SEC cracks down on spam-driven stocks
The SEC said it launched an enforcement effort to protect investors from potentially fraudulent spam e-mail promoting small company stocks with phrases like, "Ready to Explode," "Ride the Bull" and "Fast Money."
"Today's action will disrupt the operations of these boiler rooms and make it harder for the spammers and promoters to dump their stock on an unsuspecting public," SEC enforcement director Linda Thomsen said at a press conference on Thursday.
The commission said in a statement that an estimated 100 million of these spam messages are sent every week, triggering dramatic spikes in share price and trading volume before the spamming stops and investors lose their money.
It said the stocks halted typically sell for less than $1 per share and are quoted on the Pink Sheets quotation service. The trading suspensions began on Thursday and will last for 10 business days, ending at noon on March 21, the agency said.
Mark Schonfeld, director of the SEC's northeast regional office, said that investor losses related to the 35 companies are in the tens of millions of dollars.
"Now that we have stopped the trading in these stocks, we will focus our attention on the people behind the spam and profiting from it," Schonfeld said.
He said the SEC is investigating the companies themselves as well as outsiders, and that the same people are likely behind multiple spam campaigns.
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