WHAT THE 2019 SEC SUSPENSIONS MEAN FOR DELINQUENT FILERS

In July 2019, the U.S. Securities and Exchange Commission (SEC) began handing down a barrage of licensure suspensions to cut down on microcap stock fraud. The result of their efforts means that once-publicly traded companies will no longer appear with their stock symbols traded in the public market.

Suspensions Were Handed Down

Delinquent filers are any publicly-traded companies that areregistered issuers and have not been meeting their 10K and 10Q reporting requirements. As a result, a tidal wave of suspensions has been taking place on behalf of the SEC. The SEC began sending a message to other delinquent filers by suspending six entities in July.

These suspensions were just the beginning of a daily occurrence over the first half of August. More than 70 public issuers that had been delinquentwere suspended from trading based upon their “pump-and-dump” activities and manipulations.

The Barrage of Suspensions

The barrage of suspensions kicked off on July 24, 2019 when the SEC fired a warning shot by suspending trading in 6 delinquent filers:

• Gold Lakes Corp (GLLK)
• NovagenIngenium Inc (NOVZ)
• QuantumSphere Inc (QSIM)
• Shenzhen Yidian Double Way of Innovation Culture Media Corp (SYDW)
• Africa Growth Corporation (AFGC)
• Gold Dynamics Corp (GLDN)

This was just the start of a long string of daily suspensions against delinquent filers that would last through the first half of August. Over the next 3 weeks, the SEC suspended trading for 73 more public Issuers severely delinquent with their SEC filings. Some of those Issuers had recently been active including in some cases as the subject of pump & dump activity or other types of market manipulation. Notable suspensions included:

• 5BARz International Inc (BARZ)
• DTS8 Coffee Company Ltd (BKCT)
• Greenfield Farms Inc (GRAS)
• Oro East Mining Inc (OROE)
• MMRGlobal Inc (MMRF)
• Unified Signal Inc (UNSI)
• Bioshaft Water Technology Inc (BSHF)
• DMH International Inc (DMHI)
• Electronic Cigarettes International Group Ltd (ECIGQ)
• Seaniemac International Ltd (BETS)
• Axiom Corp (AXMM)
• SmartChase Corp (SCHS)
• Soul & Vibe Interactive Inc (SOUL)
• Scivanta Medical Corp (SCVM)
• Dominovas Energy Inc (DNRG)
• Empire Energy Corporation International (EEGC)
• Moller International Inc (MLER)
• American Rare Earths and Minerals (AREM)
• Dutch Gold Resources Inc (DGRI)
• You Han Data Tech Co (YHDT)
• Medisun Precision Medicine Ltd (MPME)
• Next Graphite Inc (GPNE)
• Omni Shrimp Inc (OMSH)
• PMX Communities Inc (PMXO)
• SurePure Inc (SURP)
• Greenhouse Solutions Inc (GRSU)
• Latitude 360 Inc (LATX)
• Monarch America Inc (BTFL)
• Spire Corp (SPIR)
• The Staffing Group Ltd (TSGL)

Consequences of Allowing Delinquent Traders to Practice

There are several good reasons for the SEC taking the action that it did. The main benefit is that some of these issuers exist as previously abandoned shell corporations that sustained years of deceptive, abusive, and fraudulent business practices. These instances affected the market, investors, customers, and the public-at-large.

Unfortunately, the bad apples seem determined in their efforts to thwart procedural efforts at every turn by introducing new forms of fraud.In addition to administrative benefits, other advantages of pushing out delinquent corporations exist:

Mitigates Pump-and-Dump Practices

A pump-and-dump scheme can occur when abandoned stocks are removed from public purchase. They generate fake interest and buzz by using social media, blog posts, and other effective marketing tools reserved for legitimate organizations.

The information they present gains interest from new buyers, which then creates further demand. As people begin snatching up the stocks, the fraudulent issuer will then unload their previously purchased shares on unsuspecting, well-meaning buyers. Due to the stocks not being based on anything of value, investors are left with a worthless investment.

Legal Protections Rise

A standard scheme is the occurrence of shell hijacking. Known as shell hijackers, these individuals will file a petition for custodianship with the local court on abandoned shell corporations. Due to their very nature, no one challenges the petition, since they are no longer being managed.

Shell hijackers seek to acquire these rights as a means of establishing a new pump-and-dump scheme on a previously established organization. Around and around, the process will go.

The Bottom Line

There is no place in trading for the people and organizations who willfully and intentionally attempt to defraud the system. As such, the SEC’s actions are well within reason when it comes to protecting marketing activity and stock prices.

If you are delinquent, take notice and heed the actions of the SEC as a warning shot. There are sure to be more on the horizon. Make sure you are compliant with your reporting requirements. Contact the Minamar Group for more information regarding reporting compliance by calling 866-833-3234 or sending us a message through our contact form.

We offer full non-recourse no personal guarantee mezzanine and venture capital type loans for OTC & NASDAQ listed companies only. We do not deal with private companies. We will fund both current and delinquent issuers on a case by case assessment. Both reporting and non-reporting companies considered.
Ideal candidates could be companies that have fallen behind with their SEC or OTC markets mandatory or voluntary filing requirements. In other words, we will bring all of your service providers and OTC markets in compliance
This is a stock-based loan proposition on the control block of shares and is not toxic financing or convertible debt.

In finance, mezzanine capital is any subordinated debt or preferred equity instrument that represents a claim on a company’s assets which is senior only to that of the common shares. Mezzanine financings can be structured either as debt (typically an unsecured and subordinated note) or preferred stock.
The higher cost of capital associated with mezzanine financings is the result of its being an unsecured, subordinated (or junior) obligation in a company’s capital structure (i.e., in the event of default, the mezzanine financing is only repaid after all senior obligations have been satisfied).

Additionally, mezzanine financings, are often used by smaller companies and may involve greater overall levels of leverage than issues in the high-yield market; they thus involve additional risk. In compensation for the increased risk, mezzanine debt holders require a higher return for their investment than secured or more senior lenders.