24 April 2020

SEC transaction halt highlights unique issues for issuers and investors alike


In an SEC Investor Bulletin issued on April 10, 2020, the SEC noted that the SEC Division of Enforcement has suspended trading for 20 stocks in connection with the COVID-19 pandemic. The SEC has the authority to suspend trading for up to 10 days if they believe information regarding the company is inaccurate or unreliable. Throughout the pandemic, the SEC has monitored the market for fraud and certain schemes aiming to take advantage of investors amid the ongoing pandemic. Concerns include companies claiming the ability to prevent or cure COVID-19 which may result in dramatic increases in value. The suspension of trading has applied to stock trading primarily on over-the-counter markets, with microcap stocks being of particular concern as there is often limited information available regarding such companies. In addition to suspensions in connection with fraudulent concerns, the SEC has suspended at least one stock due to a belief that investors may be confusing it with another stock. The SEC suspended trading for Zoom Technologies Inc., a company trading on an over-the-counter market as ZOOM after increases in the trading price led to concerns that the company was being confused for Zoom Video Communications, Inc., a teleconferencing company which has seen a recent surge in connection with the increase in remote working due to the pandemic. Under the circumstances, it is essential for investors to conduct their due diligence prior to making investments. If you are an investor or company owner who has been impacted by these recent changes or wish to discuss any general queries, please contact your regular Withers attorney or the contacts listed below.

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