SEC suspends trading of 15 shares, in whack-a-mole against social media hype

US regulators are participating in the stock market version of whack-a-mole: competing to suspend stocks of companies with dubious prospects that have been hyped to the moon on social media.

In a statement on Friday, the Securities and Exchange Commission said it temporarily halted operations at 15 companies due to concerns that their share prices were artificially inflated.

“We proactively monitor suspicious business activity related to social media stock promotions and act quickly to stop such trading when appropriate to safeguard the public interest,” said Melissa Hodgman, acting director of the SEC’s compliance division.

The SEC’s crackdown adds to the fallout from the GameStop Corp. frenzy, in which an army of daily traders banded together to push long-ignored stocks into the stratosphere. The regulator has routinely sought to remove dying companies from the exchanges because it is concerned that retail investors will suffer losses, but that effort has accelerated amid this year’s wild trading.

In action on Friday, regulators are venturing further into one of the loudest districts on the market, targeting penny stocks driven into frenzied prices and volumes by the relentless pumping of social media. Frenetic trading, often in nonprofits, on loosely regulated broker networks is perhaps the most extreme example of excess speculative in the 2021 market, a landscape that has also included the rise of cryptocurrencies and the craze for cryptocurrencies. special purpose procurement companies.

Two weeks ago, the SEC suspended trading in SpectraScience Inc., a company that had risen 633% in 2021 to just over two-tenths of a cent before it ceased. The SEC’s order noted that while the company had not filed reports in years and its phone number is not working, “social media accounts may be involved in a coordinated attempt to artificially influence” its share price. . SpectraScience’s volume surpassed 3.5 billion shares in a single day at the end of January, as the shares rose 167%.

None of the companies suspended on Friday have filed information with the SEC for more than a year. Under federal securities laws, the SEC can prohibit trading for 10 days and prohibit a stockbroker from requiring investors to buy or sell the stock again until certain reporting requirements are met.

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