Risk & Compliance

SEC Suspends Trading in 26 Companies

The commission cracks down on late filers, knocking their stocks off the trading block and revoking registrations.
Stephen TaubDecember 3, 2004

The Securities and Exchange Commission suspended trading in the securities of 26 companies for at least 10 days, punishing the companies for not filing their financial results on time.

Although the companies are very small and hardly household names, the move suggests that the commission considers tardiness a serious offense. The SEC asserted that the delinquencies prevented investors from obtaining current and accurate information about the companies.

Besides the trading suspensions, the SEC launched proceedings to find out whether to revoke or suspend the securities registrations of 25 companies, including 12 of those subject to the trading suspensions. Ten of the 25 corporations simultaneously settled with the commission and agreed to revoke their securities registrations.

The regulator began its policy of halting trading for delinquent reporting in June, according to the Associated Press. The current move sends a warning to Corporate America that that the SEC no longer tolerates disregard for listing requirements. “Public companies must keep investors informed through accurate and timely periodic filings with the commission,” said Alan Beller, director of the SEC’s corporate finance division.

Two of the 26 companies are former high-fliers from the late 1990s Internet bubble — DrKoop.com Inc., which at one time had a stock market capitalization that exceeded $1 billion, and Webvan Group Inc. Both are shell companies now, having gone out of business at the end of 2001, according to the New York Times.

It’s not unusual for companies to seek extra time to file their quarterly and annual reports with the SEC. At least 61 companies with market caps exceeding $100 million sought a filing extension for their September quarterly results, according to Glass, Lewis, a proxy research firm. That compares with 30 in the second quarter and 36 in the first quarter.

At the end of last year, 59 companies filed for extensions, including six companies that filed for extensions for two years in a row. At least seven of the companies cited by the SEC have not filed results since the last millennium. In fact, one of the companies — Amitelo Communications, Inc.–has not filed timely periodic reports with the commission since the period ending December 31, 1995.

The stock exchanges are also cracking down on late filers. Last month, officials from Mayor’s Jewelers Inc., who earlier this year said the company would restate prior results, received a warning from the American Stock Exchange that it may be delisted for not filing its quarterly report in time. The company has a $23 million market cap.