Section 17(b) of the Securities Act, explained for traders

The statute (codified at 15 U.S.C. 77q(b)) makes it unlawful for anyone, using the mail or interstate commerce, to:

"publish, give publicity to, or circulate any notice, circular, advertisement, newspaper, article, letter, investment service, 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, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof."

In everyday terms: if you're paid by a company, its underwriter or a dealer to talk about its stock, you have to say you were paid and say how much. That's why it's often called the anti-touting rule.

Courts have broken the rule into four elements. A violation needs someone to:

1. 1
   publish or circulate something, using interstate commerce;
2. 2
   that describes a security;
3. 3
   for consideration received, or to be received, directly or indirectly, from an issuer, underwriter or dealer;
4. 4
   without fully disclosing that consideration and its amount.

Courts have also held that 17(b) doesn't require proof of intent to deceive. Failing to disclose is enough. That's different from the general anti-fraud rules, where the government usually has to show more.

The list of formats in the statute is deliberately broad, and the SEC has applied it well beyond printed newsletters. Its 17(b) cases have involved:

• email newsletters and promotional websites;
• internet message board posts;
• research reports, where firms were paid to provide coverage and didn't say so (the SEC's 2004 settlements with seven broker-dealers);
• celebrity social media posts promoting crypto offerings that were securities.

"Consideration" isn't limited to cash. Shares, options and other things of value count, and "directly or indirectly" means a payment routed through a marketing firm doesn't escape the rule just because the issuer didn't write the check to the newsletter itself.

It doesn't ban paid promotion. As the SEC's own guidance on newsletters notes, the First Amendment means the agency can't simply prohibit newsletters from recommending stocks. The rule is a disclosure rule.

It may not tell you who's really paying. The statute requires disclosure of the receipt and the amount. How far it requires naming the source has been argued in court: at least one federal court has read it as not requiring the source to be identified, while the SEC has argued that a promoter misstating the source isn't fully disclosing. The SEC's investor guidance asks for more than the minimum (it tells investors that compliant newsletters should say who paid, how much and in what form) and separately warns that a disclosure may not reveal that the money came from a company insider.

It only reaches certain payers. The text covers consideration from an issuer, underwriter or dealer, directly or indirectly. A promotion paid for by an unrelated shareholder can raise harder questions, which is one more reason to read the "on behalf of" line carefully.

The SEC's tips for checking out newsletters set out what investors should expect to see, and the examples of vague language to distrust:

• who paid the publisher;
• the amount;
• the form of payment (cash, stock or something else).

Vague phrases like "we may receive compensation from companies we write about" fail that test. So do disclosures buried in tiny type, which the SEC flags too. Our field-by-field disclaimer guide shows each element in an illustrative example.

Because compliant campaigns have to disclose, they leave a public trail: the ticker, the money, the parties and usually the dates, often published before the campaign starts. Read one disclosure and you know about one list. Read them all and match them up, and you can see the whole campaign: how many newsletters, which operator, what budget, and what window.

That's the dataset this site is built on. Every 17(b) disclosure we collect is deduped into a single deal per campaign and published on the public ticker and operator pages. Our legality notes explain why reporting disclosed promotions makes no allegation that any of them is unlawful.

• SEC: Internet Fraud, Tips for Checking Out Newsletters
• Investor.gov: Investor Alert, Fraudulent Stock Promotions
• SEC: settled actions over undisclosed payments for research (2004)