> Of course the SECs view that any trading on US stocks is under it's jurisdiction, and Section 9(a)(4) of the SEC Act. It's known as stock bashing, it's a fairly usual form of market manipulation and attacking big American corporations like this is a great way of getting SEC attention.
Minor nit: while section 9 does deal in market manipulation overall, “stock bashing” usually refers to the activity prohibited by section 9(a)(2), concerning price manipulation through actual trading of securities (e.g. trading collusion to pump prices up). Section 9(a)(4) does concern public statements about securities; to quote it:[1]
...make any statement, which was at the time and in the light of the circumstances under which it was made, false or mis- leading with respect to any material fact, and which that person knew or had reasonable ground to believe was so false or mis- leading.
In practice, this is not cut and dry. As a security researcher I’m not personally thrilled about vulnerability disclosures being overhyped, but we have ample precedent for people with a financial interest making polarizing statements about companies. This is the modus operandi of activist investors, and the SEC doesn’t usually go after someone unless their claims are flagrantly untrue. That brings me to my next point:
> So whilst it's potentially lucrative, it's also probably illegal and more a game of when they get big enough to be picked up by the SEC rather than anything else.
I doubt it’s illegal. More precisely speaking, I doubt a successful legal action will be brought against the researchers. They took a few liberties with the severity of the vulnerability, but there is a vulnerability. The level of dishonesty they’re demonstrating doesn’t categorically make their statements untrue, nor does it quite rise to actual fraud. Hyperbole, sure. But outright dishonesty, no.
Reasonable people can disagree about the severity of the vulnerability, but there exists a vulnerability. Similarly, activist investors are historically controversial, and to some extent routinely engage in hyperbole. The truth or falsity of their claims are not typically straightforward. They are not typically challenged by the SEC despite this, even when their actions get widespread media coverage.
Minor nit: while section 9 does deal in market manipulation overall, “stock bashing” usually refers to the activity prohibited by section 9(a)(2), concerning price manipulation through actual trading of securities (e.g. trading collusion to pump prices up). Section 9(a)(4) does concern public statements about securities; to quote it:[1]
...make any statement, which was at the time and in the light of the circumstances under which it was made, false or mis- leading with respect to any material fact, and which that person knew or had reasonable ground to believe was so false or mis- leading.
In practice, this is not cut and dry. As a security researcher I’m not personally thrilled about vulnerability disclosures being overhyped, but we have ample precedent for people with a financial interest making polarizing statements about companies. This is the modus operandi of activist investors, and the SEC doesn’t usually go after someone unless their claims are flagrantly untrue. That brings me to my next point:
> So whilst it's potentially lucrative, it's also probably illegal and more a game of when they get big enough to be picked up by the SEC rather than anything else.
I doubt it’s illegal. More precisely speaking, I doubt a successful legal action will be brought against the researchers. They took a few liberties with the severity of the vulnerability, but there is a vulnerability. The level of dishonesty they’re demonstrating doesn’t categorically make their statements untrue, nor does it quite rise to actual fraud. Hyperbole, sure. But outright dishonesty, no.
Reasonable people can disagree about the severity of the vulnerability, but there exists a vulnerability. Similarly, activist investors are historically controversial, and to some extent routinely engage in hyperbole. The truth or falsity of their claims are not typically straightforward. They are not typically challenged by the SEC despite this, even when their actions get widespread media coverage.
__________________________
1. http://legcounsel.house.gov/Comps/Securities%20Exchange%20Ac...