DD Support Board and Research Team

[janice shell]

Yes. It got off to a great start in 2012, with 379 suspensions on a single day. In 2013 it did only 61, and then 255 in 2014, 128 in 2015. But there were only 19 in 2016.

Did they think they'd got 'em all? I doubt that. One of the participants at the SEC's roundtable was Michael Paley, who's co-chair of the Microcap Task Force. At one point, he said:

In particular, I want to add that in addition to the FINRA trading halts, the SEC has 12(k) authority to get a trading suspension. And the trading suspensions may be brought in situations where, you know, it is "necessary in the public interest for the protection of investors." And that's a very broad authority. The SEC, however, generally applies a higher standard than that to make sure that we are not sort of interfering more than necessary in the market. But I would say that there are -- you can look at the statistics that we have out there on our trading suspension releases, about how often it is that we do find it necessary to have a trading suspension. And yet we -- it seems that we are not --sometimes it feels as if we're not really making a dent.

And that's why I'm very glad that we're also talking about FINRA trading halts because with the limit on SEC resources and all of the other areas that we have to focus on, to the extent that we can find a way for FINRA or others to act in this area, it would be very helpful in cleaning up the market.

Paley got a response from Chris Stone, who works in FINRA's Transparency Services Department, whatever that may be:

...Specifically with respect to the ORF, I am part of the team that in real time, intraday, analyzes potential OTC equity U3 extraordinary market, market halts. And I think one thing that's worth noting is I think FINRA's general theme throughout the usage of 6440 and extraordinary market condition halts is that we're not an exchange in this space. So we lack contractual privity with issuers in the OTC equity space and we don't have listing agreements in the same way that the exchanges do. So for the 18,000-plus OTC equity symbols, and that compares with over 8,000 national market system symbols, it can be challenging to find in real time the valid information that we need to execute a U3 extraordinary market halt in this space.

That said, we have a range of exchange-like tools that we use in the space. Yvonne spoke at length earlier about our 211 qualification process. We also have a Rule 6490, which has allowed us to declare certain corporate actions deficient and not process them if we believe they're related to fraud or would otherwise threaten the clearance at settlement system. And then, obviously, lastly is 6440, our halt provision.

So I think, you know, I know we're going to get into this a little bit later on the panel, some other ideas around things that people have talked about and things we've thought about in terms of changes to 6440 or ways we could use 6440. But I guess that's just one thing I would like to set the table with for FINRA is, I think, our difference from being an exchange is kind of critical in this space.

https://www.sec.gov/spotlight/equity-market-structure-roundtables/retail-fraud-round-roundtable-092618-transcript.pdf