SEC v. JOHN DOE, No. 9:15-CV-80446-JIC (Apr. 16, 2015)
raw: Tradingsuspensions
Tradingsuspensions, No. 9:15-CV-80446-JIC (Apr. 16, 2015)
Classified non-corporate(confidence 95%). No EDGAR filing fingerprint (criminal/DOJ-side scheme). detection rule →
Parties
Securities and Exchange Commission
Keywords
tradingsuspensions
Extracted insights
Entities 3
- organization Financial Industry Regulatory Authority
- agency form 211 with finra
- agency Securities and Exchange Commission
Triples 3
- SEC May Suspend Trading A Stock
- SEC Cannot Announce That It Is Working On A Suspension
- Broker-Dealer Must File Form 211 With FINRA
PDF
Text layers
Extracted body text (12,410c)
1
Investor Bulletin:
Trading Suspensions
The SEC’s Office of Investor Education and Advocacy
is issuing this Investor Bulletin to help educate
investors about the SEC’s rules and regulations related
to stock suspensions. The federal securities laws
allow the SEC to suspend trading in any stock for up
to ten business days. This bulletin answers some of
the typical questions we receive from investors about
trading suspensions. A list of companies whose stock is
currently suspended, or which have been subject to an
SEC suspension, may be found here.
Why would the SEC suspend trading in
a stock?
The SEC may suspend trading in a stock when the
Commission is of the opinion that a suspension is
required to protect investors and the public interest.
Circumstances that might lead the Commission to
suspend trading include:
• A lack of current, accurate, or adequate
information about the company, for example,
when a company is not current in its filings of
periodic reports;
• Questions about the accuracy of publicly available
information, including in company press releases
and reports, about the company’s current
operational status, financial condition, or business
transactions;
• Questions about trading in the stock, including
trading by insiders, potential market manipulation,
and the ability to clear and settle transactions in
the stock.
Why couldn’t the SEC forewarn
investors that it was about to suspend
trading in a stock?
The SEC cannot announce that it’s working on a
suspension. We conduct this work confidentially to
maintain the effectiveness of any related investigation
we may be conducting. Confidentiality also protects
a company and its shareholders if the SEC ultimately
decides not to issue a trading suspension. The SEC
is mindful of the seriousness of suspensions, and
carefully considers whether it is in the public interest
to order a trading suspension.
What happens when the ten-day
suspension period ends?
The SEC will not comment publicly on the status
of a company when the ten-day suspension period
ends because the company may still have serious legal
www.investor.govInvestor Assistance (800) 732-0330
http://www.sec.gov/litigation/suspensions.shtml
problems. For instance, the SEC may continue to
investigate a company to determine whether it has
defrauded investors. The public will not know if
the SEC is continuing its investigation until the SEC
publicly announces an enforcement action against the
company.
Furthermore, when an SEC trading suspension ends,
a broker-dealer may not solicit investors to buy or
sell the previously-suspended stock until certain
requirements are met. Before soliciting trades or
resuming quotations in a stock that has been subject
to a trading suspension, a broker-dealer must file a
Form 211 with the Financial Industry Regulatory
Authority (“FINRA”) representing that it has satisfied
all applicable requirements, including those of Rule
15c2-11.
Among other things, Rule 15c2-11 requires broker-
dealers to review and maintain certain documents and
information about the company, including:
1. the corporation’s organization, operations, and
certain control affiliates;
2. the title and class of the securities outstanding and
being traded; and
3. the issuer’s most recent balance sheet and its profit
and loss and retained earnings statement.
No broker-dealer may solicit or recommend that an
investor buy shares in a stock that has been subject
to a trading suspension unless and until FINRA
has approved a Form 211 relating to the stock. If
there are continuing regulatory concerns about
the company, its disclosures, or other factors, such
as a pending regulatory investigation, a Form 211
application may not be approved.
However, limited or “unsolicited” trading can occur
in a stock that has been subject to a trading suspension
after the suspension ends but before a Form 211
is approved. This may allow investors to trade the
stock when a broker or adviser has not solicited or
recommended such a transaction. Even though such
trading is allowed, it can be very risky for investors
without current and reliable information about the
company.
Will trading automatically resume after
ten days?
It depends on the market where the stock trades.
Different rules apply in different markets.
For stocks that trade in the over-the-counter market
(also commonly called the “OTC market”, which
includes the Bulletin Board and OTC Markets (f/k/a
Pink Sheets)), trading does not automatically resume
when a suspension ends. Before OTC stock quoting
can resume after a suspension period, SEC regulations
require a broker-dealer to review specific information
about the company. If a broker-dealer does not have
confidence that a company’s financial statements are
reasonably current and accurate in all material respects,
especially in light of the questions raised by the SEC,
then a broker-dealer may not publish a quote for the
company’s stock. The OTC markets function through
dealer systems where only broker-dealers may quote
and facilitate trading in securities.
In contrast to stocks that trade on the OTC market,
stocks that trade on an exchange or Nasdaq resume
trading as soon as an SEC suspension ends.
If the suspended stock resumes trading,
why is it trading at a much lower price?
The trading suspension may raise serious questions
and cast doubts about the company in the minds
of investors. While some investors may be willing
to buy the company’s stock, they will do so only at
significantly lower prices.
Take Precautions following an SEC
Trading Suspension: Check for Reliable
Information.
Investors should be very cautious in considering an
investment in a stock following a trading suspension.
At the very least, investors should assure themselves
that they have current and reliable information about a
company before investing.
www.investor.govInvestor Assistance (800) 732-0330
2
http://www.sec.gov/cgi-bin/goodbye.cgi?www.otcbb.com/aboutotcbb/forms/form211.pdf
http://www.sec.gov/cgi-bin/goodbye.cgi?www.law.uc.edu/CCL/34ActRls/rule15c2-11.html
http://www.sec.gov/cgi-bin/goodbye.cgi?www.law.uc.edu/CCL/34ActRls/rule15c2-11.html
• Research the Company: Always research
a company before buying its stock, especially
following a trading suspension. Consider the
company’s finances, organization, and business
prospects. This type of information often is
included in filings that a company makes with the
SEC.
• Review the Company’s SEC Filings: This
information is free and can be found on the
Commission’s EDGAR filing system. Some
companies are not required to file reports with
the SEC. These are known as “non-reporting”
companies. Investors should be aware of the risks
of trading the stock of such companies, as there
may not be current and accurate information
that would allow investors to make an informed
investment decision.
• Be Skeptical: Investors should always ask why
someone provides them a “hot” tip. Investors
should also do their own research and be aware
that information from online blogs, social
networking sites, and even a company’s own
website may be inaccurate and sometimes
intentionally misleading:
If current, reliable information about a company and
its stock is not available, investors should consider
seriously whether this may be a good investment.
Why would the SEC suspend trading of
a stock when it knows that such action
will hurt current shareholders?
The SEC suspends trading in a security when it is
of the opinion that the suspension is required in the
public interest and to protect investors. Because a
suspension often causes a dramatic decline in the price
of the security, the SEC suspends trading only when
it believes that the public may be making investment
decisions based on a lack of information, or false or
misleading information. A suspension may prevent
potential investors from being victimized by a fraud.
How can investors find out if the stock
will trade again after a suspension?
Investors can contact the broker-dealer who sold you
the stock or a broker-dealer who quoted the stock
before the suspension. Ask the broker-dealer if it
intends to resume publishing a quote in the company’s
stock.
If there is no market to sell my security,
what can investors do with their
shares?
If there is no market to trade the shares, they may
be worthless. Investors may want to contact their
financial or tax advisers to determine how to treat
such a loss on their tax returns.
What can investors do if the company
acted wrongfully and they have lost
money?
If investors want to get their money back, they will
need to consider taking legal action on their own.
The SEC cannot act as their lawyer. Investors must
pursue all of their legal remedies themselves or with
the assistance of legal counsel they engage themselves.
For more information about how to protect your legal
rights, including finding a lawyer who specializes in
securities law, read our flyer, How the SEC Handles
Your Complaint or Inquiry.
To learn how to file an arbitration action against a
broker-dealer, investors can contact the Director of
Arbitration at FINRA. FINRA also offers mediation
as an option before going to arbitration.
www.investor.govInvestor Assistance (800) 732-0330
3
http://www.sec.gov/edgar.shtml
http://www.sec.gov/investor/pubs/howoiea.htm
http://www.sec.gov/investor/pubs/howoiea.htm
http://www.sec.gov/cgi-bin/goodbye.cgi?www.finra.org/ArbitrationMediation/index.htm
http://www.sec.gov/cgi-bin/goodbye.cgi?www.nyse.com/regulation/disputeresolution/1124919617795.html
http://www.sec.gov/cgi-bin/goodbye.cgi?www.nyse.com/regulation/disputeresolution/1124919617795.html
Where can investors get information
about trading suspensions?
Investors can find a list of companies whose stocks
have been suspended by the SEC since October 1995
on our website.
How can investors learn more?
We offer educational materials so that investors can
develop an understanding of the securities industry
and learn how to avoid costly mistakes and fraud.
Our educational materials also provide tips on how
investors can invest wisely. Investors can order our
free publications by calling (800) SEC-0330, or access
them on the Internet through the SEC’s
Investor.gov website. For additional educational
information for investors, see the SEC’s Investor.
gov website or the Office of Investor Education and
Advocacy’s homepage. For additional information
relating to (i) trading suspensions and (ii) the risks of
investing in low-priced stocks, see:
• Our publication, Microcap Stock: A Guide for
Investors
• SEC Trading Suspensions: http://www.sec.gov/
litigation/suspensions.shtml
• Investor Bulletin: Trading in Stock After an SEC
Trading Suspension -- Be Aware of the Risks
• Company filings with the SEC
• Section 12(k) of the Exchange Act
• Exchange Act Rule 15c2-11; FINRA Rule 6440
• Form 211
We have provided this information as a service to
investors. It is neither a legal interpretation nor
a statement of SEC policy. If you have questions
concerning the meaning or application of a particular
law or rule, please consult with an attorney who
specializes in securities law.
June 2011Investor Assistance (800) 732-0330
4
http://www.sec.gov/litigation/suspensions.shtml
http://www.investor.gov/publications-research-studies/publications
http://investor.gov
http://investor.gov
http://www.sec.gov/investor/pubs/microcapstock.htm
http://www.sec.gov/investor/pubs/microcapstock.htm
http://www.sec.gov/litigation/suspensions.shtml
http://www.sec.gov/litigation/suspensions.shtml
http://www.sec.gov/investor/alerts/tradingstock.htm
http://www.sec.gov/investor/alerts/tradingstock.htm
http://www.sec.gov/edgar.shtml
http://www.sec.gov/about/laws/sea34.pdf
http://www.sec.gov/cgi-bin/goodbye.cgi?www.law.uc.edu/CCL/34ActRls/rule15c2-11.html
http://www.sec.gov/cgi-bin/goodbye.cgi?finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=4414
http://www.sec.gov/cgi-bin/goodbye.cgi?www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/notices/p016697.pdf
http://www.sec.gov/litigation/suspensions.shtml
http://www.sec.gov/investor.shtmlOCR text (12,410c · textlayer · 95% conf)
1
Investor Bulletin:
Trading Suspensions
The SEC’s Office of Investor Education and Advocacy
is issuing this Investor Bulletin to help educate
investors about the SEC’s rules and regulations related
to stock suspensions. The federal securities laws
allow the SEC to suspend trading in any stock for up
to ten business days. This bulletin answers some of
the typical questions we receive from investors about
trading suspensions. A list of companies whose stock is
currently suspended, or which have been subject to an
SEC suspension, may be found here.
Why would the SEC suspend trading in
a stock?
The SEC may suspend trading in a stock when the
Commission is of the opinion that a suspension is
required to protect investors and the public interest.
Circumstances that might lead the Commission to
suspend trading include:
• A lack of current, accurate, or adequate
information about the company, for example,
when a company is not current in its filings of
periodic reports;
• Questions about the accuracy of publicly available
information, including in company press releases
and reports, about the company’s current
operational status, financial condition, or business
transactions;
• Questions about trading in the stock, including
trading by insiders, potential market manipulation,
and the ability to clear and settle transactions in
the stock.
Why couldn’t the SEC forewarn
investors that it was about to suspend
trading in a stock?
The SEC cannot announce that it’s working on a
suspension. We conduct this work confidentially to
maintain the effectiveness of any related investigation
we may be conducting. Confidentiality also protects
a company and its shareholders if the SEC ultimately
decides not to issue a trading suspension. The SEC
is mindful of the seriousness of suspensions, and
carefully considers whether it is in the public interest
to order a trading suspension.
What happens when the ten-day
suspension period ends?
The SEC will not comment publicly on the status
of a company when the ten-day suspension period
ends because the company may still have serious legal
www.investor.govInvestor Assistance (800) 732-0330
http://www.sec.gov/litigation/suspensions.shtml
problems. For instance, the SEC may continue to
investigate a company to determine whether it has
defrauded investors. The public will not know if
the SEC is continuing its investigation until the SEC
publicly announces an enforcement action against the
company.
Furthermore, when an SEC trading suspension ends,
a broker-dealer may not solicit investors to buy or
sell the previously-suspended stock until certain
requirements are met. Before soliciting trades or
resuming quotations in a stock that has been subject
to a trading suspension, a broker-dealer must file a
Form 211 with the Financial Industry Regulatory
Authority (“FINRA”) representing that it has satisfied
all applicable requirements, including those of Rule
15c2-11.
Among other things, Rule 15c2-11 requires broker-
dealers to review and maintain certain documents and
information about the company, including:
1. the corporation’s organization, operations, and
certain control affiliates;
2. the title and class of the securities outstanding and
being traded; and
3. the issuer’s most recent balance sheet and its profit
and loss and retained earnings statement.
No broker-dealer may solicit or recommend that an
investor buy shares in a stock that has been subject
to a trading suspension unless and until FINRA
has approved a Form 211 relating to the stock. If
there are continuing regulatory concerns about
the company, its disclosures, or other factors, such
as a pending regulatory investigation, a Form 211
application may not be approved.
However, limited or “unsolicited” trading can occur
in a stock that has been subject to a trading suspension
after the suspension ends but before a Form 211
is approved. This may allow investors to trade the
stock when a broker or adviser has not solicited or
recommended such a transaction. Even though such
trading is allowed, it can be very risky for investors
without current and reliable information about the
company.
Will trading automatically resume after
ten days?
It depends on the market where the stock trades.
Different rules apply in different markets.
For stocks that trade in the over-the-counter market
(also commonly called the “OTC market”, which
includes the Bulletin Board and OTC Markets (f/k/a
Pink Sheets)), trading does not automatically resume
when a suspension ends. Before OTC stock quoting
can resume after a suspension period, SEC regulations
require a broker-dealer to review specific information
about the company. If a broker-dealer does not have
confidence that a company’s financial statements are
reasonably current and accurate in all material respects,
especially in light of the questions raised by the SEC,
then a broker-dealer may not publish a quote for the
company’s stock. The OTC markets function through
dealer systems where only broker-dealers may quote
and facilitate trading in securities.
In contrast to stocks that trade on the OTC market,
stocks that trade on an exchange or Nasdaq resume
trading as soon as an SEC suspension ends.
If the suspended stock resumes trading,
why is it trading at a much lower price?
The trading suspension may raise serious questions
and cast doubts about the company in the minds
of investors. While some investors may be willing
to buy the company’s stock, they will do so only at
significantly lower prices.
Take Precautions following an SEC
Trading Suspension: Check for Reliable
Information.
Investors should be very cautious in considering an
investment in a stock following a trading suspension.
At the very least, investors should assure themselves
that they have current and reliable information about a
company before investing.
www.investor.govInvestor Assistance (800) 732-0330
2
http://www.sec.gov/cgi-bin/goodbye.cgi?www.otcbb.com/aboutotcbb/forms/form211.pdf
http://www.sec.gov/cgi-bin/goodbye.cgi?www.law.uc.edu/CCL/34ActRls/rule15c2-11.html
http://www.sec.gov/cgi-bin/goodbye.cgi?www.law.uc.edu/CCL/34ActRls/rule15c2-11.html
• Research the Company: Always research
a company before buying its stock, especially
following a trading suspension. Consider the
company’s finances, organization, and business
prospects. This type of information often is
included in filings that a company makes with the
SEC.
• Review the Company’s SEC Filings: This
information is free and can be found on the
Commission’s EDGAR filing system. Some
companies are not required to file reports with
the SEC. These are known as “non-reporting”
companies. Investors should be aware of the risks
of trading the stock of such companies, as there
may not be current and accurate information
that would allow investors to make an informed
investment decision.
• Be Skeptical: Investors should always ask why
someone provides them a “hot” tip. Investors
should also do their own research and be aware
that information from online blogs, social
networking sites, and even a company’s own
website may be inaccurate and sometimes
intentionally misleading:
If current, reliable information about a company and
its stock is not available, investors should consider
seriously whether this may be a good investment.
Why would the SEC suspend trading of
a stock when it knows that such action
will hurt current shareholders?
The SEC suspends trading in a security when it is
of the opinion that the suspension is required in the
public interest and to protect investors. Because a
suspension often causes a dramatic decline in the price
of the security, the SEC suspends trading only when
it believes that the public may be making investment
decisions based on a lack of information, or false or
misleading information. A suspension may prevent
potential investors from being victimized by a fraud.
How can investors find out if the stock
will trade again after a suspension?
Investors can contact the broker-dealer who sold you
the stock or a broker-dealer who quoted the stock
before the suspension. Ask the broker-dealer if it
intends to resume publishing a quote in the company’s
stock.
If there is no market to sell my security,
what can investors do with their
shares?
If there is no market to trade the shares, they may
be worthless. Investors may want to contact their
financial or tax advisers to determine how to treat
such a loss on their tax returns.
What can investors do if the company
acted wrongfully and they have lost
money?
If investors want to get their money back, they will
need to consider taking legal action on their own.
The SEC cannot act as their lawyer. Investors must
pursue all of their legal remedies themselves or with
the assistance of legal counsel they engage themselves.
For more information about how to protect your legal
rights, including finding a lawyer who specializes in
securities law, read our flyer, How the SEC Handles
Your Complaint or Inquiry.
To learn how to file an arbitration action against a
broker-dealer, investors can contact the Director of
Arbitration at FINRA. FINRA also offers mediation
as an option before going to arbitration.
www.investor.govInvestor Assistance (800) 732-0330
3
http://www.sec.gov/edgar.shtml
http://www.sec.gov/investor/pubs/howoiea.htm
http://www.sec.gov/investor/pubs/howoiea.htm
http://www.sec.gov/cgi-bin/goodbye.cgi?www.finra.org/ArbitrationMediation/index.htm
http://www.sec.gov/cgi-bin/goodbye.cgi?www.nyse.com/regulation/disputeresolution/1124919617795.html
http://www.sec.gov/cgi-bin/goodbye.cgi?www.nyse.com/regulation/disputeresolution/1124919617795.html
Where can investors get information
about trading suspensions?
Investors can find a list of companies whose stocks
have been suspended by the SEC since October 1995
on our website.
How can investors learn more?
We offer educational materials so that investors can
develop an understanding of the securities industry
and learn how to avoid costly mistakes and fraud.
Our educational materials also provide tips on how
investors can invest wisely. Investors can order our
free publications by calling (800) SEC-0330, or access
them on the Internet through the SEC’s
Investor.gov website. For additional educational
information for investors, see the SEC’s Investor.
gov website or the Office of Investor Education and
Advocacy’s homepage. For additional information
relating to (i) trading suspensions and (ii) the risks of
investing in low-priced stocks, see:
• Our publication, Microcap Stock: A Guide for
Investors
• SEC Trading Suspensions: http://www.sec.gov/
litigation/suspensions.shtml
• Investor Bulletin: Trading in Stock After an SEC
Trading Suspension -- Be Aware of the Risks
• Company filings with the SEC
• Section 12(k) of the Exchange Act
• Exchange Act Rule 15c2-11; FINRA Rule 6440
• Form 211
We have provided this information as a service to
investors. It is neither a legal interpretation nor
a statement of SEC policy. If you have questions
concerning the meaning or application of a particular
law or rule, please consult with an attorney who
specializes in securities law.
June 2011Investor Assistance (800) 732-0330
4
http://www.sec.gov/litigation/suspensions.shtml
http://www.investor.gov/publications-research-studies/publications
http://investor.gov
http://investor.gov
http://www.sec.gov/investor/pubs/microcapstock.htm
http://www.sec.gov/investor/pubs/microcapstock.htm
http://www.sec.gov/litigation/suspensions.shtml
http://www.sec.gov/litigation/suspensions.shtml
http://www.sec.gov/investor/alerts/tradingstock.htm
http://www.sec.gov/investor/alerts/tradingstock.htm
http://www.sec.gov/edgar.shtml
http://www.sec.gov/about/laws/sea34.pdf
http://www.sec.gov/cgi-bin/goodbye.cgi?www.law.uc.edu/CCL/34ActRls/rule15c2-11.html
http://www.sec.gov/cgi-bin/goodbye.cgi?finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=4414
http://www.sec.gov/cgi-bin/goodbye.cgi?www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/notices/p016697.pdf
http://www.sec.gov/litigation/suspensions.shtml
http://www.sec.gov/investor.shtml