SEC tires of shell game, halts trading in 379 micro-caps

Commission targets shell companin in bid to curb pump-and-dump schemes
MAR 12, 2012
By  John Goff
The U.S. Securities and Exchange Commission halted trading in 379 shell companies over concern that fraudsters could hijack stocks to steal investor money. The trading suspensions, the most by the SEC in a single day, stem from the work of an agency task force that identified clearly dormant microcap stocks in 32 states and at least six countries, the SEC said today in a statement. Microcap shares have long been used for frauds such as pump-and-dump schemes, in which a perpetrator buys stock in a thinly traded company and touts its value through false and misleading statements. Illicit profits are reaped when those behind the fraud dump their shares into the market after pumping the prices higher. “Empty shell companies are to stock manipulators and pump- and-dump schemers what guns are to bank robbers -- the tools by which they ply their illegal trade,” SEC Enforcement Director Robert Khuzami said in the agency's statement. “This massive trading suspension unmasks these empty shell companies and deprives unscrupulous scam artists of the opportunity to profit at the expense of unsuspecting retail investors.” Regulators sharpened their focus on shell companies about two years ago amid complaints that issuers, many from China, were using them to enter U.S. markets through so-called reverse mergers. In a reverse merger, closely held firms buy shells that let them sell shares on exchanges without the scrutiny that would surround a public offering. Several reverse-merger companies have seen their share prices plummet amid allegations that their financial statements were inaccurate. --Bloomberg News--

Latest News

'Bogged down' advisors just want to have fun (again)
'Bogged down' advisors just want to have fun (again)

Jim Cahn, of Wealth Enhancement Group, lifts the lid on his firm's partnership model, his views on RIA M&A, and the widely slept-on reason why advisors are merging into larger organizations.

Vestwell unveils new emergency savings account offering
Vestwell unveils new emergency savings account offering

The fintech firm is cementing its status in the workplace savings space with its latest ESA offering, which employers can integrate into their existing benefits package.

'Money Mimosas' and other ways to show your Valentine financial love
'Money Mimosas' and other ways to show your Valentine financial love

Wealth managers offer unique ideas for couples to grow closer emotionally and financially.

Limra research finds financial confidence on the rise among Black American workers
Limra research finds financial confidence on the rise among Black American workers

Survey findings suggest increased sense of financial security and more optimistic 2025 outlook, while highlighting employers' role in ensuring retirement readiness.

DOGE efforts sideswipe muni bonds backed by federal lease payments
DOGE efforts sideswipe muni bonds backed by federal lease payments

Falling prices for some securities within the $4 trillion state and local government debt market spotlight how the push to shrink spending is sending shockwaves across the US.

SPONSORED Record growth: Interval funds emerge as key players in alternative investments

Blue Vault Alts Summit highlights the role of liquidity-focused funds in reshaping advisor strategies

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.