The SEC and FINRA have had plenty of opportunity to review custodianships and clearly have not found them a problem per se (sure some of the players have gotten into trouble but that is to be expected in penny land). It seems they are more concerned with sham S-1's and made to order shells.
The problem is that they don't "review custodianships". It isn't clear to me whether they even know about them, most of the time.
But they aren't fond of blank check companies in general. Back in the 90s and early 2000s, tons of registered shells were created as blank checks that could be purchased by private companies wishing to do reverse mergers. Some attorneys specialized in creating them. One, my favorite, was Anthony DeMint. He cooked up quite a few, and gave some of them funny names, like Nothing Corp and Too Late Financials. Neither of those ever sold.
Then in 2008, concerned about the proliferation of shells, the SEC changed its rules regarding them. As a result, registered blank check shells lost a lot of their potential value. DeMint and others saw the writing on the wall and deregistered their creations.
Custodianship and receivership shells have always been relatively popular; quite a few changed hands back in the 90s and were used in ways they shouldn't have been. Some people went to prison. But obviously the SEC can't move against them and their custodians or receivers simply because the vehicles are custodianship or receivership shells. There are, after all, laws on the books providing for the appointment of custodians and receivers in certain circumstances. Naturally one is if a company has been abandoned by its management. Most of these shells actually have been abandoned, though occasionally the action is contested.
It would be difficult for the SEC to move against people seeking custodianship or receivership of these dormant shells unless they can show that those individuals lied or failed to make full disclosure in their applications to the local court. Sometimes that does happen. But as a general principal, the agency isn't fond of shell peddlers. The shells they sell may have skeletons in the closet. Or the buyers may use them in pumpadumps.
But if they're serious about doing something about the proliferation of cheap shells for sale, they aren't doing the obvious. One easy step would be to move more quickly than they do to revoke registration of delinquent filers. Another would be to find a way to keep track of all penny companies' corporate filings in their home states. If their corporate charters are revoked, then FINRA should bring down the hammer and delete the ticker.
There are better ways to go public than to buy a custodianship or receivership shell.
