[ By Howard Haykin ] The SEC took an unusual but effective measure against microcap frauds by suspending trading in the securities of 379 dormant companies.  Each company was expelled before they could be hijacked by fraudsters and used to harm investors through reverse mergers or pump-and-dump schemes.  Monday's trading suspensions - 379 in number - is a record for the most companies ever suspended in a single day by the agency. Operation Shell-Expel. The initiative was carried out by the SEC's Microcap Fraud Working Group, which used various SEC resources, including the enhanced intelligence technology of Enforcement's Office of Market Intelligence.  This databased was used to scrutinize microcap stocks in the markets nationwide and identify clearly dormant shell companies in 32 states and 6 foreign countries that were ripe for potential fraud.

"Empty shell companies are to stock manipulators and pump-and-dump schemers what guns are to bank robbers — the tools by which they ply their illegal trade.  This massive trading suspension unmasks these empty shell companies and deprives unscrupulous scam artists of the opportunity to profit at the expense of unsuspecting retail investors." -- Robert Khuzami, Enforcement Director.

The SEC relied on federal securities laws ..., which permit the Agency to suspend trading in any stock for up to 10 business days.  In most cases, once a company is suspended from trading, it cannot be quoted again until it provides updated information including accurate financial statements. There's a strong secondary market for empty shell companies, with stock manipulators willing to pay as much as $750,000 for each.  But with this trading suspension's obligation to provide updated financial information, these shell companies have been rendered essentially worthless and useless to scam artists. SEC Staff Credits. Led by Chris Ehrman, Co-National Coordinator of the SEC's Microcap Fraud Working Group, Robert Bernstein, Jessica Regan, Leigh Barrett, Megan Alcorn in the Office of Market Intelligence.  Microcap Fraud Working Group staff from each of the SEC's regional offices: Tanya Beard, David Berman, Sharon Binger, Melissa Buckhalter-Honore, Lisa Cuifolo, Tracy Davis, Elisha Frank, Kurt Gottschall, Lucy Graetz, Jennifer Hieb, C.J. Kerstetter, Victoria Levin, Aaron Lipson, Michael Paley, Farolito Parco, Jonathan Scott, and Lauchlan Wash. For further details, go to:   [SEC PR 12=91, 5/14/12], along with the following:

• List of the 379 Companies.
• Trading Suspension Order.
• Investor Bulletin: Trading Suspensions.