WASHINGTON (Legal Newsline) — The Securities and Exchange
Commission (SEC) announced this week that New York-based Forcerank LLC will pay
$50,000 after allegations it offered illegal complex derivative products to
retail investors through mobile phone games described as “fantasy
sports for stocks.”
Forcerank ran mobile phone games that had players predict
stock outcomes. Players paid to play and Forcerank kept 10 percent of entry
fees. Additionally, it obtained data about market expectations that it hoped to
sell to hedge funds and other investors.
According to the SEC, Forcerank committed two violations of
the Dodd-Frank Act. It failed to file a registration statement for a game that
essentially constituted security-based swap offerings and it failed to sell the
contracts through a national securities exchange.
“The Dodd-Frank Act sought to bring security-based swaps
activity out of the shadows, including when it involves retail investors,” said
Michael Osnato, chief of the SEC Enforcement Division’s complex financial instruments unit. “We will continue to vigilantly scrutinize the market
for improper offerings of complex security-based swaps that ignore the required
safeguards to protect retail investors.”
The SEC first warned consumers about fantasy stock trading
in June 2015. It continues to evaluate whether these games are offered
in accordance with federal securities laws.