is publicly traded and you are touting them in any way, and you have some sort of a financial relationship with them, you want to disclose your relationship with them for your own sake.

Filed under: Making Money Online | Stock Market Education | General Knowledge