Investment professionals and participation in online forums

Discussion in 'Professional Trading' started by nursebee, Aug 30, 2022.

  1. nursebee

    nursebee

    I participate in a non ET forum dedicated to a single company, comprised of many fans as investors and product users. I keep some skepticism over what I read and over participants, suspect in the past that I've been subject to pump and dump pitches in at least one stock.

    A user on the other forum began an interesting conversation about options, advocated the purchase of call options. Some of what this person wrote made sense, some was above my head. I took an approach of wanting to better understand the specific rationale at that time, so that if I purchased any call options I'd be able to sleep through any volatility. The poster was unable to sufficiently articulate to me the specific reasons. The poster told me that if I waited until I understood, the time would pass. I was suspicious of this pressure.

    This poster engaged in some dialogue with me directly. This dialogue started vie private messaging on the other forum, then to twitter, then via a new name on twitter, then the user asked for the conversation to move to facebook. I was suspicious of this also.

    The poster layed out a specific trading plan, seemed to show account movement in the millions. The plan was to sell at a well defined event in the future, publicly stated. Many users of the other forum were not as skeptical as I and the person had some fans, though equally anonymous on the internet. The poster ended up saying they sold all their positions early, weeks or months before the previously stated plan. I was suspicious of this, struck me as some front running, taking advantage of the fervor they stirred up.

    I then changed from trying to learn, to full on skepticism and negativity of the poster. The poster blocked me from seeing them on twitter. I did learn of their real name. The poster then stopped participating in the other forum to not be seen there again.

    I all but forgot about them until this morning. There is an hour long youtube video up with them being interviewed. The person in question is a Chartered Financial Analyst (CFA) with many years experience as an options trader in Chicago.

    So, my questions for you all here, what rules of engagement are there for licensed financial professionals to participate in online discussion, even anonymously? Was this person legally or ethically wrong in what they did and do I have any obligation to report them to regulating agencies?

    Previous twitter had no disclosures, they are there now. Previous did not identify as an industry professional, now it does.

    What do you think of this situation? Am I off base with my skepticism?
     
    murray t turtle likes this.
  2. It's a f'n forum, anyone is free to enter and spew whatever random, incompetent, fake, words enters their mind. If someone takes a forum seriously in anyway, then that fallacy falls on them.

    I could claim I am currently a floor trader at the NYSE with 20 years of experience. Or I teach finance at Montana State Community College University, or I run a successful strip tease male operation online of myself. Believe what you want, with a grain of sugar.

    There are no rules of engagement for any human being who posts on a forum. Welcome to the world of stupid, and meet fellow stupid people, and have a stupid time.
     
    murray t turtle likes this.
  3. ETJ

    ETJ

    Every regulatory body has some pretty tight rules, even when posting even under a pseudonym. Everything from archiving conversations - a number of firms are currently facing $1 billion in fines for not archiving conversations. No one would ever give investment advice. FINRA folks have public CRDS and SEC RIAS have a similar registry.
     
    Last edited: Aug 30, 2022
  4. M.W.

    M.W.

    CFA is not a license, it is a charter/certificate. Based on that alone the user can engage in anonymous forums as much as he wants as long as he does not violate his pledge to uphold his fiduciary duty and does not violate any laws or regulations.

     
    NorgateData and murray t turtle like this.
  5. %%
    1] An alias [false ] name is used by crooks , with pics on post office wall;
    but a nickname is much different from an alias.
    2]The few pros i have heard on radio used their real name + gave disclosures.
    3] Have to sell early or late; or scale it.
    Since he did with no name[good hint] or an alias, i would not report him.
     
  6. ktm

    ktm

    Ethically did he do anything wrong? Sure. Legally? Maybe.

    The CFA designation is a bit more highly regarded than others. You could always reach out to their governing body with some queries.

    I feel like if Jim Cramer is still on TV barking at the public for an hour a day, then we are still at a point where pretty much anything goes.
     
    NorgateData likes this.
  7. ETJ

    ETJ

    Cramer is neither an employee of a brokerage house, bank, or advisor. Merely a broadcaster. When he starts soliciting funds to manage it will change the equation, but he won't. You can read the rules on any of the regulators - both state and federal sites.
     
    Last edited: Aug 30, 2022
  8. schizo

    schizo

    In certain professions, like medicine, you are not allowed to use public forums. The underlying rationale being that this can lead to conflict of interest. However, I don't think there is a regulation concerning professional traders.

    That said, I'm pretty damn sure professional trading firms have a dedicated army of posters drumming up stocks all over the internet. For instance, you would be a fool to think /wallstreetbet is ran by an individual.
     
  9. ETJ

    ETJ

    An oldy but a goodie - Wade even pissed off the FTC.


    UNITED STATES DISTRICT COURT
    WESTERN DISTRICT OF WASHINGTON
    AT SEATTLE


    FEDERAL TRADE COMMISSION, Plaintiff,
    v.

    WADE COOK FINANCIAL CORP., and WADE COOK SEMINARS, INC., Defendants.



    Case No.

    COMPLAINT FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF

    Plaintiff, the Federal Trade Commission ("Commission"), for its Complaint alleges the following:

    1. The Commission brings this action under Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. � 53(b) to obtain temporary, preliminary and permanent injunctive relief, rescission, restitution, disgorgement and other equitable relief to redress purchasers of defendants' wealth building seminars for the injury resulting from defendants' deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. � 45(a).

    JURISDICTION AND VENUE

    2. This Court has subject matter jurisdiction over plaintiff's claim pursuant to 28 U.S.C. �� 1331, 1337(a) and 1345, and 15 U.S.C. �� 45 (a) and 53(b).

    3. Venue in the Western District of Washington is proper under 28 U.S.C. � 1391(b) and (c) and 15 U.S.C. � 53(b).

    THE PARTIES

    4. Plaintiff, the Federal Trade Commission, is an independent agency of the United States Government created by statute. 15 U.S.C. �� 41 - 58. The Commission enforces Section 5(a) of the FTC Act, 15 U.S.C. � 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission may initiate federal district court proceedings to enjoin violations of the FTC Act, and to secure such equitable relief as may be appropriate in each case, including consumer restitution and disgorgement. 15 U.S.C. � 53(b).

    5. Defendant Wade Cook Financial Corporation ("WCFC") is a Nevada corporation with its office and principal place of business at 14675 Interurban Avenue South, Seattle, Washington, 98168-4664. WCFC transacts business in the Western District of Washington.

    6. Defendant Wade Cook Seminars Inc. ("WCSI"), is a Nevada corporation with its office and principal place of business at 14675 Interurban Avenue South, Seattle, Washington, 98168-4664. WCSI transacts business in the Western District of Washington.

    COMMERCE

    7. At all times relevant to this complaint, defendants have maintained a substantial course of trade in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. � 44.

    DEFENDANTS' COURSE OF CONDUCT

    8. Since 1994, defendants have attracted thousands of consumers to their programs by representing in advertisements and other promotional materials that consumers who attend defendants' Wall Street Workshop seminar will learn how to become wealthy trading stocks using the techniques taught at the workshop. The fee for the Wall Street Workshop is between $3,000 and $5,000 depending on the discount and promotion in effect at the time the customer pays to attend the seminar.

    9. Typical representations by defendants that they have become wealthy trading in the stock market using the trading formulas taught at the Wall Street Workshop include, but are not limited to, the following:

    a. What is our rate of return? I mean, sometimes I don't even want to write these things down because they get so phenomenal. We're talking like 80, 90 percent return, an annualized return of close to 1,000 percent on an annualized basis. And again, if you're not making this kind of money, you need to come along with me and figure out the covered call formula.
    b.[F]or every 13 to 14 of these options that we make money on, we lose money on one. . . . Annualized returns: 3,848% and 2,028% . . . if you are not getting these returns, call the number you see on the screen right away.
    c. My investment team (Team Wall Street) was earning greater than 300%, often several thousand percent per annum. . . . [We] are an investment instruction team who, as far as I know, net greater returns in the stock market than any other investment group in the country.
    10. Typical representations that average consumers who attend the Wall Street Work Shop will make large amounts of money or large returns on their stock market investments by learning and using the trading formulas taught there include, but are not limited to, the following:

    a. Our Wall Street Workshop has taught thousands of people how to generate income and win big on Wall Street . . . Our processes are truly what they DO NOT teach at Harvard Business School. They are delivered in such simple and easy-to-understand ways that even teenagers are using them to earn in excess of 20% per month.
    b. One of the greatest concerns that I have as an educator is to help people learn how to make money consistently - steady income. Taking $10,000 and learning how to use that money to generate $2,000 or $3,000 of monthly income. Yes I said monthly income.
    c. And along comes Wade Cook who says, no, we're going to teach strategies. We're going to teach formulas. We're going to teach a system, a method, a way of consistently and predictably making money.
    d. You see, most of my strategies are designed to not lose money. I just hate losing money. . . . Do you? So if you don't like losing money - if you like making lots of money, then come with me as I go through this, but you've got to learn the rules. You've got to learn the formulas or the strategy.
    11. Defendants have grossly exaggerated their success trading in the stock market. Defendants have not earned the extremely high rates of return in the stock market that they have claimed in promotional materials. Likewise, defendants have exaggerated the ease with which consumers will be able to earn extremely high rates of return trading in stocks after attending the Wall Street Workshop.

    DEFENDANTS' VIOLATIONS OF THE FTC ACT

    12. Section 5(a) of the FTC Act prohibits deceptive acts or practices in or affecting commerce.

    COUNT I

    13. Paragraphs 8 through 11 are incorporated by reference.

    14. Defendants have represented, expressly or by implication, that Cook has become wealthy trading or investing in the stock market using the Wade Cook trading formulas that are taught at the Wall Street Workshop.

    15. In truth and in fact, Cook has not become wealthy trading or investing in the stock market using the Wade Cook trading formulas that are taught, but from selling seminars and products about trading or investing in the stock market.

    16. Therefore, defendants' representation as set forth in Paragraph 14 above is false and misleading and constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. � 45(a).

    COUNT II

    17. Paragraphs 8 through 11 are incorporated by reference.

    18. Defendants have represented, expressly or by implication, that consumers who attend the Wall Street Workshop will earn extremely high rates of return, for example, returns of 20% or more per month, on their stock market investments by learning and using the Wade Cook trading formulas.

    19. In truth and in fact, in many instances, consumers who attend the Wall Street Workshop do not earn extremely high rates of return, for example returns of 20% or more per month, on their stock market investments by learning and using the Wade Cook trading formulas.

    20. Therefore, defendants' representation as set forth in Paragraph 18 above is false and misleading and constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. � 45(a).

    COUNT III

    21. Paragraphs 8 through 11 are incorporated by reference.

    22. In connection with the representations set forth in Paragraphs 14 and 18, defendants have failed to disclose the actual rates of return earned by defendants and Cook on all stock-related investments.

    23. These facts would be material to consumers in their decision to pay the fee to attend the Wall Street Workshop.

    24. In light of the representations described in Paragraphs 14 and 18, defendants failure to disclose the actual rates of return earned by defendants and Cook on all stock-related investments, is a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. � 45(a).

    COUNT IV

    25. Paragraphs 8 through 11 are incorporated by reference.

    26. By disseminating promotional materials and advertisements, and conducting Financial Clinics that contain testimonials from the clinic speakers and from former Wall Street Workshop attendees, defendants have represented, expressly or by implication, that the testimonials reflect the typical or ordinary experiences of members of the public who attend the Wall Street Workshop.

    27. In truth and in fact, the testimonials from clinic speakers and former Wall Street Workshop attendees do not reflect the typical or ordinary experiences of members of the public who attend the Wall Street Workshop.

    28. Therefore, defendants' representation as set forth in Paragraph 26 above is false and misleading and constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. � 45(a).

    COUNT V

    29. By disseminating promotional materials and advertisements and conducting Financial Clinics in which they make the representations set forth in Counts I, II, and IV defendants have represented, expressly or by implication, that they possessed and relied upon a reasonable basis that substantiated such representations, at the time the representations were made.

    30. In truth and in fact, defendants did not possess and rely upon a reasonable basis that substantiated such representations, at the time the representations were made.

    31. Therefore, defendants' representation as set forth in Paragraph 29 above is false and misleading and constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. � 45(a).

    INJURY

    32. Defendants' violations of Section 5 of the FTC Act, as set forth above, have caused and continue to cause substantial injury to consumers. Absent injunctive relief by this Court, defendants are likely to continue to injure consumers.

    THIS COURT'S POWER TO GRANT RELIEF

    33. Section 13(b) of the FTC Act, 15 U.S.C. � 53(b), empowers this Court to issue a permanent injunction against defendants' violations of the FTC Act, and, in the exercise of its equitable jurisdiction, to order such ancillary relief as preliminary injunction, rescission, restitution, disgorgement of profits resulting from defendants' unlawful acts or practices, and other remedial measures.

    PRAYER FOR RELIEF

    WHEREFORE the Commission respectfully requests that this Court, as authorized by 15 U.S.C. � 53(b) and pursuant to its own equitable powers:

    (1) Permanently enjoin defendants from violating Section 5(a) of the FTC Act;
    (2) Award all such relief as the Court finds necessary to remedy the defendants' violations of Section 5(a) of the FTC Act, including but not limited to rescission of contracts, the refund of monies paid and disgorgement; and
    (3) Award the Commission the costs of bringing this action, as well as any other equitable relief that the Court may determine to be proper and just.
    DATED: ___________, 2000.

    Respectfully submitted,

    ________________________
    Eleanor Durham
    ATTORNEY FOR PLAINTIFF
    FEDERAL TRADE COMMISSION
     
  10. I don't fully understand the Law and FTC as it regards to trading, teaching, selling, advertising and marketing,

    But as long as the seller/guru....has actually achieved 1,000% or 3,000% returns with valid Proof....it's completely legal to say so in your advertisings?
    Without being considered misleading and bogus and false?

    It seems like the FTC is out to bust everyone who talks about trading publicly whether completely valid and legit, or bogus.
    Just because the little, small, man can't achieve greatness....that doesn't mean it's a completely bogus, flawed, system that he bought.
     
    Last edited: Aug 30, 2022
    #10     Aug 30, 2022