In January 2025, the founder of Citron Capital, LLC (“Citron”) filed a petition for rulemaking with the US Securities and Exchange Commission requesting the SEC to initiate rulemaking to clarify the regulation of trading by individual investors who publicly comment on securities. Raising First Amendment protection concerns, the petition argues there are no existing SEC rules or guidance for investors on the following question: “after publicly commenting on a security, how long must an individual wait to make a trade?” The petition urges the SEC to provide guidance and clarify regulatory expectations regarding a number of issues, including: (1) trading restrictions after public commentary; (2) the scope of applicability of trading restrictions across investors, (3) the role and sufficiency of disclaimer language as a safe harbor in online public commentary; and (4) protections for investors’ free speech and property rights while commenting on and trading in securities.
While the petition follows SEC charges in 2024 against Citron and its founder for their alleged engagement in a multiyear scheme to defraud followers by publishing false and misleading statements regarding trading recommendations, the petition nonetheless raises interesting questions, especially in light of the rise of influencers. Read the rulemaking petition.