Is this stock promotion?
Securities Act Section 17(b) makes it unlawful to publicise a security for compensation without fully disclosing who paid and how much. This checklist scores a piece of promotional material against that requirement and against the observable markers of a paid campaign. It is an educational aid, not legal advice and not a determination about anyone.
What Section 17(b) actually requires
Section 17(b) of the Securities Act — the anti-touting provision — makes it unlawful to publish, give publicity to, or circulate any communication describing a security for consideration received from an issuer, underwriter or dealer, without fully disclosing the receipt of that consideration and its amount.
Three features of that make it unusually sharp.
- It does not require the promotion to be false. An entirely accurate article about a genuinely good company violates Section 17(b) if it was paid for and the payment was not disclosed.
- It requires the amount, not just the fact. "The publisher may hold positions and may receive compensation" discloses almost nothing. The provision asks for who paid and how much.
- It reaches the publisher, not only the issuer. The person circulating the material carries the obligation.
Because it does not require proving that anything said was untrue, Section 17(b) is charged frequently — it lets a regulator establish a violation from the disclosure alone, without litigating the merits of the company.
What the questions are looking for
- Is compensation disclosed at all?
- The threshold question. No disclosure and no payment is fine. No disclosure and a payment is a violation, and the reader cannot tell which they are looking at — which is precisely the harm the provision addresses.
- Is the amount stated?
- A disclosure that says compensation was received without saying how much does not satisfy the provision as written. Vagueness here is the most common defect in real promotional material.
- Is the payer identified?
- "A third party" is not an identification. Payments routed through intermediaries specifically to obscure the issuer's involvement are a recurring feature of charged campaigns.
- Was the publisher paid in stock?
- Payment in shares creates a direct incentive to move the price and an intention to sell into the demand the promotion creates. That combination is scalping, and it is a materially more serious matter than an undisclosed cash fee.
- Does the disclosure appear where a reader will see it?
- Full disclosure in six-point grey type below the fold is a familiar pattern. Placement and prominence are part of whether disclosure is meaningful.
- Are the claims checkable against filings?
- This is not a Section 17(b) question — it goes to fraud. A material development that exists appears in a filing. One that lives only in promotional material is being described to you rather than disclosed to the market.
- Is the company small, thinly traded and recently renamed?
- None of these is wrongdoing. All three together describe the vehicle these campaigns overwhelmingly use, because a small float is what makes a price movable at all.
What this tool cannot tell you
Whether any particular material is unlawful. That turns on facts a reader cannot see — whether money changed hands, in what form, and whether the claims are true. A high score here means the material has the observable characteristics of a paid campaign with defective disclosure, which is a reason to be careful and a reason to read the filings. It is not a determination about anyone, and this page is not legal advice.