INSIGHT: #Gamechanger at SEC—Hashtags Increase Eyes on Enforcement

Several weeks ago, I noticed something new on Twitter: The SEC’s Division of Enforcement started using the hashtag #SEC.

Like many practitioners in the securities space, I follow the SEC and its regional offices and divisions on Twitter. The SEC’s Twitter feeds are typically mundane catalogues of SEC news, press releases and links that were previously circulated via email to subscribers.

But the Enforcement Division’s use of the hashtag #SEC caught my eye.

Hashtags are used to “index keywords or topics on Twitter” so that users can “easily follow topics they are interested in.” Before the SEC commandeered the hashtag #SEC, conversations around that keyword usually discussed Southeastern Conference football. Today, if you click on the hashtag #SEC you will find a strange mix of tweets about NFL draft picks and securities regulation.

Naturally, because I was fascinated by the Enforcement Division’s newfound social media prowess, I tweeted about it: “Anyone else notice that @SEC_Enforcement started using the hashtag #SEC this week? Wonder how Southeastern Conference (@SEC) fans are going to like securities enforcement stories cropping up in their feed?”

I, too, started using the hashtag #SEC, but I didn’t think about the SEC’s use of hashtags again until recently, when I noticed that the SEC’s Boston Regional Office used a string of hashtags (#misappropriation, #fraud, #securities, #hedgefunds, #investors) in a tweet relating to a pending enforcement action.

(The Boston office was announcing that it had obtained an emergency asset freeze and temporary restraining order against an investment adviser accused of fraud.)

It turns out, the Boston office’s tweet wasn’t a one-off. On the contrary, the Boston office recently used the hashtags #theusualsuspects and #keysersoze in a tweet about another enforcement action—references, of course to the Academy Award-winning film starring Kevin Spacey. (This time, the Boston office was announcing charges against a man who allegedly perpetuated a securities fraud scheme to which his cousin previously pleaded guilty.)

I wondered, again on Twitter, whether the SEC’s offices and divisions are engaging in a concerted effort to publicize enforcement actions more broadly through social media.

Upon further inspection, I found that the SEC is using hashtags much more extensively. Now, the Commission itself (@SEC_News), the Enforcement Division (@SEC_Enforcement), the Division of Economic and Risk Analysis (DERA) (@SEC_DERA), the SEC’s New York regional office (@NewYork_SEC), and the SEC’s Boston Regional Office (@Boston_SEC) are all using hashtags more fluently. (The SEC’s San Francisco and Fort Worth regional offices have not yet started using hashtags, but the CFTC (@CFTC), FINRA (@FINRA) and other agencies are increasingly using hashtags to index their tweets.)

And their hashtags cover sweeping topics. For example, the SEC’s twitter accounts have used the following hashtags: #accounting, #affinityfraud, #compliance, #FCPA, #fintech, #fraud, #hedgefunds, #IPO, #insidertrading, #investing, #investment, #investors, #Miami, #microcap, #misappropriation, #pharma, #Ponzi, #securities, #tickets, and #whistleblowers, among others.

An SEC #Gamechanger

This is a significant development because of “the amazing power of Twitter hashtags.” Indeed, “if you use the right hashtags in your tweets, they are insanely powerful and can drive crazy engagement and traffic.” For that reason, businesses often use hashtags “to build a temporary community, create a buzz, or start a discussion around a particular topic.” (Some successful hashtag campaigns, like #icebucketchallenge or #shareacoke, pervade our daily lives.)

Hashtags are fostering conversations and awareness in the securities enforcement space, too. The hashtags #fraud and #insidertrading, for example, are repositories of thousands of tweets about fraud and insider trading—news stories, commentary, personal musings, and links to enforcement press releases.

By using hashtags, the SEC and other government agencies are flagging their risk alerts, no-comment letters, rulemakings, meeting schedules, press releases, litigation releases, etc. for a broader audience—an audience that might not otherwise take notice of an SEC press release.

Tweets that announce settled enforcement actions are particularly noteworthy. Like the SEC’s press releases, its tweets sometimes include eye-catching headlines. For example, “#SEC charges New Jersey investment adviser with securities #fraud.” Or, “#SEC charges #microcap fraudster with running a pump-and-dump scheme.” And sometimes the tweets contain damning quotes from senior SEC staff. For example, “For almost two years, [defendant] told tens of thousands of investors that their returns were higher than they actually were despite warning signs that should have alerted [defendant] that it was miscalculating those returns...”

New Challenge for Defendants

For defendants seeking to settle an enforcement action quietly, this new dynamic presents a challenge.

It is not uncommon for defendants, through their counsel, to negotiate the language in a press release that announces a settled enforcement action. (In some cases, defendants may prevail upon the staff not to issue a press release at all.) But in agreeing to the language of a press release, defendants and their counsel—if unconsciously— make assumptions about how widely the press release will be broadcast.

A Fortune 100 company that settles SEC charges, for example, will assume that practitioners who subscribe to SEC Enforcement updates will receive—and might even read—the press release. The company also might reasonably assume that a news outlet will pick up the story. A smaller company, or an individual, might make the same assumptions. (In either case, counsel should advise its client of the publication risk and, where appropriate, work with the client’s communications team or a third-party crisis management or public relations firm to develop a communications strategy around the press release.)

SEC Twitter is a game changer, though, because defendants and their counsel must operate under a new set of assumptions about how well-contained a press release will be. Combine a provocative caption with a popular hashtag, and the SEC can exponentially increase its Twitter impressions and click-through rate, thereby amplifying the publicity—and public consciousness—of an enforcement action.

This may be what the SEC is betting on. Indeed, if the SEC’s recent dispute with Tesla founder Elon Musk has taught us anything, it’s that the Enforcement staff understands the power of a provocative tweet.

We now find ourselves at the intersection of SEC settlements and social media. This is a distinctly modern risk for defendants in SEC proceedings and it begs the question: Should defendants negotiate (or discuss) with the enforcement staff how—or whether—the SEC will tweet out a press release on social media? It’s certainly something to consider.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Kurt Wolfe is a member of Troutman Sanders LLP’s White Collar and Government Investigations team, where he advises public companies, financial institutions, asset management firms, broker-dealers, and individuals in connection with internal investigations and regulatory enforcement actions. Follow him on Twitter at @Enforce_Update.

The opinions expressed are those of the author and do not necessarily reflect the views of the firm or its clients.