Eugene Grygo, chief content officer, FTF News
Celebrities have another worry to add to their lists well beyond the spying paparazzi: the SEC.
Yes, the SEC.
Officials via the SEC Division of Enforcement and the Office of Compliance Inspections and Examinations (OCIE) have issued a statement warning celebrities that their endorsements of initial coin offerings (ICOs) and related ventures “may be unlawful if [the celebrities] do not disclose the nature, source, and amount of any compensation paid, directly or indirectly, by the company in exchange for the endorsement.”
The warning appears to follow a spate of endorsements of ICOs by a reality TV star, actors and athletes.
The SEC is reminding them via the statement that if they are “using social media networks to encourage the public to purchase stocks and other investments,” they must “disclose the nature, source, and amount of any compensation paid, directly or indirectly, by the company in exchange for the endorsement.”
If a celebrity doesn’t disclose this information it’s “a violation of the anti-touting provisions of the federal securities laws. Persons making these endorsements may also be liable for potential violations of the anti-fraud provisions of the federal securities laws, for participating in an unregistered offer and sale of securities, and for acting as unregistered brokers,” according to the SEC.
The crux of the matter is that these endorsements may inadvertently be seen as support for “virtual tokens or coins sold in ICOs” [that] “may be securities, and those who offer and sell securities in the United States must comply with the federal securities laws.”
It’s not clear that celebrities would know about financial markets and securities law – but some are likely to, given the fortunes they are sitting on. Yet the SEC begs to differ.
“Celebrities who endorse an investment often do not have sufficient expertise to ensure that the investment is appropriate and in compliance with federal securities laws,” the SEC cautions investors. “Conduct research before making investments, including in ICOs. … For more information, see an Investor Alert that the SEC’s Office of Investor Education and Advocacy issued today regarding celebrity endorsements.”
In addition, the SEC wants investors to be “wary of investment opportunities that sound too good to be true. We encourage investors to research potential investments rather than rely on paid endorsements from artists, sports figures, or other icons.”
And just in case you were wondering, the omniscient SEC is watching.
The regulator “will continue to focus on these types of promotions to protect investors and to ensure compliance with the securities laws,” officials add.
Need a Reprint?