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 SEC.gov.

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 mstout@otclawyers.com.

 

 

 

 

One thought on “What is an SEC Trading Suspension?

  1. Pingback: What is a Trading Halt? | Matheau J. W. Stout, Esq.

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