SEC weeds out 202 questionable stocks this year

SEC weeds out 202 questionable stocks this year

SUSPENDED COMPANIES So far this year the SEC has suspended 202 stocks, putting 2010 on pace to beat 2009's record number of suspensions. Sources: Securities and Exchange Commission, USA TODAY research

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By Matt Krantz, USA TODAY

Regulators are stepping up efforts to weed out some of the smallest and most questionable publicly traded companies.

Hoping to prevent investors from being misled by companies with big promises but little financial information, the Securities and Exchange Commission suspended trading in 202 stocks this year, already topping the 183 stocks that were suspended through the end of the third quarter of 2009. The SEC suspended a record 234 companies for all of 2009, a level that will be easily surpassed this year at the current clip. Suspensions are way up from the 183 and 98 in 2008 and 2007, respectively, a USA TODAY analysis of SEC data shows.

"We've seen an uptick in suspensions," says Tim Ryan of the Pink OTC Markets, which operates the Pink Sheets, where many of the suspended stocks trade. The SEC is "more proactive about it."

Shell companies — firms with little or no assets or operations — continue to attract regulators' attention because they are easy targets for manipulation by stock promoters. There are 3,123 shell companies trading, up from 2,577 at the start of 2010, 2,719 in January 2009 and 2,289 in 2008, says AuditAnalytics.com. Rising suspensions show the SEC is trying to:

•Stop problems before they get bigger. The SEC can suspend trading in stocks if the companies provide false or misleading information or lack current information. Suspensions can be the start of more investigation and are a way for the SEC to stop alleged scams early, says Maureen O'Hara, professor at Cornell.

•Leverage its focus on a specific type of policing. As the SEC develops the ability to identify and suspend companies, it's easier to repeat the process, says Jonathan Macey, professor of law at Yale.

•Get relatively easy regulatory wins. Many of the companies being suspended are nothing more than a post office box and a ticker symbol. The SEC can shut these down, and protect investors from being tricked, with little worry of prolonged legal battles, Macey says.

The SEC's push to stop questionable stocks is helpful for investors who have trouble separating real companies from phony ones as long as they have a stock symbol, O'Hara says.

Some worry, though, that poorly informed investors will still get tangled up in shell-company scams. "Even if the SEC could clean out all these companies ... (gullible) investors will find something else to throw their money at," Macey say


http://www.usatoday.com/money/markets/2010-08-24-delist24_ST_N.htm