How are services like Tim Sykes and other services like his legal? They are sending alerts of when to buy and sell stocks. Is it a grey area?
Until the anti-America Left achieves its goal of, "the destruction of America and total dictatorial power/control over everything we say, do, think", etc.... it's still legal to voice an opinion* about anything... even stocks and the market. *See... 1st Amendment to US Constitution
He most likely adds a disclaimer which says that his service is only "training and education" and not "investment advice" (which is B.S., but whatever). Also has a lot of disclaimers saying that this is high risk and that you can lose all of your money (in fine print of course). Training and education services are mostly exempt from regulatory requirements of investment advisors, which is a loophole wide enough to drive a truck through.
There have been enough recent regulatory constraints to effectively curb the penny stock trade. Momo days are largely over. It doesn't work so well when a scumbag can't issue a twitter or letter that doesn't move (manipulate) the POS issue.
It's not this "loophole". It's freedom of speech... same as op-ed views in newspapers. Years ago when the SEC was arguing to regulate newsletter writers, the SCOTUS shot them down under 1st Amendment. But of course... if you are using your newsletter in an attempt to manipulate price to your/family members/associates financial advantage (like in a scheme of "pump-and-dump")... that's a different kettle of fish.
This is taken directly from Mr. Sykes's Terms of Service page. Excellent CYA job. (I'll make you rich, but I'm not legally giving you advice): GENERAL DISCLAIMER The Company is not an investment, financial, tax, or legal advisor or a broker-dealer and does not purport to provide personalized investment, financial, tax, or legal advice in any form. The Company does not recommend the purchase of particular securities nor does the Company promise or guarantee any particular investment results. You understand and acknowledge that there is a very high degree of risk involved in trading securities and, in particular, in trading futures and options, and in trading penny stocks. You acknowledge and agree that you, and not the Company, are solely responsible for your own investment research and decisions. Do not trade with money that you cannot afford to lose. You understand that the Company encourages you to seek the advice of a qualified securities professional and/or tax or legal advisor, as necessary, before making any investment, and to investigate and fully understand any and all risks before investing. The Company assumes no responsibility or liability for your trading and investment results and you agree to hold the Company harmless for any such results or losses. Past results of any individual trader or trading system published by the Company are not indicative of future returns by that trader or system, and are not indicative of future returns which may be realized by you. In addition, the methods, techniques, information, content, indicators, strategies, columns, articles and all other features of the Company Sites and Materials, or any Company product or service, (collectively, the “Information”) are provided for informational and educational purposes only and should not be construed as investment advice. Accordingly, you should not rely on the Information in making any investment. Rather, you should always perform additional independent research in order to allow you to form your own opinion regarding investments. You are solely responsible for your own trading decisions, and nothing in the Information is intended to be or should be interpreted as a promise or guarantee of any particular result. You should always check with your licensed financial, investment, legal, or tax advisor to determine the suitability of any investment.
I believe this question is in regard to sending alerts to buy stocks and investing in them himself, using the news letter to push price higher, not just making recommendations. I think Tim is smart enough to not invest in his recommendations and prefers to just fleece the subscribers of monthly payments he received whether his calls make money or not. Just making buy and sell recos to the general public though is protected but if people are willing to blindly buy stocks based on newsletter recommendations then they get what they deserve.
Both the SEC and CFTC have actually gone after folks like this when their performance claims or other claims are fraudulent. Disclaimers don't protect them from committing fraud. The AGs of every state have the power to examine commerce - especially if they believe fraud is ongoing. The are classic cases where folks like this have been tagged and one of the keys has been actual commerce. Wade Cook (best selling author) was a classic example and his mailing list was so valuable it was the only asset when he filed bankruptcy to get from under the fines. If you really think the guy is a fraud reach out to your state AG. Most states you can do it online.
FOR IMMEDIATE RELEASE: Oct 5 2000 SEATTLE - Oct. 5, 2000 - Two Seattle-area companies that allegedly sold "get rich quick" investment advice not backed up by results will discontinue deceptive practices and pay millions of dollars back to consumers. Those terms were agreed to by Wade Cook Financial Corporation and Wade Cook Seminars Inc., in consent decrees signed with Washington state and the Federal Trade Commission. The agreement was announced today by Attorney General Christine Gregoire, Washington state Department of Financial Institutions Director John Bley, and FTC Regional Director Charles Harwood. The consent decrees are part of a series of legal settlements being negotiated between Cook's companies and 14 states, including Washington. The settlement with Washington was filed in King County Superior Court and incorporates a separate consent decree filed this week in U.S. District Court in Seattle by the Federal Trade Commission. Under terms of the decrees, Cook's companies will stop using deceptive practices and pay restitution to as many as 13,400 Washington consumers who paid a total of $53.8 million to participate in Wade Cook seminars. Further, Wade Cook Financial will pay Washington state $136,000 for consumer education and to reimburse the state for its investigative costs. Wade Cook, the founder of the companies, is a former Tacoma cab driver turned stock market guru. "Cook made his millions selling seminars, not playing the stock market as he has advertised. He either deceived consumers or he didn’t follow his own trading advice," Gregoire said. "This case is not about good or bad advice. It is about Cook's failure to be truthful in his presentations," Bley pointed out. "He should have to tell the truth about his success, just like everyone we regulate. We hope our actions will ensure that he does so from now on." The complaint filed simultaneously with the consent decree alleges that Cook’s companies made false claims about the wealth he acquired and told others they could duplicate his financial success if they followed the trading formulas taught in the seminars. The complaint also alleged that Cook’s companies manipulated claims of financial success by not disclosing losing transactions; and that the companies falsely reported trading transactions. The two companies, headquartered in Tukwila, made $110 million from the sales of financial seminars and other products last year. Cook personally made $18 million in royalties during the same time period. "Our staff reviewed the stock market trades by Cook’s companies over a period of several years, and found that his annual returns ranged from plus 3.3 percent to a 5.3 percent loss," said Bley. "All this while he was claiming triple-digit returns for his stock and options strategies." Consumers are lured to free financial seminars, say regulators, with promises they will gain wealth and riches by following Cook’s investment formulas. The seminars are actually three-hour sales pitches for a two-day Wall Street Workshop that costs between $3,000 to $5,000 and teaches consumers the formulas to Cook’s trading "success." In 1998, the corporation held 3,733 seminars in more than 379 U.S. cities. The defendants also tout the benefits of the Wealth Information Network (WIN), an online subscription service given free for six months to those who sign up for the Wall Street seminar. WIN allegedly provides up to the minute, detailed information on "all" trades made by the corporations, using the Wade Cook formulas. After the six-month trial, consumers are charged for the service. The subscription service costs $2,995 for the first year with a $1,995 per year renewal fee. "People see the trades Cook wants them to see," Gregoire said. "Investing in the stock market is risky enough. The investment world can do without those who use a façade of success to lure the unsuspecting."
"Wade Cook, the founder of the companies, is a former Tacoma cab driver turned stock market guru." I am sure people knew his background yet still forked over thousands for his "advice". At some point I stop feeling sorry for the victims...