Firm Charged for Fraudulent Press Release Statements
SEC Releases
Introduction
While the industry continues to see some relief from the rulemaking of the previous administration, there are still frequent reminders that investigations and enforcements are still occurring regularly.
A Firm based in California was charged with making materially false and misleading statements in a press release the SEC described as fraudulent.
This recent enforcement serves as a reminder that compliance departments need to be sure that public facing information is accurate and in compliance with the Marketing Rule.
What Happened?
According to the SEC:
- A Private Company raised over $1.2 million after a press release from August of 2020 announced that:
- A successful test of their battery technology occurred at two pre-eminent laboratories in the US and UK.
- The company had signed its first two beta customers.
- However, at that time neither of those statements were true; no tests were completed, and no beta customers had been signed.
- The Company, along with its CEO, consented to the final judgment without admitting or denying the charges.
- The company will pay a $200,000 civil penalty while the former CEO will pay a $100,000 civil penalty.
- The CEO is barred from acting as a Director or Officer of a Public Company for 2 years or from participating in any security transactions besides those of his own personal accounts.
Vigilant’s Conclusion
Statements made to the public must comply with the tenants of the Marketing Rule.
Successful Firms will ensure they have a process that allows for a review of marketing materials prior to publication that assesses accuracy and completeness, which is an important step to avoid accusations of false and misleading statements.
Vigilant provides an efficient and thorough Advertising and Marketing Review Services that can provide an assessment and remediation of your current processes. Reach out to us today if you have any questions or concerns.