The Securities and Exchange Commission on Monday halted trading in the shares of 61 companies, part of a crackdown in so-called empty shell companies.
The SEC's "Operation Shell Expel" is intended to tackle manipulation of small, publicly traded companies that are dormant and thus become ripe for fraud. Because such firms are so thinly traded, crooks can more easily manipulate their stock price by hyping the companies as ongoing concerns, gulling investors to buy shares.
"Stock manipulators crave empty shell companies that they can use to conduct pump-and-dump schemes and line their pockets with illicit trading profits by taking advantage of unsuspecting investors," said Andrew Ceresney, co-director of the SEC's division of enforcement, in a statement. "We will aggressively suspend trading in such empty shells to take away a tool of their trade and help rid our markets of fraud."
Some of the suspended listings are connected to household names, such as Pabst Blue Ribbon beer or Ron Popeil's Ronco Corp., the maker of Veg-o-matic and Pocket Fisherman. Descriptions of CBR Brewing, for example, say it produces and sells Pabst Blue Ribbon in mainland China. It lists a Hong Kong address and says the city government of Zhauqing controls more than 65 percent of the shares.
Ronco, according to a market snapshot on Bloomberg, "engages in the development, marketing, and distribution of kitchen products and household products in the United States." Ronco filed for bankruptcy protection in 2007, a case that became contentious when then current and former executives turned on one another. But the company liquidated that same year.
Today's suspensions constitute the second-largest list of shell companies taken on by the SEC in a single day. On May 14, 2012, the SEC halted trades in a record 379 companies.
"Once a company ceases its filings and investors no longer have current information about it, there is no good reason for that empty shell to remain exposed in our public markets," said Christopher Ehrman, co-national coordinator of the SEC's microcap fraud working group, said in a statement. "In this initiative, we are committed to identifying unacceptable risks in the marketplace and removing them to safeguard investors."