U.S. regulators on Thursday suspended trading in four small over-the-counter stocks of companies that they said have been touting the development of products to prevent or treat the Ebola virus, and warned investors to beware of similar scams.
The Securities and Exchange Commission said it had suspended trading in the shares of New York-based Bravo Enterprises Ltd, California-based Immunotech Laboratories Inc, Canada-based Myriad Interactive Media Inc and Wholehealth Products Inc, which is also located in California.
The SEC also issued a warning that “con artists” may be soliciting investors and claiming to be developing treatments or medicine to prevent the deadly virus.
Company officials at Bravo Enterprises Ltd, Immunotech Laboratories Inc and Myriad Interactive Media could not be immediately reached for comment.
A woman who answered the phone at Wholehealth Products hung up after saying the company was private.
In 2013, the SEC stepped up its enforcement in microcap fraud with the creation of a new task force that specializes in penny and microcap markets.
From time to time, the SEC issues investor alerts, especially when fraudsters try to lure investors using topics that feature prominently in the news, such as earthquakes or hurricanes.
“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, ” said Elisha Frank, co-chair of the SEC Enforcement Division’s Microcap Fraud Task Force.
“Fraudsters are constantly exploiting issues of public concern to tout a penny stock company supposedly in the business of addressing the latest crisis.”
The SEC has the power to suspend trading in companies for 10 days.
After that, brokers can resume trading the stock, but they must first make sure certain information about the company is up-to-date and file a form with regulators to demonstrate that the proper requirements are met.
Often times, once a microcap company has its shares suspended, brokerages are reluctant to file that form and resume trading because of the potential risks involved.
In this case, the SEC said it suspended trading of the four companies because there was a lack of publicly available information about their operations.