The SEC Says Sponsored Research Didn't Disclose It Was Paid For

3. GSCR's business primarily consists of producing promotional materials about microcap issuers and distributing these materials online to potential investors in exchange for cash payments from the issuers or third parties. Since GSCR's inception, Goldman has drafted nearly all of GSCR's publications, and he has personally drafted and publicly posted all of GSCR's tweets. 

4. Between April 28, 2016 and March 2, 2021, Goldman used GSCR's Twitter account (@GoldmanSmallCap) to publish twenty-nine sponsored promotional tweets that failed to disclose that GSCR had been compensated by the issuers to promote their securities. Specifically, these twenty-nine tweets promoted the securities of issuers that had paid GSCR for promotional services, but did not disclose that they were paid promotions or identify the amount of GSCR's compensation. 

5. Each of the twenty-nine tweets included positive messages about the issuer's business or commentary on the potential value of the issuer's securities. In each of the tweets, Goldman included a "cashtag" -- the issuer's ticker symbol preceded by a dollar sign ("$"). 

6. As a result of the conduct described above, Respondents violated Section 17(b) of the Securities Act, which prohibits publishing, giving publicity to, or circulating "any notice, circular, advertisement . . . or communication which, though not purporting to offer a security for sale, describes such security for a consideration received or to be received, directly or indirectly, from an issuer . . . without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof." 

conduct a comprehensive review of the disclosure practices of all entities they directly or indirectly own or control, and implement policies and procedures regarding compliance with Section 17(b) of the Securities Act, including with that Section's requirements concerning disclosure of both the receipt of consideration and the amount thereof. 

Certify, in writing, compliance with the undertaking set forth above . . .

Unless otherwise noted, investors should view all of our reports, updates, notes, alerts and podcast interviews as sponsored content, or sponsored research.  What does this mean?

It means that the content we produce is paid for by the issuers or a third party. Although we are paid to publish and distribute the content, we do not take on any assignment unless we believe that a particular company or stock has merit; i.e., has meaningful upside potential that outweighs the risk.  Given the risk profile of many of the companies we have covered or written about, the underlying stocks' risk/reward is akin to venture capital which has a low success rate (batting average) but when there is a winner it can move higher in value exponentially. Therefore, in the case of any stock we write about or engage in an interview, we believe it has the potential to generate outsized returns despite its inherent, above-average business, market, or financial risk.

Why Sponsored Research?

The reasons behind companies' seeking our coverage vary.  In most cases, the firms on which we publish reports cannot attract traditional research coverage by investment banks and broker-dealers. They may wish to add to their shareholder base and overall value because they are contemplating future up-listings or are perhaps seeking to use an opportunity such as greater awareness and visibility as an opportunity to raise funds for acquisitions or working capital. In nearly all cases, we find that while management teams know their industry and can speak to their partner or customer audiences, they have difficulty presenting their company to prospective investors. This is one of our strengths, as we attempt to succinctly describe the underlying companies, their industries, where they fit in the food chain, etc. Moreover, we deem it important for the research to be presented in the proper format.

Without such reports or interviews, it is likely that the stock would languish and speculative investors would not have an opportunity to learn or potentially invest in such a company.  However, given the companies' risk profile, we endeavor to list what would be considered leading risks in the risk factors sections found in our coverage initiation reports. . . .

4. Between April 28, 2016 and March 2, 2021, Goldman used GSCR's Twitter account (@GoldmanSmallCap) to publish twenty-nine sponsored promotional tweets that failed to disclose that GSCR had been compensated by the issuers to promote their securities. Specifically, these twenty-nine tweets promoted the securities of issuers that had paid GSCR for promotional services, but did not disclose that they were paid promotions or identify the amount of GSCR's compensation. 

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