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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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Thu, 01/30/2014 - 12:18 | 4384242 Max Damage
Max Damage's picture

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

Thu, 01/30/2014 - 12:20 | 4384253 InjectTheVenom
InjectTheVenom's picture

You didn't tweet that !

Thu, 01/30/2014 - 12:32 | 4384296 max2205
max2205's picture

When will ICann pay his 100k?

 

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

Thu, 01/30/2014 - 12:54 | 4384358 Confused
Confused's picture

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

Thu, 01/30/2014 - 13:12 | 4384379 zaphod
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.

 

Thu, 01/30/2014 - 12:32 | 4384298 WarriorClass
WarriorClass's picture

My advice is completely non-profit.

http://americandictators.blogspot.com/

Thu, 01/30/2014 - 12:29 | 4384288 Grinder74
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.

Thu, 01/30/2014 - 15:03 | 4384818 Urban Redneck
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.

https://twitter.com/WhiteHouse

https://twitter.com/BarackObama

Thu, 01/30/2014 - 12:17 | 4384247 unrulian
unrulian's picture

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

Probably

Thu, 01/30/2014 - 12:18 | 4384249 Dr. Engali
Dr. Engali's picture

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

Thu, 01/30/2014 - 12:21 | 4384257 VD
VD's picture

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

Thu, 01/30/2014 - 12:22 | 4384266 Dr. Engali
Dr. Engali's picture

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

Thu, 01/30/2014 - 12:39 | 4384323 ParkAveFlasher
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.

Thu, 01/30/2014 - 12:23 | 4384272 nope-1004
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.

 

Thu, 01/30/2014 - 12:34 | 4384302 maskone909
maskone909's picture

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

Thu, 01/30/2014 - 12:19 | 4384250 Pheonyte
Pheonyte's picture

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

Thu, 01/30/2014 - 12:20 | 4384252 pods
pods's picture

Hmmm, so IcahnTweet might be next?  

Or is this just a net that catches little fish?   

pods

Thu, 01/30/2014 - 12:30 | 4384292 Grinder74
Grinder74's picture

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

Thu, 01/30/2014 - 12:20 | 4384254 Obama_4_Dictator
Obama_4_Dictator's picture

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

Thu, 01/30/2014 - 12:21 | 4384261 MsCreant
MsCreant's picture

Uh, shit's rigged? Miss that?

Thu, 01/30/2014 - 12:22 | 4384268 Pheonyte
Pheonyte's picture

Facepalm's earnings. Fonz called it last night.

Thu, 01/30/2014 - 12:25 | 4384274 Skateboarder
Skateboarder's picture

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

Thu, 01/30/2014 - 12:28 | 4384283 Bunga Bunga
Bunga Bunga's picture

cause Pres announced MyQE.

Thu, 01/30/2014 - 12:22 | 4384265 MsCreant
MsCreant's picture

So they are going after Goldman?

Or Jon Corzine?

Just...nevermind.

Wed, 02/05/2014 - 21:53 | 4406484 MeelionDollerBogus
MeelionDollerBogus's picture

FREE JON CORZINE!!

Thu, 01/30/2014 - 12:24 | 4384269 buzzsaw99
buzzsaw99's picture

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

Thu, 01/30/2014 - 12:23 | 4384271 philosophers bone
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?

Thu, 01/30/2014 - 12:25 | 4384276 Dr. Engali
Dr. Engali's picture

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

Thu, 01/30/2014 - 12:30 | 4384286 Bunga Bunga
Bunga Bunga's picture

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

Thu, 01/30/2014 - 12:31 | 4384291 Pure Evil
Pure Evil's picture

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

Midget tranny porn is where its at!

Thu, 01/30/2014 - 12:34 | 4384303 spankfish
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.

Thu, 01/30/2014 - 12:35 | 4384308 buzzsaw99
buzzsaw99's picture

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

Thu, 01/30/2014 - 12:38 | 4384315 FieldingMellish
FieldingMellish's picture

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

Thu, 01/30/2014 - 12:39 | 4384319 RabbitChow
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. 

Thu, 01/30/2014 - 12:40 | 4384321 Uncle Sugar
Uncle Sugar's picture

Stay with Cramer!   /sarc

Thu, 01/30/2014 - 12:41 | 4384333 29.5 hours
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.

 

Thu, 01/30/2014 - 12:50 | 4384346 ziggy59
ziggy59's picture

Does this apply to iiCon, icahn?

Thu, 01/30/2014 - 12:59 | 4384376 kchrisc
kchrisc's picture

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

"Banksters, the world destroying aliens amongst us."

Thu, 01/30/2014 - 13:50 | 4384510 Iam Yue2
Iam Yue2's picture

I hear they are after Bill Gross for this;

 


"UK economy lies 'on bed of nitroglycerine"

Thu, 01/30/2014 - 14:05 | 4384557 ZDRuX
ZDRuX's picture

Just another restriction on freedom of speech.

Thu, 01/30/2014 - 14:36 | 4384654 Max Cynical
Max Cynical's picture

Too little...too late.

Faith and trust in the markets was lost long ago.

Thu, 01/30/2014 - 14:54 | 4384756 jballz
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.

Junked...lame.

Thu, 01/30/2014 - 15:07 | 4384844 ATG
ATG's picture

ZH next SEC target?

 

Whatever happened to our First Amendment/Bill of Rights?

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