If you work as a public relations (PR) executive at a publicly traded company, your primary business objective is to paint your company in as positive a light as possible—from issuing press releases highlighting new innovations your company has made to responding to media questions or criticism on a policy or product. Walking the tightrope of employer loyalty and personal integrity can be a difficult one, especially when your statements or actions can send your company's stock price soaring. How can you insulate yourself against allegations of securities fraud or market tampering if you buy or sell company stock yourself? Read on to learn more about securities fraud and what you can do to help protect yourself from such allegations while still competently and diligently performing your PR job.
What types of acts or behaviors can constitute securities fraud?
While most people often associate the term "securities fraud" with charges of insider trading, there are a number of other anti-fraud laws promulgated and enforced by the US Securities and Exchange Commission (SEC), including laws against market manipulation.
Market manipulation is a fairly broad area and is defined as any intentional conduct designed to control or artificially raise or lower demand for a security. While this alleged manipulative conduct doesn't necessarily need to be performed by an employee of the company at issue, those in the PR business are particularly susceptible to charges of market manipulation, as it's your words and actions that can help increase (or decrease) public confidence in your company's solvency and future growth.
Some of the most common types of market manipulation include hiding potentially harmful information or spreading falsely positive information. For example, if a competitor is beginning to encroach into your company's market share and cutting into your profits, spreading a rumor among investors that your company will soon be purchasing this competitor could cause stock prices to rise when they should instead be falling. This action can often constitute market manipulation even if you don't profit from your own misstatements—but if you double down on this breach of ethics by buying or selling your own company's stock after your statements have affected the stock price, you could also subject yourself to charges of insider trading.
What should you do to avoid potential charges of securities fraud?
Even those who conduct themselves with scrupulous honesty on and off the job can run into trouble when trying to find a way to "spin" negative nonpublic information in a way that doesn't reflect badly upon their employer.
Your safest bet is to avoid the purchase or sale of your own company's stock as much as possible. While this alone won't protect you against a charge of market manipulation, it will ensure you don't have any opportunity to capitalize on any inadvertent misinformation and should serve as a mitigating factor if you do find yourself facing an SEC investigation.
If you already hold some investments in your company's stock which you don't want to sell, or if you're part of an employee stock purchase plan (ESPP) that allows you to purchase company stock at below-market rates, there are some additional steps you can take to protect yourself and your reputation. First, you'll want to enlist the assistance of a broker or investment adviser rather than handling these investments yourself. Ensuring that all your company investments are purchased and sold on a predetermined timetable by a neutral third-party custodian will ensure your transactions don't draw suspicion—even if they do inadvertently occur at convenient times.
You may also want to do some independent investigation whenever being asked to disseminate information or answer questions about a potentially dicey issue. While you may be able to avoid sanctions for spreading false information if you can show that this information was provided to you by a reliable higher-up, if the SEC can show that you should have known this information was untrue, you could still face potential sanctions for statements made. If necessary, find a securities law attorney through an establishment like Carter West Law firm for advice.Share