Close Close
ThinkAdvisor

Regulation and Compliance > Federal Regulation > SEC

SEC Halts Trading in 15 Companies Due to Social Media Activity

X
Your article was successfully shared with the contacts you provided.

What You Need to Know

  • The trading suspensions are designed to halt “potential attempts to exploit investors during the recent market volatility.”
  • The regulator is paying closer attention to the impact of social media posts in the wake of the GameStop trading frenzy.
  • The SEC can suspend trading in stocks for 10 days.

The Securities and Exchange Commission Friday suspended trading in securities of 15 companies because of “questionable trading and social media activity.”

The agency said it did so as part of its continuing effort to respond to “potential attempts to exploit investors during the recent market volatility.”

The Friday action “follows the recent suspensions of the securities of numerous other issuers, many of which may also have been targets of apparent social media attempts to artificially inflate their stock price,” the agency said in a statement.

Nick Morgan, partner at legal defense firm Paul Hastings and a former SEC trial attorney, told ThinkAdvisor Friday in an email: “I have no doubt that the SEC is paying closer attention to the impact of social media posts now than it was prior to the political furor over GameStop.”

According to Melissa Hodgman, acting director of the SEC’s Division of Enforcement, the SEC’s “recent suspensions of trading in nearly two dozen securities — including 15 today — are one facet of our ongoing efforts to police the market and protect investors.”

Regulators, she explained, “proactively monitor for suspicious trading activity tied to stock promotions on social media, and act quickly to stop that trading when appropriate to safeguard the public interest. We also remind investors to exercise caution and do their diligence before investing generally, including in companies promoted on social media.”

The SEC order also states that none of the issuers has filed any information with the SEC or OTC Markets, where the companies’ securities are quoted, for over a year.

As a result, the SEC suspended trading in the securities of Bebida Beverage; Blue Sphere; Ehouse Global; Eventure Interactive; Eyes on the Go; Green Energy Enterprises; Helix Wind; International Power Group; Marani Brands; MediaTechnics; Net Talk.com; Patten Energy Solutions Group; PTA Holdings; Universal Apparel & Textile; and Wisdom Homes of America.

Morgan said the SEC “normally uses trading suspensions when the company’s periodic filings are not up to date (or are suspected of being materially inaccurate). An SEC trading suspension generally requires some violation of the federal securities laws, and often the company’s periodic reports are not up to date, creating a vacuum of available information about the company.”

In mid-February, during the GameStop mania, Morgan continued, “the SEC suspended trading of SepctraScience, alleging ‘since late January 2021, certain social media accounts may be engaged in a coordinated attempt to artificially influence SCIE’s share price.’ ”

Friday’s announcement, Morgan added, “continues that trend. Presumably GameStop is not included in today’s announcement because GameStop is current on its periodic filings and the SEC has not yet identified any actionable misrepresentations that would justify a trading suspension.”

Under the federal securities laws, the SEC can suspend trading in a stock for 10 days and generally prohibit a broker-dealer from soliciting investors to buy or sell the stock again until certain reporting requirements are met.

The order states: “It it appears to the [SEC] that there are questions regarding: the adequacy and accuracy of information concerning the securities of each of the issuers … because questions have arisen as to their operating status, if any; the recent, increased activity and volatility in trading in the securities … , in the absence of any publicly available news or recent information by these issuers; and certain social media accounts may be engaged in a coordinated attempt to artificially influence their share prices.”