No Puffery For Anonymous Posting
A recent decision from the U.S. Court of Appeals for the 10th Circuit highlights the potential SEC risks that flow from online postings. The case is Securities and Exchange Commission v. Curshen (editor’s note: it’s never a good thing when you’re on the other side of the “v.” from the SEC). The SEC was upset about 35 anonymous internet postings Curshen made concerning a company called Freedom Golf. The statements apparently painted an “overly optimistic view of Freedom Golf’s financial future.” The Appellate Court affirmed a trial court order enjoining Curshen from further violations, and that ordered Curshen to disgorge about $66,000 in profits. Ouch. But here’s the interesting point. Courts recognize that “puffery” – vague optimistic statements about a company made by company officials – typically does not violate SEC regulations. There is a sense of “consider the source” to this reasoning. In other words, what do you expect company to say? In this case, Curshen’s postings may have qualified as puffery if he had identified himself as the poster. But since he posted his comments anonymously, readers couldn’t “consider the source” and so Curshen lost the puffery defense. It is generally considered good form to be transparent on social media sites – if you have a vested interest in what you’re talking about it’s best to disclose that. And as this case demonstrates, doing so may save you the hassle of an SEC action.