Archive for May, 2019

SEC: Updated Investor Alert: Social Media and Investing – Avoiding Fraud

Editor’s Note:  Five years ago the SEC alerted the public to the damage that could result from the unethical use of social media.

The SEC’s Office of Investor Education and Advocacy is issuing this Investor Alert to help investors be better aware of fraudulent investment schemes that may involve social media. U.S. retail investors are increasingly turning to social media, including Facebook, YouTube, Twitter, LinkedIn and other online networks for information about investing. Whether it be for research on particular stocks, background information on a broker-dealer or investment adviser, guidance on an overall investing strategy, up-to-date news, or to simply discuss the markets with others, social media has become a key tool for U.S. investors.

SEC: High-Yield Investment Programs (HYIP)

Fraudsters may use social media to promote a HYIP website or may encourage investors to use social media to share information about a HYIP website with others.

High-Yield Investment Programs

The Internet is awash in so-called “high-yield investment programs” or “HYIPs.” These are unregistered investments typically run by unlicensed individuals – and they are often frauds. The hallmark of an HYIP scam is the promise of incredible returns at little or no risk to the investor. A HYIP website might promise annual (or even monthly, weekly, or daily) returns of 30 or 40 percent – or more. Some of these scams may use the term “prime bank” program. If you are approached online to invest in one of these, you should exercise extreme caution – they are likely frauds.

Circle ID: A Case for Regulating Social Media Platforms

There are some who see the regulation of social media platforms as an attack on the open internet and free speech and argue that the way to protect that is to let those platforms continue to self-regulate. While it is true that the open internet is the product of the same freedom to innovate that the platforms have sprung from, it is equally the product of the cooperative, multi-stakeholder organisations where common policy and norms are agreed.

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Republique Francaise: A Framework to Make Social Media Platforms More Accountable

The French government is among the long list of countries who are implementing a program to address issues associated with social media.

The second pillar of their program is a:

A prescriptive regulation focusing on the accountability of social networks, implemented by an independent administrative authority and based on three obligations for the platforms:
· Obligation of transparency of the function of ordering content,
· Obligation of transparency of the function which implements the Terms of Service and the moderation of content,
· Obligation to defend the integrity of its users.

Read French Framework for Social Media Platforms

The Editor: Will Regulation of the Social Media Maim the US High Tech Industry?

In the very short period of time that CRE has established an interactive public docket which addresses possible US regulation of the social media two dominant concerns have been raised both in the literature and on the basis of first-hand discussions with stakeholders:

(1) how do you address First Amendment Issues, and

(2)  will mission creep maim the US high tech industry?

Question (1) is self-explanatory.

Question (2) is raised in terms of mission creep; the ability of regulators to continually expand upon their initial mandate.  Mission creep not only results from the promulgation of regulations but in a myriad of guidance documents.

The Editor: CRE Letter to NTIA

CRE routinely works with federal agencies regarding the improvement of their regulatory programs. In this memorandum to NTIA we have asked  them to become involved in the potential regulation of the social media.

The Editor: What is the operational sequence for examining the possible regulation of social media?

Any number of tasks could be initiated including, technical viability, First Amendment issues, digital impersonation and content control. In any event the National Institute of Standards and Technology should be tasked immediately to assess the technical viability of regulating social media.

National Institute of Standards and Technology

The Editor: Where is the US review of ongoing programs in other countries to implement a program to regulate social media?

A number of other countries including the UK, Germany and Australia either have an ongoing program or a soon to be implemented program to regulate social media. Which federal agencies are following these real world laboratories so as to assist the US in the directions it might follow.

Thus far CRE’s inquiry concludes that the Administration is leaving such studies up to academics, NGO’s and regulatory watchdogs such as CRE.

The Editor: The Use of Guidance or Rules to Address Issues with Social Media?

     The guidance debate is moving from 30,000 feet to ground level


Scholars in administrative law have written on the differences between an agency issuing guidance versus rules for years.  There is no clearer statement on the subject than a recent post by Professor Strauss based in part upon a study conducted by the Administrative Conference of the United States authored by Professor Parrillo.

Forbes: Governments Can’t Regulate Social Media Because They Are Too Dependent On It

Perhaps the most striking aspect of the strange spectacle that was Mark Zuckerberg’s congressional testimony last year was the degree to which members of the US Congress kept acknowledging Facebook’s immense sway over the democratic process and how important the site was to each of their reelection efforts. Congressperson after congressperson repeated how critical Facebook was to getting themselves elected and maintaining contact with their constituents.


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