NEW YORK Feb 3 The Securities and Exchange
Commission on Monday said it had suspended trading in 255
dormant shell companies as part of a previously announced
initiative to fight fraud in microcap stocks.
The SEC said the issues were "clearly inactive" and "ripe
for abuse" in the over-the-counter market, though no abuse was
The suspensions came as part of an anti-fraud initiative
that began in 2012. Shell companies have faced heightened
scrutiny for years. There was a wave of "reverse-mergers," where
foreign companies acquire U.S. shell companies as a way to list
on domestic exchanges while bypassing regulatory requirements.
Several of those names, especially those from China, were
accused of fraud in 2011.
In a statement, Andrew J. Ceres, director of the SEC
Enforcement Division, said dormant shell companies were
frequently used in pump-and-dump schemes, where perpetrators buy
cheap stocks and talk them up through false statements, then
selling the holdings at a higher price for a profit.
The suspension took hold at the start of trading on Monday
and will end at 11:50 p.m. on Feb. 14. Suspended stocks can't be
relisted unless the company can prove it is still operational, a
requirement that the SEC said was "extremely rare."
"The trading suspension essentially renders the shells
worthless and useless to scam artists," the SEC wrote.