Very Interesting, look at the bold type.
SEC Trading Halts And the “Pink Sheets”
By Giando Argentina
Published by OTCNN.com
10/31/2000 10:36 AM EST
I received a question from a reader regarding the status and procedures of trading halts and subsequent ability to be re quoted on the OTCBB. I will try my best to explain the process and hopefully familiarize investors with the ins and outs of halts. While there are different reasons for trading halts, I will focus on SEC imposed 10 day trading halts.
Out of 10 securities receiving the 10-day trading halt from the SEC and subsequent quotation on the “Pink Sheets” this year, none have regained quotation on the OTCBB. The trading halts were enforced due to “questions that have been raised about the accuracy and adequacy of publicly disseminated information.” While the specifics differ for different companies the idea is basically the same. A popular misconception about the SEC imposed trading halts is that the SEC is responsible for preventing companies from being quoted on the OTCBB. Actually the mechanics of the OTCBB are somewhat different from the other markets. Stocks are not listed on the OTCBB but quoted. In other words, the NASD has no business relationship with the companies themselves and it is up to the Market Maker to either opt to quote or not quote a particular stock.
The Market Makers then have a responsibility of performing due diligence on the company and send the NASD the proper periodic data of the company. Whether that is right or wrong, it is not for me to say, it’s just the way the rules are currently written. When the SEC suspends a stock from trading the Market Makers must then perform their due diligence and be certain that the company does not pose a likely risk for investors to be defrauded.
So basically it is not up to the SEC to allow stocks to be quoted on the OTCBB once the 10-day suspension has passed but it is up to a Market Maker to file the necessary forms to quote an issue on the OTCBB. With an SEC trading halt the underlying idea is to prevent investors from being placed at risk from investing in a questionable company. Public opinion many times focuses on the fact that the SEC at times is either too slow or too fast at imposing a trading halt. When it is time for the stock to be quoted on the OTCBB again then the blame falls on the Market Maker and the perceived idea that they benefit from not quoting a stock on the OTCBB. The Market Makers under current rules are in a no win situation, if they refuse to quote a stock on the OTCBB the public berates them but if they quote a questionable stock on the OTCBB and the company turns out to be fraudulent after a halt is imposed they could be held liable.
Regardless of the reason behind an SEC imposed trading halt, current investors will not be satisfied as they stand to lose a considerable amount of money. The idea is to help future investors understand that there are questions regarding the company that may not have been answered satisfactorily. Either way SEC imposed trading halts are not to be taken lightly as all companies subjected to it this year have yet to recover.
Cheers
Voluntary Disclosure: Strong Buy : Long and Short Term
Cheers
Voluntary Disclosure: Strong Buy : Long and Short Term
