When an SEC trading suspension ends, a broker-dealer may not solicit investors to buy or sell the previously-suspended stock until certain requirements are met. Before soliciting trades or resuming quotations in a stock that has been subject to a trading suspension, a broker-dealer must file a Form 211 with the Financial Industry Regulatory Authority (“FINRA”) representing that it has satisfied all applicable requirements, including those of Rule 15c2-11.
Among other things, Rule 15c2-11 requires broker-dealers to review and maintain certain documents and information about the company, including:
1. the corporation’s organization, operations, and control affiliates;
2. the nature of the securities outstanding and being traded; and
3. the issuer’s most recent balance sheet and its profit and loss and retained earnings statement.
No broker-dealer may solicit or recommend that an investor buy shares in a stock that has been subject to a trading suspension unless and until FINRA has approved a Form 211 relating to the stock. If there are continuing regulatory concerns about the company, its disclosures, or other factors, such as a pending regulatory investigation, a Form 211 application may not be approved.
However, limited or “unsolicited” trading can occur in a stock that has been subject to a trading suspension after the suspension ends but before a Form 211 is approved. This may allow investors to trade the stock when a broker or adviser has not solicited or recommended such a transaction. Even though such trading is allowed, it can be very risky for investors without current and reliable information about the company.
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