The Securities and Exchange Commission on Thursday abruptly suspended trading in four small companies that drew investors' attention last month following the Ebola scare and warned investors to be wary of scams tied to the deadly outbreak.
The regulatory agency said it halted trading in the companies' stocks, all of which are traded in over-the-counter markets, because the companies haven't provided enough information about their operations for investors to make informed decisions.
The SEC identified the companies as Patchogue, N.Y.-based Bravo Enterprises Ltd., Monrovia, Calif.-based Immunotech Laboratories Inc., Toronto-based Myriad Interactive Media Inc., and Anaheim, Calif.-based Wholehealth Products Inc.
At the same time, the SEC issued an investor alert specifically citing the potential for fraud in microcap companies "purportedly involved in Ebola prevention, testing, or treatment." The SEC said in a statement that "scam artists often exploit the latest crisis in the news cycle to lure investors into supposedly promising investment opportunities."
“We move quickly to protect investors when we see thinly-traded stocks being promoted with questionable information that make them ripe for pump-and-dump schemes,” Elisha Frank, Co-Chair of the SEC Enforcement Division’s Microcap Fraud Task Force, said in a statement. “Fraudsters are constantly exploiting issues of public concern to tout a penny stock company supposedly in the business of addressing the latest crisis.”
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.
The SEC warned that scammers could exploit the Ebola scare in the same way scammers attempted to exploit natural disasters such as Hurricane Katrina and Hurricane Sandy in the past. Investors should be wary about promises or guarantees of high investment returns with little or no risk, avoid solicitations with pressure to “buy RIGHT NOW,” and beware of unsolicited investment offers through social media, the SEC said.
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