New Law Could Hold Service Providers Liable For Investor Misrepresentations

from the safe-harbors? dept

In general, we’re big fans of the safe harbors found in the DMCA and the CDA, as they do what common sense should do instead: make sure that a third party is not held liable for actions of its users. Unfortunately, common sense isn’t always so common, and some people have trouble understanding this concept. In fact, it appears that a new bill may go in the other direction when it comes to investor information. A proposed bill that is supposedly designed to allow the SEC to better protect investors from bad info would potentially hold service providers liable for information posted by users if the service provider has “actual knowledge that the material contains a misrepresentation [or] in the absence of actual knowledge, is aware of facts or circumstances from which it is apparent that the material contains a misrepresentation [and] upon obtaining such knowledge or awareness, fails to act expeditiously to remove, or disable access to, the material.”

That would go against the basic Section 230 CDA safe harbors, so I’m not quite sure how you reconcile the two. In general, you can understand why it seems to make sense that service provider needs to remove such info, but it opens up all sorts of questions. Say someone in our comments posts some sort of misrepresentation. Are we now going to need to police that? If someone else tells us it’s a misrepresentation, will we now need to delete the comment? Are we expected to investigate whether or not some random comment on the site is a misrepresentation? Policing such things on forums all over the place would place an incredible burden on any website that allows user generated content. Why not keep the Section 230 safe harbors and focus on holding the actual parties (those who posted it) responsible, rather than the tools they use?

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Comments on “New Law Could Hold Service Providers Liable For Investor Misrepresentations”

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Anonymous Coward says:

Lesson 1: Don't play with money you can't afford to loose.

If the reader of an online forum takes something as “stock advice” without further verifying it’s source or whatnot, they’re no better off getting investment advice from the latest edition of “Star Magazine”.

Unfortunately, as more people get into investing, a healthy number of dumb people are playing craps with their retirement. Thomas Tessler once said “A fool and his money are soon parted.”

This amounts to nothing more than incenticising foolish investing, by saying “Uncle Sam has my back”

The SEC is going about it wrong and shouldn’t protect foolish investors when they couldn’t even figure out what the hell Bernie Madoff was doing.

Smart investors should see that their money is best managed in a reputable fund, and don’t ever, ever, play with money you can’t afford to loose.

Dark Helmet (profile) says:

Re: Re: YESSS!

“DH is right on. Why haven’t we done this before?”

Well thanks, but Designated Hitter was actually being sarcastic. I actually don’t mind the trolls and industry supporters, even the ones that are pretty clearly involved at some level or another in a way that throws into question their honesty.

Even when they are being blatant tools and lying/jiving/antogonizing/etc., Mike’s and others responses have given me additional information and ways to rebut certain reasonable sounding but ultimately unsound arguments.

I can only hope I’ve done the same for someone at some point.

Sniff….sniff…now I’m getting all sentimental and shit….

ROn (profile) says:


I agree with the wording presented. The concept has nothing to do with safe horbors but instead is knowingly aiding in a crime. e.g.: If you convinced a person on the street to buy something from someone else, knowing that the thing was faulty, and some injury resulted from that thing, then you would be partly responsible for the injury arising from that faulty thing. The same would be true of a service provider. Knowingly aiding in the commission of a crime still results in partial responsibility for that crime. The wording does not require policing but does specifically state that there is responsibility when one takes no action while aware that there is a misrespresentation. I think proof of knowledge will be difficult. And, how does one become aware of a misrepresentation? Hmmm, 3 strikes anyone?

Anonymous Coward says:

This is just another attempt to limit free speech by categorizing anything that disagrees with the government, RIAA, MPAA, FDA, Pharmaceutical corporations, et al as a misrepresentation so it can be censored.

Instead, why not just CORRECT the misrepresentation in a following post hence encouraging DISCUSSION. Isn’t that the point of this? That way we can all learn from one anothers mistakes. But their whole agenda is to prevent learning and to promote indoctrination.

Anonymous Coward says:

Madame Zelda provides bad investment advice too.

I’m a little ashamed to admit it, but I get most of my investment advice from a psychic.

Most of the time, Madame Zelda is correct, but sometimes she’s wrong. Dead wrong.

I will contact Paul Kanjorski, about this travesty and hopefully the bill will be fixed before it goes to The Hill. There are a lot of nefarious psychics out there, and we should band together against bad readings.

Anonymous Coward says:

I think one intent there is to reduce the ease of manipulating stocks by circulating false rumors. Things like “I saw Steve Jobs at Stanford Hospital’s Cancer Center this morning.” (Just to be clear, I did not).
Mike, you argue here that we should “focus on holding the actual parties (those who posted it) responsible”, but in the next post you will defend, as in the past, the right of the service provider to protect the identity of the poster.
It seems that this would allow law enforcement to put some pressure on the service provider in cases where their forum is used to commit a crime. Not necessarily a bad thing, but, like all tools, it can be misused or abused. What’s the alternative? Let naive people get taken, hoping that they will learn? It did not work very well for spam.

Anonymous Coward says:

Re: Re:

Mike tends to select his legal point of view from a menu of things. He doesn’t often appear to apply the concepts of balance and connection.

His vague answer for this will be that the companies will have to spend 6 months prove without a doubt in a court of law that the posting is a problem, and then get a court order, which will reveal that the service provider only keeps records for 30 days and that the person is untraceable. He would appose the keeping of records for longer because it would be a burder on the site owners, and would some how violate some people’s free speech and privacy expectations. Basically, set the rules up so that it is impossible to go after anything said or done online, because it’s some sort of mega-free speech that is protected by the digital gods.

He will soon post to say I am full of crap, but after reading this site for a while, you will catch on to where he is going.

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