SEC Suspends Trading of 61 Companies

In the Matter of 3CI Complete Compliance Corp. et al.  On June 3, 2013, the SEC announced it had suspended trading in the securities of 61 empty shell companies that are delinquent in their public filings.  The list of companies whose securities have been suspended can be found here.

The SEC suspended the trading because microcap companies are thinly-traded and are therefore often used in “pump-and-dump” schemes.  In a pump-and-dump scheme, the perpetrators hype a thinly-traded microcap stock through false and misleading statements.  They buy the stock at a low price before touting the company and then sell after they have driven up the price by creating the appearance of market activity.  They then dump the stock for profit by selling it into the market at the higher price once investors have bought in.  Often, the stock price then falls and the investors are left with worthless stock.

In announcing the suspensions, the SEC touted its enhanced intelligence technology in the Enforcement Division’s Office of Market Intelligence which allowed the SEC to identify the dormant shell companies.  Now that the companies are suspended, they have to provide updated financial information to prove they are operational and are therefore less likely to be used in any fraudulent schemes.

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