iHub Investor Relations Professional (IRP)/Commercial Users Program

[Soapy Bubbles]

The Debate on Supplying (Dis)information

Many were debating whether or not an IRP shall be held liable for potential mistatements leading to securities manipulation while holding shares (commons or preferred). Although many deny the legal implication of providing accrurate data under section 17, the court has established liablity in the case of the event where disinformation (either intentionally or unintentionally produced) lead to a settlement against the promoter. We're all familar (or you better damned should be) with Lebed's case:

http://www.sec.gov/litigation/admin/33-7891.htm

in which the following is cited:

Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder prohibit acts, transactions, practices or courses of business that operate as a fraud or deceit in connection with the offer, purchase or sale of securities, including misrepresentations and omissions of material fact. Section 10(b) and Rule 10b-5 there under expressly prohibit the use of any manipulative or deceptive device.

Section 8A of the Securities Act and Section 21C of the Exchange Act authorize the Commission to enter a cease-and-desist order against an individual who has violated any provision of the Securities Act or the Exchange Act or rules thereunder.

Based on the scheme described above, the Commission finds that Lebed violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.


Now the question -- does this ruling apply to IRPs? Of course. With that ruling the court established that a promoter is "expressly prohibit[ed] the use of any manipulative or deceptive device" -- guess what, this covers our chatting at iHUB. Thus IRPs, if deemed manipulative, are subject to the Lebed Ruling while on iHUB. This is the ruling that makes disclosure MANDATORY, and the use of sound data (strictly in the public domain, not protected information) desireable.

Now what does that mean for IRPs? Does it imply a uniform code of conduct? If so, how is it enforced? Does iHUB have the right to enforce legal policy? (The answer is no since they are not a government agency endowed w/ such a right. In fact, such an assumption of powers is a felony.)

If there is no such Code, then is just being labeled as an IRP enough (just to alert the community of paid interests) and leave it to the individual not to violate the Lebed Ruling? If so, non-IRPs, traders, and others need to be protected if an IRP is taken down. Can that be provided? To be blunt, I don't want to get taken down along w/ an IRP via "guilty by association".

You see, this is the sort of question we're grappling with. We all know iHUB is a nexus of legal and illegal activities -- all of which have been tolerated thus far. But now we're beginning to draw the line in the sand, and I hope such a line is grounded in established law.

Despite all this, it's an interesting problem to discuss even if we fail to obtain a solution.