A few days ago the Securities and Exchange Commission (SEC) announced the largest trading suspension in agency history. The agency halted 379 companies Monday, and another 6 companies later in the week. The SEC’s previous largest trading suspension was an order in September 2005 that involved 39 companies.
Microcap companies typically have limited assets and low-priced stock that trades in low volumes. An initiative tabbed Operation Shell-Expel by the SEC’s Microcap Fraud Working Group utilized various agency resources including the enhanced intelligence technology of the Enforcement Division’s Office of Market Intelligence to scrutinize microcap stocks in the markets nationwide and identify clearly dormant shell companies in 32 states and six foreign countries that were ripe for potential fraud.
“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,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “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.”
An interesting read: The Role of Domestic Shell Companies in Financial Crime and Money Laundering (2006)
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