Shell Stocks; Reverse Mergers; Acquisitions; Zombies; Greys; & All "Other" Plays

[Special Situations]

SEC & Shells.


#SEC Proposes Amendments to Enhance Retail Investor Protections.
https://www.sec.gov/news/press-release/2019-189

#Proposed Rule.
https://www.sec.gov/rules/proposed/2019/34-87115.pdf


"The proposed amendments to the piggyback exception would prohibit broker-dealers from relying on the piggyback exception for shell companies. This proposed amendment is intended to help retail investors by preventing shell companies, which can be used as vehicles for fraud, from maintaining a quoted market."


"The Commission does not believe that securities of shell companies should be continuously quoted pursuant to an exception that presumes that sufficient information about the issuer of the quoted security is reaching the marketplace. A continuously quoted market can increase the share price of a shell company that may have been promoted using inaccurate or misleading representations and could allow fraudsters to more easily fool new investors into believing there is an active and independent market for its security."


"One possible alternative would be to more narrowly target pump-and-dump schemes by eliminating the piggyback exception for publications or submissions of shell companies only during a fixed period after a reverse merger between a shell company and an operating company."


"These amendments could also benefit investors by potentially deterring fraudulent activity. For example, the inability of broker-dealers to rely on the piggyback exception when publishing quotations for securities of shell companies could draw trading activity away from these securities. Currently, many publications of quotations for quoted OTC securities associated with issuers identified as shell companies are eligible for broker-dealers to rely on the piggyback exception."


"Less liquid OTC securities could also migrate away from the quoted OTC market as a result of the proposed restrictions on the piggyback exception pertaining to (1) shell companies, (2) recently suspended securities, and (3) securities without a sufficient prior history of both bid and ask prices."


"As mentioned previously, some broker-dealers may withdraw from quoting certain OTC securities (e.g., shell companies) as a result of the costs of initiating and resuming quotations associated with the proposed amendments. As a result, there may be diminished price competition in these types of securities."



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