SEC suspends trading in inactive company touted on social media
The United States Securities and Exchange Commission (SEC) today suspended trading in an inactive company amid questions surrounding online promotion of the company’s securities and recent trading activity.
The SEC’s trading suspension order states that since late January 2021, certain social media accounts may be engaged in a coordinated attempt to artificially influence the share price of SpectraScience Inc. (OTC:SCIE), an inactive Minnesota-based corporation. The order further states that during the same period, the share price and trading volume of SpectraScience shares increased even though there was no publicly available news from the company.
The regulator has found that SpectraScience is delinquent in its reporting, having not filed any periodic reports since 2017. The company’s most recent website and phone number are non-functional.
On January 30, the SEC issued an alert warning investors to understand the significant risks of trading based on social media, noting that discussions on social media can tempt investors to “jump on the bandwagon,” leading to significant investment losses.
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.
Let’s note the recent statement by the SEC on market volatility. The regulator said it was closely monitoring and evaluating the extreme price volatility of certain stocks’ trading prices.
“The Commission will closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities”, the SEC said.
In addition, the SEC said it will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws. Market participants should be careful to avoid such activity, the regulator warned.