Sierra Trading, a popular online coupon marketplace for investors, said Friday that it has suspended all coupon sales, which are used to purchase stock or other securities, after the Securities and Exchange Commission warned that it may violate its terms of service.
Sierra Trading, the world’s largest online coupon market, said it was suspending all coupon sale sales, including the one for Sierra Trading Posts, in a notice to customers posted on its website.
“The suspension is in effect until we receive an update on the SEC determination.
Sierra Trading reserves the right to re-evaluate the terms of its agreement with our members if necessary.”
The SEC on Thursday informed Sierra Trading that it would begin an investigation into the company’s terms of sale, the company said.
Safeguarding investor privacyWhile Sierra Trading is not the first online retailer to suspend coupon sales in recent months, the suspension is significant.
A number of online coupon sites and trading platforms have been targeted by regulators in recent years, including eBay, where the SEC in 2016 banned the use of coupon sales to buy products.
Sears Holdings, another popular online discount retailer, also announced in January that it was pulling the plug on its online coupon program.
A spokesperson for Sierra trading said the company is confident in the safety and integrity of its members’ information and is taking steps to strengthen its policies.
In the past few years, companies like Amazon, eBay, and Google have stepped up to the plate, using online coupon sales and other forms of marketing to entice investors to buy shares of their stocks.
Sixty percent of all shares traded on the Nasdaq stock exchange are owned by insiders, according to research firm Wedbush Securities.
Sue Osmond, a professor of law at Boston University, said the SEC has taken a hard line on online coupon trading because it wants to make sure it is not violating securities law.
“It is an important part of the regulatory process, and the SEC is going to do its job,” she said.
“But the SEC should also take a hard look at this.”
Sierra trading also uses a system of trading agents called the Sierra Trading Agent.
An agent will have the authority to set the price a share will be worth and how much a customer will pay for it.
Skeptics of online coupons have long pointed out that many online coupon websites and trading sites do not require members to register and pay to participate.
Sterling said that while there is no question that online coupon sellers and brokers are manipulating the market, there is also no evidence of any collusion or insider trading.
Sandy Zuckerman, an attorney for Sierra Traders, told the Wall Street Journal that the suspension was in response to a series of questions about how the company operated.
Somewhat surprisingly, the SEC investigation was not based on the same type of questions that prompted the SEC to investigate online coupon brokers in the first place, Zuckerman said.
“The SEC’s focus on online brokers was focused on a few issues, such as the ability of online brokers to provide the kind of accurate, fair, and transparent pricing that members want and need,” Zuckherman said in a statement.
“Instead, this investigation focused on whether Sierra Trading was engaging in conduct that violated federal securities laws.”
In a statement, Sierra Trading said the suspension would allow the company to respond to SEC requests, such a to determine if the SEC had jurisdiction over Sierra Trading and if the company has acted in good faith.
“In addition to the suspension, Sierra trading also said it will begin a voluntary program to help its members learn more about online coupon selling and other marketing methods.
Sandra Doss, a spokesperson for the SEC, told Bloomberg News that she has asked Sierra Trading to disclose all of its online selling activities.”
Sierra is committed to providing our members with the information they need to make informed decisions about their investment portfolios,” Doss said.