The SEC's Unfinished Business

In all the coverage of the SEC's new journalist-subpoena guidelines, including my item in this blog, nobody mentioned a lingering issue: Just how does the SEC define "journalists" and "news-gathering"? Nothing in the SEC policy statement defines those terms, and that troubles me.

This a subject I've discussed before (thanks to New Market Machines for reminding me). When the subpoena morass first arose, SEC chairman Christopher Cox told Reuters that people "masquerading as journalists" are a problem, and that the guidelines would cover just the media and nobody else.

The problem is that stock swindlers have long posed as "journalists," such as by publishing "stock market newsletters" that are little more than stock-promotion vehicles. More recently, we have the anonymous crackpots of the anti-naked-shorting cult, some of whom are from the world of penny stocks and are well acquainted with stock-scam tactics.

As I noted in my item last month, the "sanitycheck" website, a favorite of Overstock.com's loopy CEO Patrick Byrne, bills itself as an "independent" website that likes to say that it engages in "journalism." In fact, "sanitycheck" has as much in common with journalism as the anti-shorting "market reform" movement has in common with genuine market reform. In other words, nothing. In fact, its tactics and secrecy make it more a kind of stock market version of the Ku Klux Klan than anything else.

"Sanitycheck" is run anonymously by an individual who hides behind a phony name (used medical equipment salesman Phil Saunders, a/k/a "Bob O'Brien") while he serves as a shill for Overstock and publishes drivel on "stock counterfeiting." One of the site's primary functions is to slander and intimidate journalists who fall afoul of Patrick Byrne and the naked-shorting cultists. One of "O'Brien's" "reporting techniques" is to publish a lie or rumor about someone or other, and then give that person or institution X amount of time to respond or he will consider it as "fact." (See Feb. 15 entry here.)

The SEC needs to investigate the funding, tactics and secret ownership of "Sanitycheck" and similar sites, without being deterred by the misimpression that such phony, crackpot websites are part of the "news media." Some kind of formal guidelines defining the media (perhaps simply excluding anonymously-run sites run to push a particular "cause") are clearly needed.

Now one might think that the SEC would know the difference between a crackpot website and a genuine online journal like, say, Slate. However, judging from its recent witch hunt against journalists, I am not so sure.

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Wall Street Versus America will be published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.