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Latham & Watkins Securities Li tigation & P rofessional Liability
Practice
June 29, 2018 | Number 2338
Liability Under the Federal Securities Laws for Media
Personalities
How statements in both traditional and new media outlets may catch the SEC’s attention.
From mus ic moguls and sport s icons promoti ng cryptocurrenci es and digit al tokens ,1 to reality television
stars bringing down the price of an old-fashioned s tock with a si ngle tweet, 2 the worlds of media and
securi ties are more connect ed than ever before. The US Securiti es and Exchange Commission (SEC)
has tak en notice, recent ly warning t he public about media celebrities promoting c ryptocurrency and token
sales that may be, in es sence, securities offerings. Media pers onaliti es featured in bot h old and new
media shoul d be on guard: the federal securi ties laws apply t o public statements regarding securities, and
the SE C will not hesit ate to bri ng enforcement actions if the agency believes that the media has been
used to dec eive investors.
Thi s Client Alert expl ores two primary sources of potential liability for media personalities:
• The antifraud provisions i n the Securiti es Act of 1933 (Securit ies Act) and the S ecurities Exc hange
Act of 1934 (Exc hange Act)
• Certain provisions of the Investment Advis ers Act of 1940 (Advisers Act)
These stat utes may not jum p out as appl ying to those in the media, who are more often as sociated with
the Firs t Amendment’s protecti on of free speech. To be sure, most statements in the m edia do not trigger
the federal s ecurities laws . But some do, as described below.
Securities Fraud
Se curities Act Section 17(a) and Exchange Act Section 10(b): Omissions and Misrepresentations of
Mate rial Fact
Both t he Securities A ct and the Ex change Act prohibit any person from, directly or indirectly, em ploying a
device or sc heme to defraud another person in c onnection with the s ale of a sec urity.3 Liability under
these s tatutory provisions ari ses from misst atements or omis sions of “material fac t” — statements that
either dis tort or omit i nformati on that a reasonable investor would consider im portant in m aking an
investment deci sion. 4
