## Facts

- Yun Soo Oh Park operated a paid, internet-based stock-tip service (“Tokyo Joe’s”) distributed through a subscriber website and mass emails.
- For compensation, Park regularly provided securities recommendations and market commentary to subscribers in a non-personalized, uniform format.
- The SEC alleged Park recommended securities while already holding positions in them and then sold after subscriber-driven price/volume increases, without disclosing his trading (scalping).
- The SEC alleged Park used promotional performance claims and testimonials that were false or misleading, including selective reporting of gains and omission of losses.
- The SEC brought a civil enforcement action alleging violations of Exchange Act § 10(b) and Rule 10b-5 and the antifraud provisions of the Investment Advisers Act, premised on Park’s status as an “investment adviser.”

## Issues

1. Whether the complaint plausibly alleged Park was an “investment adviser” under the Investment Advisers Act despite providing impersonal, mass-distributed recommendations for a fee.
2. Whether applying the Advisers Act antifraud provisions to Park’s online stock-tip business was barred by the First Amendment.
3. Whether the SEC adequately alleged securities fraud under Exchange Act § 10(b) and Rule 10b-5 based on scalping nondisclosure and misleading promotional statements, including the existence of a duty to disclose and the “in connection with” element.

## Decision

- The court denied Park’s Rule 12(b)(6) motion to dismiss.
- The court held the SEC plausibly alleged Park acted as an “investment adviser” because he provided securities advice “for compensation” through “publications or writings.”
- The court held the First Amendment did not bar the claims at the pleading stage because the SEC alleged fraudulent and deceptive conduct in a commercial advisory business, not protected editorial commentary.
- The court held the complaint adequately stated § 10(b)/Rule 10b-5 claims by alleging material omissions and misstatements tied to securities trading, including nondisclosure of scalping conflicts.

## Legal Principles

- Under the Investment Advisers Act, a person may qualify as an “investment adviser” when, for compensation, the person is in the business of advising others about securities, including advice delivered through publications or writings; individualized advice is not required by the statutory definition.
- The publisher-related exclusion does not bar Advisers Act coverage at the pleading stage where the complaint alleges the enterprise’s central purpose is paid securities advice and the adviser has undisclosed conflicts in recommended securities.
- Fraudulent or misleading commercial speech and deceptive practices connected to compensated investment advice may be regulated consistent with the First Amendment.
- A duty to disclose may arise where a relationship of trust and confidence is plausibly alleged and where nondisclosure of conflicts would make affirmative promotional statements misleading.
- “Scalping”—recommending securities while secretly trading to profit from follower-induced price movements—can constitute a material omission supporting antifraud liability when the conflict is not disclosed.
- The “in connection with” requirement is satisfied at the pleading stage when alleged misstatements or omissions are intended to induce securities transactions and are tied to trading activity and expected price effects.

## Conclusion

The court permitted the SEC’s enforcement action to proceed, finding the complaint sufficiently alleged that a paid online stock-tip operator could be an investment adviser, that alleged scalping and misleading promotions stated antifraud claims under the Advisers Act and Rule 10b-5, and that the First Amendment did not preclude regulating deceptive conduct in this compensated advisory context.


Securities & Exchange Comm’n v. Park, 99 F. Supp. 2d 889 (N.D. Ill. 2000)