If only that was how things worked in the OTC then most of it would be shut down by the SEC tomorrow.
I am afraid that just isn't how it works though. I wish it were, and believe the SEC would be doing the market as a whole a favor if they just shut down the pinksheets...
But they allow an "alternative reporting standard" and SEC filers that go delinquent for for over a year to keep trading. Hell they don't even shutdown tickers where the underlying State business registration is revoked!!
And in cases where there is underlying fraud demonstrated and "evidence" sent to the SEC, it can be months, even years, before they act.
I know of one case I was very familiar with where the company disclosed/pumped its ownership in some Brazilian LTN bonds worth millions. It had images of them and everything. But they were clearly fake...and it wasn't the first time they had pumped questionable "bonds". But this time documentation was obtained from the Brazilian government showing they were fake SPECIFICALLY and that was sent to the SEC. Months go buy and the board is noting "they MUST BE REAL, the SEC has taken no action!!!". Well about 3 months later the SEC suspended...specifically referencing the "bonds" they received information on three months earlier. Anyone who bought the stock during that period thinking the lack of action on the part of the SEC meant they were real...lost everything.
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