How to Become a Stock Promoter
Stock promotion appears easy -- send out a bunch of emails that tout stocks, hold a conference call or two and send out some press releases -- and get paid for it. Companies hire people to attract more investors to buy their stocks, which usually results in higher stock prices. While it's simple to set up shop as a stock promoter, there are significant risks that can result in heavy fines and jail time if you don't follow Securities and Exchange Commission, or SEC, and Financial Industry Regulatory Authority, or FINRA, rules and regulations.
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Instructions
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Study the SEC and FINRA rules and regulations. A stock promoter's top priority is to comply with these requirements. You don't actually need any certifications or licenses to promote your stock-picking talent and work as a stock promoter, but if you fail to maintain perfect compliance, you not only risk legal action against you and your employees, but against your client companies, their stocks and their shareholders, as well. Your client company will be held at least partially responsible for your misdeeds, and may risk being ejected from the exchange where it is trading. In addition, the market will drive the stock price down.
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Find a good attorney who specializes in securities law. You will need contracts covering your services to client companies; legal disclosures for your website, newsletters and other promotional materials; legal disclaimers and some tutoring regarding what to expect and what not to do.
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Develop your investor contact database by purchasing mailing lists of investors and writing and promoting a stock-picking newsletter. You can't sell stock to your readers, but their purchases will make the stock price rise. The value of a stock promoter lies in his ability to promote a client company's stock to large numbers of investors and stockbrokers, who trust the promoter enough to buy positions in most -- if not all -- that promoter's recommended stocks. Your database should contain at least a few hundred thousand names.
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Develop your following by demonstrating your skill at picking high-flying stocks through your newsletter and special subscribers to your stock-picking premium service. Developing a following can be accomplished via Internet and social media marketing.
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Research public companies to find those that appear to have under-priced stock. Generally, company management is anxious to publicize the value of the company, partially because their stockholders will stop complaining that the stock is not appreciating in value. These companies are your potential clients.
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Tell prospective client companies how many investors and stockbrokers follow your recommendations, how careful you are about compliance issues and how high you expect their stock to trade based on your recommendations. If you live up to your promises, your client company will be happy, and you will find it easy to get more companies to hire your services.
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Join the National Investor Relations Institute and the National Investment Banking Association, and attend as many of their educational programs and conventions as you can. Network in your local venture capital community to develop potential company clients and deep-pocketed investors for your database.
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Tips & Warnings
Have your attorney help you negotiate compensation with your first few clients. What is considered acceptable compensation is a constant topic of discussion in regulatory circles, so it is vital that you launch your business following the current standards of best industry practices.
You must disclose how you are compensated by your client, and how much cash and stock was involved. You must also disclose when you sell the stock you receive, and at what price. Ethical promotion activities and truthful claims and projections are also required. Pay attention to what happens to non-compliant stock promoters. In a regulatory action against a prominent stock promoter, the SEC alleged that after the promoter received millions of shares of his client company's stock as compensation, the promoter did not disclose publicly that he was paid for his promotion efforts and how much money and stock he received. The promoter featured his client's stock on his website, recommended purchase of the securities through his newsletter, and predicted high price appreciation for the stock without any reasonable basis for those projections. The promoter also pushed the stock price up and sold it without revealing his actions to the public. The promoter was barred from ever doing penny stock business, charged large fines and forced to disgorge all ill-gotten gains of more than $2 million, plus pre-judgment interest.
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