Liability for financial bloggers / Seeking Alpha authors?

[CRHawk]

 

I figured the topic of potential liability for financial bloggers and Seeking Alpha authors would be well discussed on the internet.  Obviously you need to avoid pumping and dumping, but I figure there are other issues, right?

 

I've searched and can only find information about general liability insurance for bloggers. 

 

If I write up my investment idea for Seeking Alpha, and make $10, what is my liability?  Why are so many people writing for Seeking Alpha, and this isn't discussed?  Is it really not an issue?

 

I see very few writers posting under the name of an company or LLC.

 

-Jeff

[oddballstocks]

What's the liability? That you touted a bad pick?  People are responsible for investing in their own. The WSJ isn't liable if they say xyz growth company is hot, you invest and lose money. It's the same for any writing.

 

Where you can get into issues is if you are already managing money. Then you have some compliance to watch out for. Check with your regulator.

 

As to why people write? Isn't it self evident? Some want interest in the names. Others like to brag about what they found. Some have the burden to teach others. Think of writing online like a digital business card. Prospective clients and employers can see the quality of the work and ideas before they hire/buy.

 

We need to stop seeing liability everywhere that it doesn't exist. You can buy a cheap umbrella policy and a cheap E&O policy if you're worried. Not to be brash but I write a lot and this is the sort of question my lawyer would laugh at if I asked. There isn't a reason to worry, and if you want to worry someone will happily see you insurance to soothe your fears. As a separate aside there is a carve-out in the investment company act for newsletters and non-specific investment advice. Blogs would fall under that. If you are giving out personalized investment advice based on people's income/personal situations then you are on thin ice and might need to register. If you are tossing out "IBM is a buy at $50" that is exempt.

[Travis Wiedower]

Nate is spot on. To add to that, I run an RIA and the Ohio Division of Securities audited me a couple months ago. During the process I specifically asked about my investing blog and my shareholder letters (being posted online) and they were fine with everything.

[thepupil]

What's the liability? That you touted a bad pick?  People are responsible for investing in their own. The WSJ isn't liable if they say xyz growth company is hot, you invest and lose money. It's the same for any writing.

 

Where you can get into issues is if you are already managing money. Then you have some compliance to watch out for. Check with your regulator.

 

As to why people write? Isn't it self evident? Some want interest in the names. Others like to brag about what they found. Some have the burden to teach others. Think of writing online like a digital business card. Prospective clients and employers can see the quality of the work and ideas before they hire/buy.

 

We need to stop seeing liability everywhere that it doesn't exist. You can buy a cheap umbrella policy and a cheap E&O policy if you're worried. Not to be brash but I write a lot and this is the sort of question my lawyer would laugh at if I asked. There isn't a reason to worry, and if you want to worry someone will happily see you insurance to soothe your fears. As a separate aside there is a carve-out in the investment company act for newsletters and non-specific investment advice. Blogs would fall under that. If you are giving out personalized investment advice based on people's income/personal situations then you are on thin ice and might need to register. If you are tossing out "IBM is a buy at $50" that is exempt.

 

I would make an exception with regard to blogging about shorts. There are legal / personal security risks when dealing with shady management teams and no one want their livelihood attacked. They may be low probability, but it pays to be a little paranoid in my opinion. A lot of shortsellers  distribute their theses through others who are more willing to bear that risk.

 

Also, Greenlight sued that one blogger for disclosing that GL was building a stake in a company. They dropped it but I'm sure it wasnt' fun. Not sure if blogger figured it out or violated confidentiality.

http://dealbook.nytimes.com/2014/03/24/david-einhorn-gets-his-blogger/?_r=0

There are risk to any public posting in my view.

[premfan]

What's the liability? That you touted a bad pick?  People are responsible for investing in their own. The WSJ isn't liable if they say xyz growth company is hot, you invest and lose money. It's the same for any writing.

 

Where you can get into issues is if you are already managing money. Then you have some compliance to watch out for. Check with your regulator.

 

As to why people write? Isn't it self evident? Some want interest in the names. Others like to brag about what they found. Some have the burden to teach others. Think of writing online like a digital business card. Prospective clients and employers can see the quality of the work and ideas before they hire/buy.

 

We need to stop seeing liability everywhere that it doesn't exist. You can buy a cheap umbrella policy and a cheap E&O policy if you're worried. Not to be brash but I write a lot and this is the sort of question my lawyer would laugh at if I asked. There isn't a reason to worry, and if you want to worry someone will happily see you insurance to soothe your fears. As a separate aside there is a carve-out in the investment company act for newsletters and non-specific investment advice. Blogs would fall under that. If you are giving out personalized investment advice based on people's income/personal situations then you are on thin ice and might need to register. If you are tossing out "IBM is a buy at $50" that is exempt.

 

Oddball since I listen to your podcast I have some context.  You seem like a nice down to earth guy on the show.  Much different vibe with your content at least lately. I remember the early forum oddball which was less brash and with less rantish behavior.  This could be some branding here. Since you are kind of internet famous now in this small circle.

[premfan]

What's the liability? That you touted a bad pick?  People are responsible for investing in their own. The WSJ isn't liable if they say xyz growth company is hot, you invest and lose money. It's the same for any writing.

 

Where you can get into issues is if you are already managing money. Then you have some compliance to watch out for. Check with your regulator.

 

As to why people write? Isn't it self evident? Some want interest in the names. Others like to brag about what they found. Some have the burden to teach others. Think of writing online like a digital business card. Prospective clients and employers can see the quality of the work and ideas before they hire/buy.

 

We need to stop seeing liability everywhere that it doesn't exist. You can buy a cheap umbrella policy and a cheap E&O policy if you're worried. Not to be brash but I write a lot and this is the sort of question my lawyer would laugh at if I asked. There isn't a reason to worry, and if you want to worry someone will happily see you insurance to soothe your fears. As a separate aside there is a carve-out in the investment company act for newsletters and non-specific investment advice. Blogs would fall under that. If you are giving out personalized investment advice based on people's income/personal situations then you are on thin ice and might need to register. If you are tossing out "IBM is a buy at $50" that is exempt.

 

I would make an exception with regard to blogging about shorts. There are legal / personal security risks when dealing with shady management teams and no one want their livelihood attacked. They may be low probability, but it pays to be a little paranoid in my opinion. A lot of shortsellers  distribute their theses through others who are more willing to bear that risk.

 

Also, Greenlight sued that one blogger for disclosing that GL was building a stake in a company. They dropped it but I'm sure it wasnt' fun. Not sure if blogger figured it out or violated confidentiality.

http://dealbook.nytimes.com/2014/03/24/david-einhorn-gets-his-blogger/?_r=0

There are risk to any public posting in my view.

 

+1 on the risk to any public posting. That said, www.tipranks.com does a good job keeping a track record on financial bloggers.

[LongHaul]

I think it is a good idea to generally have an idea about defamation laws and specifically libel if writing.

https://en.wikipedia.org/wiki/Defamation

 

If you are writing about shorts then you better know them cold and be very careful.  If mgmt is fraudulent then their life is their fraudulent company.  You are attacking their gravy train, reputation, etc.

 

See this case as an example.  There are many others. 

http://seekingalpha.com/article/2298195-seeking-alpha-strikes-a-victory-for-free-speech

 

 

 

[oddballstocks]

The points about shorts are good. You are playing with fire there. Legally it's probably fine, but it's like going and telling body builders that using steroids is illegal. Sure it's true, but they can pound you into the ground before anyone comes to help.

 

In terms of brashness/rants I'm not sure what you mean. I am a very to the point person. In terms of the risk to this I think there aren't many. On the other hand I have had a number of items I casually mentioned to my lawyer thinking they were no big deal and he started to hyperventilate. Specifically contractual issues or employment issues. It's good to run things past a lawyer. I've come to learn that I as a layperson think is important are issues the law doesn't care about. But things I am blissfully unaware of and disregard the law cares very much about. Employment law and contract law are two areas where whatever a lawyer charges you is worth it.

[oddballstocks]

What's the liability? That you touted a bad pick?  People are responsible for investing in their own. The WSJ isn't liable if they say xyz growth company is hot, you invest and lose money. It's the same for any writing.

 

Where you can get into issues is if you are already managing money. Then you have some compliance to watch out for. Check with your regulator.

 

As to why people write? Isn't it self evident? Some want interest in the names. Others like to brag about what they found. Some have the burden to teach others. Think of writing online like a digital business card. Prospective clients and employers can see the quality of the work and ideas before they hire/buy.

 

We need to stop seeing liability everywhere that it doesn't exist. You can buy a cheap umbrella policy and a cheap E&O policy if you're worried. Not to be brash but I write a lot and this is the sort of question my lawyer would laugh at if I asked. There isn't a reason to worry, and if you want to worry someone will happily see you insurance to soothe your fears. As a separate aside there is a carve-out in the investment company act for newsletters and non-specific investment advice. Blogs would fall under that. If you are giving out personalized investment advice based on people's income/personal situations then you are on thin ice and might need to register. If you are tossing out "IBM is a buy at $50" that is exempt.

 

Oddball since I listen to your podcast I have some context.  You seem like a nice down to earth guy on the show.  Much different vibe with your content at least lately. I remember the early forum oddball which was less brash and with less rantish behavior.  This could be some branding here. Since you are kind of internet famous now in this small circle.

 

Are you referring to what's on the blog? I haven't posted as much recently. Although and I mentioned to someone Friday I'm writing more than I ever have in the past. It's all behind a paywall not.

 

Sorry if I come off as rude or whatever. Can you point me to a few examples?

 

If this is regarding the SFB Bancorp thing I feel justified on that. I get a sense of injustice when an 8% owner of a company treats it as their private piggy bank. To me that is wrong and it needs to be corrected.

[mranski]

FYI, I recall, (could be mistaken), that umbrella liability policies exclude business related activities?

[Tkcane]

Insurance guy and attorney here.  Don't forget that insurance (general liability or errors & omissions) covers indemnity AND defense costs.  You can't drive 3 feet without seeing an advertisement for a plaintiffs lawyer - so don't confuse being right or in compliance with not having to defend yourself from a suit.  Even if it's frivolous, it's not an inexpensive proposition to hire an attorney and answer the complaint.

[Nelson]

Also people should keep in mind that these websites all have pages hidden somewhere called "terms of use" or "privacy policy" or whatever that pretty clearly state in legalese that none of the advice is specific for anyone and that anyone who blindly follows a Seeking Alpha article into a stock is dumb (I'm paraphrasing, of course). These pages have been proven to hold up in court.

 

Keep in mind that for insurance guys, the solution to any problem will always be more insurance. It's like asking your barber if you need a haircut.

[CRHawk]

Thanks everyone!  That helped.

 

I have some further questions, but will probably need to speak with a lawyer for those.

 

-Jeff

[ScottHall]

Thanks everyone!  That helped.

 

I have some further questions, but will probably need to speak with a lawyer for those.

 

-Jeff

 

It's not the worst idea to run it all by a lawyer anyway. I can't speak for anyone else, but I'm not a lawyer; I'm only going off of what I came to understand by working for a publishing business.

 

It's probably not the best policy to take legal advice from people on an online forum anyway, heh.