SEC Suspends Polar Petroleum Corp. l Securities Lawyer 101
On June 10, 2013, the Securities and Exchange Commission (the “SEC”) suspended trading in the securities of Polar Petroleum Corp. (“POLR”), a company quoted on the OTC Markets OTCQB tier. The suspension was issued pursuant to Section 12(k) of the Securities Exchange Act of 1934.
In its announcement, the SEC cited concerns about the “accuracy and adequacy of assertions by Polar, and by others, to investors in press releases and promotional material concerning, among other things, Polar’s assets, operations, and financial condition.”
In its news release announcing the suspension of Polar’s securities, the SEC cautioned broker-dealers, shareholders, and prospective purchasers to carefully consider the foregoing information along with all other currently available information and any information subsequently issued by the company. The agency also reminded brokers and dealers of the requirements of Rule 15c2-11 under the Exchange Act, at the termination of the trading suspension, and that no quotation may be entered unless and until they have strictly complied with all of the provisions of Rule 15c-211.
In the weeks before the SEC action, the company had issued a series of press releases in which it emphasized the proximity of its oil leases in Alaska to operations run by the likes of BP, ConocoPhillips, and Exxon. Worse yet, a promoter called Ken Williams of Hard Asset Report sent out over-the-top mailers informing prospective investors that the stock’s price could rise as high as $27. The third party that paid for the promo was said to be Commodity United Ltd., an entity not further identified. The “total budget” disclaimed was $2.66 million. In the wake of the suspension, POLR declared that it knew nothing about the promotional campaign.
Stock price rose from $1.80 in late April to $5.75 on the day before the suspension.
About SEC Trading Suspensions
The Securities Exchange Act authorizes the SEC to issue a trading suspension for up to ten business days. Investors should exercise caution before investing in a public company after the SEC has issued a trading suspension. Those who fail to do so ignore an obvious indication of securities fraud. From January 1, 2010 through December 31, 2012, there were over 1,100 SEC trading suspensions. They are blazing red flags warning that violations of the securities laws may have occurred.
The SEC will order a trading suspension if it determines it is necessary to protect investors. Generally, SEC trading suspensions are issued if there is:
♦ a lack of current, accurate, or adequate information about an issuer;
♦ concern about the accuracy of publicly available information, in press releases and public filings and reports; or
♦ suspicious trading activity, including trading by insiders, potential market manipulation, and problems with clearing and settlement of transactions in the issuer’s securities.
Securities suspended by the SEC fall into two categories. The first is comprised of delinquent filers: stock of fully-reporting issuers that have neglected to keep up with their obligation to file annual and interim financial reports with the SEC. In connection with the suspension, those companies will be subjected to an administrative proceeding in which the SEC seeks to revoke the issuer’s registration. Once that happens, the issuer has a simple choice: it can catch up with its delinquent filings quickly, or have its ticker–and its existence as a public company–eliminated. Most companies in this situation do not object to revocation, despite the brief hopes of investors.
The second category consists of issuers suspected of securities fraud; Polar falls into that group. The SEC may follow the suspension with a further investigation that can result in a civil lawsuit down the road.
A list of issuers whose stock is currently suspended, or which have been subject to an SEC suspension, may be found at the link below:
When an SEC trading suspension ends, a broker-dealer may not solicit investors to buy or sell the previously-suspended security until certain requirements are met, including the submission of a Form 211 with the Financial Industry Regulatory Authority (“FINRA”) by a market maker. The market maker must represent that the issuer has satisfied all applicable requirements, including those of Rule 15c2-11. No broker-dealer may solicit or recommend that an investor buy shares in a stock that has been subject to a trading suspension unless and until FINRA has approved a Form 211 relating to the stock. Neither may any broker-dealer publish quotes for the stock.
If there are continuing regulatory concerns about the issuer, its disclosures, or other factors such as a pending regulatory investigation, a Form 211 application may not be approved. In the absence of a termination notice from the SEC, stating that no further enforcement action is contemplated, market makers are unlikely to sponsor a formerly-suspended company. Not a single one of the 1,100 stocks that were suspended from January 1, 2010, through December 31, 2012 returned to normal trading on the OTCMarkets platform.
Rule 15c2-11 requires broker-dealers to review and maintain certain documents and information about the issuer, including the corporation’s organization, operations, control affiliates, the nature of the securities outstanding and being traded, the issuer’s most recent balance sheet, and its profit and loss and retained earnings statements.
When a stock is suspended, after four sessions without published quotations it will be demoted to the Grey Market. Once the suspension ends, limited or “unsolicited” trading can occur in these Grey stocks. Investors may trade, but at their own risk. Typically, a brand new Grey loses 60% to 80% of its value the first day out; within a few weeks, volume declines dramatically.
Investors should be extremely cautious when considering an investment in a stock following a trading suspension. At a minimum, investors should ensure that a broker-dealer has submitted a Form 211 that has been approved so that they have current and reliable information about an issuer before investing.
Additional information about SEC trading suspensions can be found here:
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.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
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