Pump and dumpers get nailed to the wall because they sell while they are telling everyone to buy. They are not providing bad financial advise, they are defrauding people.
Unless disclosed, this is illegal. (EDIT: Never mind, idioms.)
... unless you disclose your position?
edit: yeah https://www.cnbc.com/2022/05/04/jim-cramer-how-he-invests-hi...
Ex.
1. Buy crap stock “XYZ” with a low float (prone to volatile spikes with volume).
2. Tell audience to buy crap stock.
3. Sell crap stock.
That’s manipulation and the SEC don’t take kindly to it. Cramer presumably does long things he talks about, or doesn’t pretend he will, and isn’t immediately selling it after discussing it on his show.
The key issue is:
“ the individuals regularly sold their shares without ever having disclosed their plans to dump the securities while they were promoting them.”
That would be quite illegal if not disclosed.
They were literally pump-and-dumping. This is, to the letter, illegal. Cramer is not doing that.
These 'analysts' on CNBC are supposed to follow disclosure rules.
https://www.nytimes.com/1995/07/09/magazine/a-mover-of-marke...
One of the biggest concerns is what you are doing in private vs what you are doing publicly.
So lets say "Big Bank" says "we recommend XYZ with a target price of $19.99 by end of year, our recommendation is BUY"
On the surface there is no issues with this, but lets say "BIG BANK" is LONG a million shares of XYZ.. Now you have a potential issue.
You are telling your clients to BUY (upward pressure on the stock) while you have a big bet that the stock will go up.
In the industry we refer to this as "talking your book" https://www.yourdictionary.com/talking-one-s-book
Over the years the rules have tighten when it comes to equity research and disclosing your position.
Now to the issue with what took place here - The individuals advocating the stock, how were they compensated? What is their position on those stocks?
Because this is UNCLEAR it is a violation of the SEC rules.
Lastly, one thing still bothers me about equity research is the rare "Sell" recommendation. Very few equity research departments ever issue a "Sell" recommendation..
For any crime it not being "blatantly obvious" is pretty essential to it not being prosecuted. I'm no fan of Jim Cramer, but he makes enough money just giving bad advice that there's no reason for him to also be secretly profiting from it illegally. In addition he's high profile enough that I'm sure plenty of people have looked into it hoping to find something.
But if he was secretly profiting form it illegally then that illegal activity would have to be made "blatantly obvious" in order for him to be convicted, and the federal government doesn't like prosecuting unless they're near certain of a conviction.
These influencers were performing an easy to observer and therefore easy to prosecute crime, which is why they are being charged.
The far larger and more important issue is disclosure laws.
As the other guy posted, you cant recommend one thing and do another.
"we recommend you BUY XYZ" while you are holding a lot of shares in this and sell into the buy market you created.
You also cant offer recommendations without disclosing how you are compensated.
I'm Canadian and more familiar with its rules / regulations but Canadian rules are often best practices used globally.
https://www.iiroc.ca/news-and-publications/notices-and-guida...
Disclosure of financial interest (clause 3608(2)(ii))
A Dealer must disclose whether any person involved in creating the content of a research report has an ownership interest in the subject issuer’s securities. When disclosing ownership interests, a Dealer is not required to include information relating to administrative or clerical staff involved in preparing a research report.
Disclosure of remunerated services (clause 3608(2)(iii)) Clause 3608(2)(iii):
does not require duplicate disclosure from the individuals when the Dealer discloses the services, and excludes normal investment advisory or trade execution services, such as an investment account by the issuer.
Disclosure if making a market (clause 3608(2)(vi))
A Dealer must disclose if it is making a market in an equity or equity related security of the issuer. In addition, a Dealer must make the same disclosure in a fixed income research report if the Dealer is making a market in an equity or equity related security of the issuer.
They're recommending people give their cash to buy a thing (I'm specifically thinking of the "Cash for gold" ads which are constantly playing on the conservative talk radio that our machinists listen to in the shop), while they're doing the opposite: giving away their gold to in exchange for your cash.
Either they're acting against their own self-interest, sacrificing their incorruptible, safe gold for the risky, inflationary fiat currency, or they're lying about what they believe.
> Either they're acting against their own self-interest, sacrificing their incorruptible, safe gold for the risky, inflationary fiat currency, or they're lying about what they believe.
There is a lot to unpack here. But it comes down to this. You can advertise your services and not violate SEC laws, or you can do things which violate SEC rules.
As for buying gold for cash :
1) This isnt covered by the SEC, (perhaps the CFTC?)
2) your post about "fiat currency" vs gold is unclear. You are aware that they don't just buy bold bricks, but unwanted jewelry, etc as well?
If we replace "gold" with "used cars" does it work the same way? You are selling your unwated broken car which may be of some value to someone else.
I suppose you're probably right, their claim that they're superior to other securities and exchanges would not actually bring them under the jurisdiction of the SEC.
Can you show me the returns of this inverse Cramer ETF?
As far as I can tell it hasn't been released yet, look for ticker SJIM. if this is true it makes the second part of your statement look like you just flat out made it up.
As it stands, shorting everything Cramer says to buy (and buying everything he says to short) has a +21% return rate.
Yes, it requires you to use your fingers and manually buy/sell individual stocks instead of buying a single ETF. But then it wouldn't be HN without needlessly pedantic users.