What Happens After a Trading Suspension Ends? H

What Happens After a Trading Suspension Ends?

Historically, most companies subject to trading suspensions by the SEC have been quoted in the over-the counter (OTC) market on the OTC Bulletin Board or other broker-dealer operated systems prior to the suspension—and most SEC suspensions are based on a lack of current information about the company. The end of a trading suspension does not mean that quoting and trading automatically start again for OTC stocks. Instead, certain requirements in SEC Rule 15c2-11 must be met. A broker must also file a form with FINRA that needs to be approved before quoting can resume. The broker can file the form after it obtains and reviews current information about the company, including:

• the company’s organization, operations and certain control affiliates;


• the title and class of securities outstanding and being traded; and


• the company’s most recent balance sheet and profit and loss and retained earnings statement.

The broker filing the form must have a reasonable basis for believing the information is accurate and that it comes from reliable sources. A broker generally cannot quote the stock or solicit or recommend the stock to any investor until the form is approved. After approval, the broker can begin quoting—and other brokers may also quote the stock relying, or "piggybacking," on the first broker’s quote without filing the form or reviewing the company information on their own. Be aware that the SEC’s ability to continue a trading suspension indefinitely is strictly limited. As a result, the lifting of a trading suspension does not mean that the SEC’s concerns have been addressed and no longer apply.

Investors need to be careful before purchasing a stock after an SEC trading suspension has ended. If you are considering this move, here are several things you can do to help protect yourself:

• Ask the broker quoting the stock what information it has on the company and how recent that information is, bearing in mind that the SEC’s reasons for imposing a trading suspension typically involve a lack of current, reliable information.


• Look for information on your own and evaluate carefully whatever you find.


• Understand that there may be an illiquid market for some of these stocks, particularly if the company does not have to file periodic reports with the SEC.


• Use extreme caution if anyone is recommending you purchase the stock without offering current information about the company.