Dear Twitter-Based Newsletter Sellers: The SEC Is After You

Tyler Durden's picture

Now that Twitter is officially the second coming of Yahoo Finance message boards, the inundation with offers from clueless hacks who have nothing better to do than sell you $29.95 newsletters with guaranteed get rich quick schemes (one has to be so grateful for this boundless supply of noble humanitarians who would rather see you get rich than follow their own advice, and invest with their own capital), even more guaranteed than Obama's MyRA ponzi scheme, has hit off the charts levels. However, there is some hope this is ending, and the regulators, as usual 3-5 years behind the curve - are finally be cracking down on these self-acclaimed financial Nostradami following an announcement today that the SEC "charged a New York-based money manager and his firm with making false claims through Twitter, newsletters, and other communications about the success of their investment advice and a mutual fund they manage."

And while this description would fit roughly half the people who can't wait to share their copious financial "advise" on the social network (for a modest fee) in this specific case, the SEC was targeting Mark A. Grimaldi and Navigator Money Management (NMM), whom it found that they "selectively touted the past performance of the Sector Rotation Fund (NAVFX) and specific securities recommendations they made to clients.  They cherry-picked highlights but ignored less favorable recommendations and other data that would have made the facts complete."

The SEC’s order finds that Grimaldi also made misleading statements on Twitter.  He claimed responsibility for model portfolios in his newsletters that “doubled the S&P 500 the last 10 years.”  However, Grimaldi made the claim even though he had no involvement in the model portfolio performance for the first three years.

Once again: a description that covers pretty much everyone seeking to retain new clients on "we-only-win-here" Twitter.

Grimaldi agreed to pay a penalty of $100,000, and he and the firm agreed to be censured and comply with certain undertakings including the retention of an independent compliance consultant for three years.  Without admitting or denying the SEC’s findings, NMM and Grimaldi are required to cease and desist from future violations of these sections of the securities laws.

No more Twitter-touting for him. But the worst news for all newsletter peddlers: "SEC exam staff notified NMM that the newsletters could be considered advertisements under Rule 206(4)-1, which generally prohibits false or misleading advertisements by investment advisers." This supposedly also includes his false and misleading tweets, which considering Twitter is a public venue, pretty much guarantee anyone who has been touting their performance is now SEC-fodder.

From the full SEC charge:

“The securities laws require investment advisers to be honest and fully forthcoming in their advertising to give investors the full picture,” said Sanjay Wadhwa, senior associate director for enforcement in the SEC’s New York Regional Office.  “Grimaldi and his firm are being held accountable for using social media and widely disseminated newsletters to cherry-pick information and make misleading claims about their success in an effort to attract more business.”


According to the SEC’s order, Grimaldi is majority owner, president, and chief compliance officer at NMM, which is based in Wappingers Falls, N.Y.  Grimaldi particularly used a newsletter called The Money Navigator to solicit clients for NMM and investors for the Sector Rotation Fund.  The Money Navigator had more than 60,000 subscribers.  In 2008, the SEC conducted an examination of NMM and a fund it managed.  SEC exam staff notified NMM that the newsletters could be considered advertisements under Rule 206(4)-1, which generally prohibits false or misleading advertisements by investment advisers.  SEC staff also noted that the newsletters could be considered advertisements under Rule 482, which governs advertisements for mutual funds and other investment companies and has specific requirements for ads containing performance data.


The SEC’s order details several misleading advertisements made by NMM and Grimaldi in newsletters following that SEC examination.  For example, they misleadingly claimed in a December 2011 newsletter that Sector Rotation Fund was “ranked number 1 out of 375 World Allocation funds tracked by Morningstar.”  However, a time period of Oct. 13, 2010 to Oct. 12, 2011 was cherry-picked to broadly acclaim that ranking, and Sector Rotation Fund had a poorer relative performance during other time periods.  From Jan. 1 to Nov. 30, 2011, the day before Grimaldi published the ad, at least 100 other mutual funds in that same Morningstar category outperformed Sector Rotation Fund.

And the full filing:

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Max Damage's picture

Bullish for Twitter then. $100 a share within a week?

max2205's picture

When will ICann pay his 100k?


Really...that's it? What a fucking joke

Confused's picture

The corruption will continue, after all the cartel needs to protect those that are part of the club. 

zaphod's picture

What the SEC is supose to focus on are the real crimes of market manipulation, which is rampant on wall street.

These are very small fish, why is the SEC wasting their limited time and resources going after what is essentially small message boards, and not going after the mega-bankers. 

IMHO anyone following the advise of small twitter pump and dump schemes deserves their sub par returns. It is supose to be a free market after all, that includes fools being parted from their money, which is different from criminal bankers.


Grinder74's picture

Right, because every mutual fund is totally completely honest about when they win awards.  There's never been a mutual fund before that touted some top ranking.


That NAVFX fund actually did 16.13% last year.  And no I don't work for them/it.


Hey SEC, you might want to look into a little ponzi scheme called MyRA run by some Nigerian Kenyan bank employee posing as an American citizen.

Urban Redneck's picture

Like these twitter feeds... I hear they're offering GUARANTEED returns... But of course the SEC is too busy with tranny porn and little fish.

unrulian's picture

There's a city in Turkey called Myra. Coincedence?


Dr. Engali's picture

I guess the SEC hasn't heard the name Carl Icahn.

VD's picture

does Icahn sell a $29.99 subscription¿¿¿ thatz his 'loophole'....fukn vampire...

Dr. Engali's picture

No his loophole is the fact he's a whale and this mutual fund firm is a minnow.

ParkAveFlasher's picture

iCon has a soccer field/faux stadium named after him on Randalls Island, just south of Hell Gate.  Big shiny stainless steel letters, probably costing more than the field itself, greet Queens-bound drivers ramping onto the Triboro Bridge, "ICAHN STADIUM" (of course, backwards, as the grandstands back up to the massive ramp).  Trance festivals are held adjacent to that.

These financiers (or, financial overseers) own New York, its halls of "justice", and the secret phalanxes of mercenaries dispersed among the myriad ranks of the police and fire departments, and their extensions into the ancient orders of the NYC underworld.  There are laws that do apply to the overseers, only they are the laws of physics, for laws of men are not really laws bound by physical inevitability, they are contracts to be followed or not, and as with all contracts, there are hidden levels of contractual obligation or lenience.

nope-1004's picture

Exactly.  Gaming the casino is only punishable if you tweet the newsletter.  Which means the SEC is actually saying that the content of the 140 characters (and therefore Twitter itself) is worthless.


maskone909's picture

**Click here to see how this man consistantly made 100% gains! No he doesnt work for a primary dealer.

Pheonyte's picture

Something tells me that Icahn's twitter pumping of AAPL won't be included in this crackdown.

pods's picture

Hmmm, so IcahnTweet might be next?  

Or is this just a net that catches little fish?   


Grinder74's picture

That's all their net ever catches: little fish.  Because the little fish can't afford the lawyers to fight back.  

Obama_4_Dictator's picture

anyone explain to me why the DOW is up 100 points today...did I miss something??

MsCreant's picture

Uh, shit's rigged? Miss that?

Pheonyte's picture

Facepalm's earnings. Fonz called it last night.

Skateboarder's picture

Cuz the DOW 20,000 hats aren't gonna sell if it goes down.

MsCreant's picture

So they are going after Goldman?

Or Jon Corzine?


buzzsaw99's picture

Error: Twitter did not respond. Please wait a few minutes and refresh this page.

philosophers bone's picture

Go after the little guys and expose the little lies.  Or maybe once and a while for optics go after the "big guys" (corporation only, not individuals) and expose the little lies.   But never expose the "big lies".  Edward?

Dr. Engali's picture

$100,000 should be enough to cover the SEC's porn subscriptions for a month.

Bunga Bunga's picture

When you run out of basic necessities you really need to do something.

Pure Evil's picture

It costs a lot of money to watch little people shag the carpet.

Midget tranny porn is where its at!

spankfish's picture

"SEC "charged a New York-based money manager and his firm with making false claims through Twitter, newsletters, and other communications about the success of their investment advice and a mutual fund they manage."

I call bull shit!  Nobody at the SEC smart enough to do this or has enough of an attention span to drop the "youporn" tube link.

buzzsaw99's picture

they have help from ferc and the cftc. lulz lulz lulz

FieldingMellish's picture

Attention SEC: MyRA claims to provide a "guaranteed return with no losses". I would investigate.

RabbitChow's picture

So you can still sell your 29.95 newsletter as long as you don't manage any funds or are a registered securities broker. 

Uncle Sugar's picture

Stay with Cramer!   /sarc

29.5 hours's picture

The SEC going after people who make misleading statements. Yes...Tempted to say something scathing and ironical but it chokes in my throat. My grasp of the English language does not suffice to express the contempt the SEC deserves.


ziggy59's picture

Does this apply to iiCon, icahn?

kchrisc's picture

Now I get it, Corzine didn't sell a newsletter. That explains everything.

"Banksters, the world destroying aliens amongst us."

Iam Yue2's picture

I hear they are after Bill Gross for this;


"UK economy lies 'on bed of nitroglycerine"

ZDRuX's picture

Just another restriction on freedom of speech.

Max Cynical's picture

Too little...too late.

Faith and trust in the markets was lost long ago.

jballz's picture


Wow this is some pretty harsh treatment of internet hacks for a site pushing goldcore and reggie and a whole slew of fairly assholish permabears and goldbugs selling advice.


The way I read this is.....SEC is coming after zerohedge, just alphabetically and got to T so far.


ATG's picture

ZH next SEC target?


Whatever happened to our First Amendment/Bill of Rights?