SEC Issues Trading Suspension of Norstra Energy
On June 26, 2013, the Securities and Exchange Commission (“SEC”) suspended trading in the stock of Norstra Energy, Inc. (“NORX”). This was the second trading suspension for cause of the week. In its action, the SEC cited “questions regarding the adequacy and accuracy of information about Norstra, including, among other things, its business operations” as the reason for the action.
NORX purports to be in the gas and oil business, engaged in exploration efforts in the under-exploited southern portion of the Bakken-Alberta Fairway in the central portion of western Montana. Eco-Trade (“BOPT”) is another penny company supposedly working in the Bakken; it was halted by FINRA in late April.
In the last several years, the Bakken has been the subject of considerable interest and some controversy, which makes claims of exploring or exploiting rich claims there attractive to penny stock companies and penny stock promoters. Not surprisingly, Norstra had been pumped and dumped; the promoter was Eric Dany and Full Service Media. The promo was funded by Arista Theme Ltd, a British Virgin Islands company that said it owned not NORX stock and would not be trading it. The total “advertising” budget was $3.64 million. As with several other recently-suspended stocks, hard mailers were used in the promotion.
Stock price soared from a little under a dollar to an intraday high of $2.06 on June 6. It then crashed over the next five sessions.
On July 1, NORX finally got round to commenting publicly on the SEC’s enforcement action, saying rather oddly that it had “come to the Company’s attention” that “unrelated parties” had been pumping the stock. It denied any involvement in the promotion. As to the SEC action, Norstra noted that it looked forward to the resumption of trading on July 11, “so that our shareholders will not continue to be disadvantaged by the trading suspension.”
Those shareholders will instead be disadvantaged by having to deal with the realities of the Grey Market, on which trading will resume. Market makers will not be permitted to make a market or publish quotations. The only remedy will be for the company to locate a sponsoring market maker willing to file a Form 211 with FINRA. MMs are extremely reluctant to do that in the case of formerly-suspended stocks, unless the SEC has indicated it has no intention of bringing an additional enforcement action.
In all likelihood, NORX, like BOPT, will be stuck on the Greys forever. An SEC suspension is a death knell for a penny stock,
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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