Category Archives: Caveat Emptor

Defunct OTC Companies That Continue to Trade

What is a Defunct OTC Company?

Sometimes when a public company is no longer operating or in business, its stock can continue to trade on the OTC Markets even when its filings are delinquent. These OTC companies are shown as a Stop Sign on, and they are often labeled as “Defunct” or “Dark.”

Why Does a Defunct Public Company’s Stock Continue Trading?

The common stock of Defunct public companies or Stop Signs can continue to trade as long as there are shares in its public float.  These shares may have been previously registered under an S-1 Registration Statement when the company’ s SEC filings were current, or they may have been deposited by long-time Shareholders using Rule 144 or Section 4(a)(1) as an exemption to registration.

When Does a Defunct OTC Company’s Stock Cease Trading?

The free trading stock in the OTC Company’s public float will continue to trade unless those shares are deregistered by the SEC, trading is suspended or halted, or the registration of the Defunct public company’s stock is revoked by the SEC.

When Does the SEC Halt or Suspend Trading in a Defunct Public Company?

Unless there is evidence of wrongdoing, the SEC generally does not like to prohibit trading of stock in a Defunct OTC public company because doing so would harm those Shareholders who are holding stock in Defunct Stop Signs and those willing buyers and sellers who want to trade the stock despite the risks involved.

SEC Will Suspend Trading if There is Manipulation or False and Misleading Information

The SEC will halt or suspend trading in the stock of a Defunct public company when either

  1. The Defunct OTC company’s stock price appears to be manipulated; or
  2. When the SEC believes that the OTC company’s public information posted in filings or press releases is false or misleading.

When a trading suspension occurs, will label the stock with a Caveat Emptor or skull and cross bones symbol, indicating that there is a public interest concern and that investors should take special care.

When Does the SEC Deregister a Defunct Company’s Stock?

The SEC may also revoke the registration of a Defunct public company’s stock. Under Section 12(j) of the Securities Exchange Act of 1934, the SEC is authorized to revoke the registration of a security if the public company fails to comply with the federal securities laws.

The deregistration of a public company’s stock will also result in the Caveat Emptor label and skull and crossbones at, and then the Company’s trading symbol or ticker will not be searchable at all.  The SEC prohibits broker-dealers from executing trades in stocks when a Defunct public company’s registration is revoked pursuant to Section 12(j).

Securities Attorney for Shareholders of Defunct Public Companies

Shareholders owning stock in OTC Markets Stop Signs, which are delinquent in their filings or marked Defunct can contact OTC securities lawyer Matt Stout for a no cost review of their certificate and supporting documents to see if Rule 144 or Section 4(a)(1) can be used to clear restricted stock.

Securities Lawyer to Bring Defunct Companies Current

Management of delinquent SEC filers marked as Stop Signs or Caveat Emptor often work with Matt Stout to bring their companies current under the Exchange Act, or file Form 15 with the SEC in order to begin reporting as a current Pink Sheet on

OTC Bulletin Board and OTC Markets Securities lawyer Matt Stout can be reached at (410) 429-7076 or


What are Unsolicited Quotations in OTC Stock?

Unsolicited Quotations are bid and ask quotes that market makers post to reflect unsolicited orders by their customers.

Do Brokers Accept Deposits of Stock With Only Unsolicited Quotations?

Yes. Many OTC brokers which specialize in over-the-counter penny stocks trading on the OTC Markets or OTC Bulletin Board will readily assist customers with deposits of stock even when the only quotations are unsolicited.  This is especially true if the OTC Issuer is an SEC reporting company and current in its filings.

Why Would a Stock Only Have Unsolicited Quotations?

Sometimes OTC companies are subject to FINRA or SEC trading suspensions for unexplained volume caused by spam.  At other times, many companies from the same industry are subject to increased scrutiny and several of them will have their trading suspended while FINRA or the SEC investigates allegations of wrongoing.

After a Caveat Emptor Label Many Companies May Lose Market Makers

Many of those companies are able to clear themselves of any wrongdoing, and remove the Caveat Emptor or Skull and Crossbones label, and they are subsequently cleared to trade again, but at first, no market makers remain willing to take the risk.

These OTC Issuers may once have had a robust trading volume with many well known market makers, but following a Caveat Emptor designation they might temporarily remain without a market maker to file a new Form 211 to comply with SEC Rule 15c2-11.  This could happen after a trading suspension, which lasts more than 10 days, for example.  At that point, only unsolicited quotations would be shown.

How are Unsolicited Quotations Published for Penny Stocks?

A customer will call his broker asking to buy or sell a particular OTC stock.  The broker then posts a quotation demonstrating the brokerage customer’s interest in the stock, which was not solicited by the brokerage. These quotations are marked as “unsolicited” quotations on or on the OTC Bulletin Board.

OTC Markets Securities Lawyer for Shareholders and Issuers

Shareholders and Management of OTC Markets or OTC Bulletin Board companies can contact OTC Markets lawyer Matt Stout at (410) 429-7076 or with questions regarding trading suspensions, complying with SEC Rule 15c2-11, or clearing restricted stock.


Can the SEC Revoke a Stock’s Registration?

Yes, the SEC can revoke the registration of a stock under the Securities Exchange Act of 1934 (the “Exchange Act”).

If a public company remains out of compliance with federal securities laws, Section 12(j) of the Exchange Act  authorizes the SEC to revoke the registration of its stock, in which case broker-dealers may not execute trades in that stock.

What is a Trading Halt?

In contrast to an SEC trading suspension, which lasts for 10 days over a public interest concern, a trading halt is used by is used by securities exchanges like the New York Stock Exchange (NYSE) and the NASDAQ, and usually lasts less than an hour.

Reasons for a Trading Halt

A trading halt can be called at any time during the trading day

  1. So a public company can release important news which is likely to have a huge effect, either positive or negative, on the stock’s volume; or
  2. When there is a major imbalance in orders between buyers and sellers in a stock.

What is a Trading Delay?

A trading halt is also called a trading delay.   The term “delayed opening” is used when a securities exchange halts trading at the start of the trading day.

Types of Trading Halts and Delays

There are two different kinds of trading halts and delays.

  1. Regulatory, usually when a public company has pending news that the exchange believes will cause a volume spike.   This allows market participants time to assess the impact of the news release.
  2. Non-regulatory, usually when there is a question about whether the security continues to meet the exchanges listing requirements or when there is a significant order imbalance.


What is an SEC Trading Suspension?

The Securities and Exchange Commission (“SEC”) has the authority to suspend trading in any stock for up to Ten (10) days when it believes that information about the Company may be inaccurate or unreliable.  Investors can search a list of SEC trading suspensions at

Reasons the SEC Might Suspend Trading

  1. A lack of “current, accurate, or adequate” information about the public company–   If the Issuer is an OTCQB or OTCQX, this will cause OTC Markets to label it as a Pink Sheet until the filings are current.
  2. Questions regarding the accuracy of publicly available information–  This usually refers to press releases, but can also refer to periodic reports, like the 8-K, that mention financials, mergers or acquisitions.
  3. Trading in the stock–  A concern over insider trading or market manipulation involving email spam is often the cause.

Does trading automatically resume after the Ten Day Suspension?

Microcap stocks that are quoted on OTC Markets or on the OTC Bulletin Board (“OTCBB”) do not automatically resume trading following a 10 day SEC trading suspension.

In order for OTC Markets or FINRA’s OTCBB to resume quoting a suspended stock, the Issuer must have a market maker sponsor a new 15c2-11 filing.

Responding to an SEC Trading Suspension

SEC trading suspensions are valid tactics used by the Commission when there is a public interest concern over either a lack of information or the presence of new information that needs to be verified.

The proper response in either case is to make sure that the Issuer’s filings and press releases are current and accurate.  If a mistake was made, the Issuer should file an Amendment immediately.   Once the filings and news releases are current and accurate, then the next job for the Issuer’s securities counsel is to compile and present documentation which supports the statements made in the filings or news releases which caused the concern.

Public companies which post accurate new releases that state verifiable facts and avoid hyperbole should be able to produce supporting documentation within the 10 day SEC trading suspension, and after review by the SEC, the matter should end there.

While it is often true that an SEC review and response to such documentation could take longer than 10 days, and that a new 15c-211 filing may be inevitable, it is the Issuer’s responsibility to cooperate and assist the SEC in their investigation.   The sooner an Issuer provides documentation to the SEC, the sooner the trading suspension can be lifted.

Microcap public companies or shareholders with concerns over an SEC trading suspension or trading halt can contact securities lawyer Matt Stout at (410) 429-7076 or





What Does Caveat Emptor or Skull & Crossbones Mean on OTC Markets?

caveat-emptor The Caveat Emptor or “Buyer Beware” warning on OTC Markets means that there is  a public interest concern involving the Issuer, its Management or Securities.

Although the skull and crossbones implies that there is something possibly toxic about the stock, and looks scary, it really functions to alert the Issuer to provide documentation requested by a regulatory authority like the SEC in order to clear up what might just be a misunderstanding.

Caveat Emptor is Inevitable When Issuers Ignore SEC Inquires

In many cases, the existing Management or prospective Buyers of Caveat Emptor pubic vehicles will discover that the source of the skull and crossbones is a matter easily explained when a securities lawyer takes the time to follow the process.

Another way of looking at a Caveat Emptor is that the skull and crossbones is the inevitable result when an Issuer ignores an SEC inquiry, even if there is nothing whatsoever wrong.

Issuers Should Respect the Process and Hire Counsel to Respond

The difference between having a skull and crossbones for a few days or forever comes down to whether an Issuer respects the process enough to respond properly.  Hoping it will go away doesn’t work.  Management hiding their heads in the sand won’t remove it.

It is not the goal of the SEC, OTC Markets or any other organization to blacklist companies for life; those with good management and transparent numbers, that take the time and demonstrate good faith by cooperating fully are often rewarded quickly.  There is nothing to lose by responding and Shareholders have a lot to gain if the stock can start trading again.

Even if there was a legitimate public interest concern which caused the Caveat Emptor warning, once the Issuer takes affirmative steps to address past problems, it can distance itself from bad actors or past mistakes.   This process is all about disclosure, and more transparency is always better for both Management and Shareholders.

Pink Current Issuers who suddenly find themselves saddled with the Caveat Emptor badge should pick up the telephone and hire experienced securities counsel, who can coordinate the process of providing the regulatory authority with the information they need.

When is the Caveat Emptor Warning Removed By OTC Markets?

OTC Markets quoted companies may have the Caveat Emptor warning removed by providing their investors with detailed disclosures following the Alternative Reporting Standard.  This is accomplished by using either the OTC Markets Disclosure & News Service or, if the Issuer is an OTCQB, by becoming current again in their SEC filings.  Even after filings are brought current, OTC Markets may continue to mark an Issuer as Caveat Emptor if it believes there might still be a public interest concern.  For this reason, Issuers should specifically address any public interest concerns in their disclosures rather than trying to pretend it didn’t happen.

Experienced Securities Counsel for Caveat Emptor Vehicles

OTC Markets Issuers facing a Caveat Emptor situation should contact experienced securities legal counsel to discuss what is required to remove the skull and crossbones.  There are many reasons why the Caveat Emptor warning can be added to an Issuer’s trading symbol and the proper actions in response depend on why the Issuer was flagged.

Caveat Emptor May Create An Opportunity for Buyers of Public Vehicles

When existing Management of a Caveat Emptor vehicle gives up in frustration or chooses not to respond properly to an SEC inquiry, this can create an opportunity for a group with the money and patience to deal properly with any lingering public interest concerns.  Due diligence is essential in evaluating the difficulty of removing the Caveat Emptor warning, and this should be factored in when looking at a skull and crossbones vehicle that is for sale.

Management or Shareholders of OTC Markets skull and crossbones public vehicles can contact securities attorney Matt Stout at (410) 429-7076 for further information.

How Does A Trading Halt Affect the OTC Issuer’s Stock?

Who Can Place a Trading Suspension or Trading Halt on an OTC Security?

Only the SEC or FINRA can suspend or halt trading in a public company’s stock quoted on the OTCQX, OTCQB or OTC Pink Sheet marketplaces.  OTC Markets does not suspend trading or stop publishing quotations for any Issuer on its own accord.

A trading suspension or halt has nothing to do with whether or not an Issuer has continued to subscribe to the OTC Markets Disclosure and News Service, to OTCIQ, or even if the Issuer’s filings are not current on OTC Markets.  Pink Sheet Stop Signs can, in theory, remain Pink No Information forever without having trading in their stock suspended or halted.

What happens if the SEC or FINRA Issues a Trading Halt in an OTC Markets stock?

When trading in an OTC stock is suspended by the SEC or halted by FINRA, OTC Markets Group removes all quotes from its inter-dealer quotation system and displays a “Halted/Suspended” message.

How Long Do Trading Suspensions Last?

SEC suspensions for OTC Markets OTCQX, OTCQB and OTC Pink Sheets last Ten (10) business days.

Once the suspension has ended, market makers may re-enter their bid and ask quotes if a new Form 211 is filed with FINRA that includes the Issuer’s current financial information.

Without the new 15c2-11, the trading symbol will remain a Caveat Emptor or skull and cross bones.

What Can Caveat Emptor Issuers Do About SEC Suspensions or FINRA Trading Halts?

Management or Shareholders of OTC Markets Caveat Emptor or skull and cross bones Issuers can contact Matt Stout, securities lawyer, with questions on the process of addressing SEC trading suspensions or FINRA trading halts, and to discuss the 15c2-11 process at (410) 429-7076 or