Example 4

Kevin is the president of Shapiro Inc., an investment relations company. Kevin contracts with six publicly traded companies to electronically promote their stock. Kevin posts a profile and a strong buy recommendation for each company on Market Strategy's Internet site. Kevin also sends unsolicited email to 250,000 potential investors indicating that the stock is guaranteed to increase in value. The six companies compensate Kevin for the promotion with cash and stock. Neither the Internet site nor the emails disclose the compensation arrangement between Kevin and the six companies. Kevin has violated this standard because the Internet site and emails are misleading to potential investors. Kevin should not have guaranteed that the securities would increase in value. Kevin has also violated Standard VI. C (Referral Fees) by not disclosing the existence of an arrangement with the six companies through which he receives compensation in exchange for his services. Kevin may have also violated Standard V. A (Diligence and Reasonable Basis) if he failed to perform a diligent and thorough investigation appropriate to the circumstances of his investment recommendations.