On May 14 a Bulgarian stock schemer is alleged to have moved the share price of consumer company Avon Products by making a false filing to the Securities and Exchange Commission.
Three months later, nothing is stopping someone else from doing the very same thing.
The Securities and Exchange Commission says it’s not making changes to its Edgar filing system.
A spokeswoman for the SEC told Business Insider: “Filers are responsible for the accuracy of their filings and as demonstrated face enforcement actions for false filings.”
The SEC didn’t answer questions about taking further steps to prevent fraudulent filings.
The false Avon filing, which was widely disseminated by the Edgar system, is alleged to have been created by a Bulgarian man called Nedko Nedev. The filing said that a fictitious private equity firm called PTG Capital would submit a bid to buy the very real and publicly-listed cosmetics company Avon.
It’s a difficult situation for the SEC, which lacks the resources to have a person visually monitor every filing it processes before sharing it with the public. The volume of paperwork the agency otherwise would have to manually confront would also overwhelm its staff and budget.
“Once you submit the filing it’s pretty much available instantaneously,” said Dechert LLP partner Ian Hartman, who works with Edgar filings.
The Avon M&A escapade is far from the only example of crooks using false filings in an to attempt to dupe a bigger cross-section of market players. Stock market fraudsters have also tried to dupe reputable public relations companies with false reports in hopes of catching investors off-guard.
After getting hacked, one big PR firm wised up. Berkshire Hathaway’s Business Wire instituted password-protected submissions to ensure that press releases really come from its actual clients and not from a fraudster.
The SEC referred Business Insider to its previous statements on the PTG Capital fraud when contacted. USDOJ was contacted for comment but did not provide a response by publication time.
Avon also declined to comment through its spokesman.