A few noteworthy points, of which there are many more: 1.
Trading suspensions are, by design, prophylactic. The SEC has the authority to suspend trading in a stock “if in its opinion the public interest and the protection of investors so require.”[6]
2.
The path that leads to a recommendation that the Commission order a trading suspension often starts with referrals from FINRA, tips from investors, or from the Commission staff’s own market surveillance.
3.
Trading suspensions have been a critical element of the Commission’s response to COVID-19.
4.
The Commission has also suspended trading in the stock of at least three microcap issuers whose names or ticker symbols closely resembled those of unrelated companies whose products are actually relevant to COVID-19, such as testing, N-95 masks, and videoconferencing technology, due to concerns about investor confusion, among other things.[11]
5.
A trading suspension is not a finding of fraud or misconduct.[12]
So, first point, note well - from the SEC's own enforcement director, a trading suspension is not a finding of fraud or misconduct. They use it as a tool or step for sometimes further investigation. However, note, they suspended trading in 3 companies during this time just because their stock ticker symbol could be confused with another company - how fair is that?
They also admit that they are being pro-active and can suspend trading just because they feel it is in the public's interest because of their sense of information in the market-place. And because they state that a suspension is not a finding of fraud or even of misconduct, they could do it because of other people putting out mis-information in the market place or concerns over trading patterns.
So all the posts claiming the suspension was due to fraud by KB or the company go directly against the SEC's Enforcement Division's Co-Director's public statement about their recent actions, even though in many instances, it may involve fraud.
Here's the full segment of the speech from which my quotes have been taken.
C. Results
Now let me turn to some of the results we have achieved so far on behalf of investors. 1. Trading Suspensions
In our March 23 statement, Stephanie and I emphasized that the Division was “committing substantial resources to ensuring that our Main Street investors are not victims of fraud or illegal practices in these unprecedented market and economic conditions.”[5] The most visible manifestation of this commitment is the significant number of trading suspensions the Commission has ordered in the last several months. Trading suspensions are, by design, prophylactic. The SEC has the authority to suspend trading in a stock “if in its opinion the public interest and the protection of investors so require.”[6] In many instances, the Commission suspends trading when there are questions about whether public information about the issuer is accurate, adequate, or reliable.[7] Because of the importance to and potentially significant impact on investors of questions about whether public information about the issuer is accurate, adequate, or reliable, we are conducting these investigations on an accelerated basis.
The path that leads to a recommendation that the Commission order a trading suspension often starts with referrals from FINRA, tips from investors, or from the Commission staff’s own market surveillance. Because time is often of the essence, Enforcement staff engage in accelerated fact gathering and analysis, analyzing public statements by and about the issuer and reviewing trading data. In some cases, the staff may contact brokers, promoters, or others for documents or information. Where claims have been made about contracts or new products, staff may contact counter parties or others to gather facts about whether those claims are accurate. If the staff believes that a trading suspension is warranted, it makes a recommendation to the Commission for expedited consideration.
The SEC may suspend trading in any stock for up to 10 business days, after which trading may resume. For stocks that trade on an exchange, quoting may resume as soon as a suspension ends. For stocks quoted over-the-counter (OTC), however, quoting does not automatically resume after the suspension ends. Instead, a broker-dealer generally may not solicit investors to buy or sell the previously-suspended stock until certain requirements are met. Because a trading suspension that results in a break in two-way quotations for more than four business days removes the so-called “piggyback exception” that enables many OTC tickers to be quoted by market-makers, a broker-dealer may resume quoting an OTC stock only if it has a reasonable basis under the circumstances for believing that a company’s financial statements are reasonably current and accurate, and complies with the requirements of Rule 15c2-11.[8]
The SEC has a process in place that allows anyone adversely affected by a trading suspension to file a petition seeking to terminate the suspension order.[9] The SEC may provide appropriate relief where the suspension expires while the petition is pending. These petitions should be filed with the Office of the Secretary and are directed to the Commission in the first instance, and Commission decisions may be appealed to a federal circuit court. The Commission has noted that it also has the authority to provide relief from possible consequences arising from the trading suspension, such as the loss of piggy-back eligibility.[10]
Trading suspensions have been a critical element of the Commission’s response to COVID-19. Since February 7, the Commission has suspended trading in the securities of more than 30 issuers as a result of questions about the adequacy and accuracy of coronavirus-related information. These suspensions followed a broad range of claims by issuers, including those relating to access to testing materials, developments of treatments or vaccines, and access to personal protective equipment. The Commission has also suspended trading in the stock of at least three microcap issuers whose names or ticker symbols closely resembled those of unrelated companies whose products are actually relevant to COVID-19, such as testing, N-95 masks, and videoconferencing technology, due to concerns about investor confusion, among other things.[11]
2. Enforcement Actions
A trading suspension is not a finding of fraud or misconduct.[12] In many instances, the Division of Enforcement will continue to investigate whether an issuer whose stock has been suspended from trading was engaged in potential fraud or other misconduct and, if appropriate, will recommend charges to the Commission. Because of the potential severity of the impact of this sort of misconduct on investors we are conducting these investigations on an extremely accelerated basis.
