SEC Foreign Firm Suspension Blitz Spurs Monthslong Trading Halts

A Wall Street cop’s orders to temporarily freeze trading in 14 public companies based in Asia over pump-and-dump schemes are turning into indefinite timeouts as the New York Stock Exchange and Nasdaq impose follow-on trade halts.

The Securities and Exchange Commission’s latest use of its suspension powers kicked off last September, when the regulator imposed a 10-day freeze on trading in QMMM Holdings Ltd. and Smart Digital Group Ltd., flagging potential manipulation of their stock on social media. In the case of QMMM, the digital marketing company’s shares had surged nearly 1000% in less than three weeks after touts on social media following a crypto strategy announcement.

The SEC’s moves, permitted under federal securities law, were supplemented in nearly every instance with longer trading halts handed down by US exchanges. Short of delisting, the indeterminate suspension of public companies’ stocks after alleged manipulation aims to protect investors. But it also leaves companies and shareholders in limbo as to when a ticker will trade again.

Previous administrations imposed their own trading suspensions, including a slew under Biden-era Chair Gary Gensler against social media-hyped penny stocks that traded over-the-counter outside of centralized exchanges. The latest penalties, however, target stocks listed on the largest exchanges and align with President Donald Trump’s focus on foreign issuers.

“It isn’t a tool that has deeply been used until now and we have seen it happen 14 times in the course of just a few months,” said Tejal Shah, a former associate director at the SEC’s New York office. “That is unique and really does emphasize how seriously this administration is taking it.”

The timing of exchanges’ trading halts suggests coordination with the SEC taking place behind the scenes, according to Shah, who left the position in September to join Cooley LLP as a partner. She had worked on a similar suspension imposed on Tingo Group Inc. during her time at the agency.

“When something is trading on Nasdaq or NYSE, it gives the patina of a real company, more than an OTC trading stock,” she said. “That has increased over the last few years and retail investors are particularly vulnerable.”

Cross-Border Crackdown

The SEC in September announced a cross-border task force, with Chairman Paul Atkins highlighting risks such as “ramp-and-dump” schemes in which bad actors allegedly manipulate the price of an issuer’s stock and cause drastic swings in share prices.

The schemes often involve companies based in certain foreign jurisdictions including China, Hong Kong, and Singapore, and in some cases incorporated in the Cayman Islands.

Beyond forming a task force, the current SEC is “making a pathway that could materially change cross-border issuer treatment over time,” said Ruba Qashu, a partner at Procopio, Cory, Hargreaves & Savitch LLP who co-leads the firm’s capital markets and securities practice.

Atkins said he was directing SEC staff across multiple divisions to consider and recommend additional investor protection measures, including new disclosure guidance and potential rule changes.

“What the SEC can do is propose rules under existing authority, issue staff disclosure guidance, and approve exchange rule changes that effectively raise the bar for getting and staying listed,” Qashu said.

The SEC is weighing next steps, for instance, after taking comments on a 2025 concept release on whether to revise the definition of a foreign private issuer eligible for exemption from certain disclosure and filing requirements. The agency in December also gave Nasdaq a green light to pursue a new risk-based framework in which the exchange could deny initial listings where a company’s security appears susceptible to manipulation.

Nasdaq’s proposal cited SEC suspension orders for companies incorporated in the Caribbean with executive offices located in Asia, highlighting recommendations made to investors by unknown people via social media—a hallmark of the alleged manipulation that prompted more than a dozen suspensions and trading halts by the federal regulator. NYSE has also proposed tightening its initial listing standards.

“The SEC generally pointed to social media-driven promotional conduct by unknown persons that appears intended to create artificial price and volume, sometimes with coercive ‘proof’ mechanics like screenshot submission,” Qashu said.

Spokespeople for the SEC and Nasdaq declined to comment. NYSE spokespeople didn’t immediately respond to requests for comment.

SEC Targets

Foreign issuers looking to raise money from US investors must determine how to respond to heightened scrutiny from the SEC and stock exchanges.

“Companies that are private that are thinking about IPOing should try to maintain oversight over who is in possession of their shares, to try to keep it getting in the hands of people who might then engage in manipulative trading,” Shah said.

Companies trying to “lift the cloud” from a trading suspension can actively engage with the SEC, answer information requests, and inform investors about the status of those discussions, said Walker Newell, a senior vice president and executive director of the financial risk practice at Gallagher who formerly served as SEC senior counsel.

“The explicit international branding of the task force and these suspensions is new from a messaging perspective,” he added.

Among the companies suspended since September, several—including Japan-based artificial intelligence company Robot Consulting Co.—have sought to keep the market apprised of efforts to remove trading halts by cooperating with Nasdaq and the SEC.

Another company with stock subject to trading freezes, Hong Kong-based cosmetic brand Pitanium Ltd., said in an email that it “has provided the information requested by the Nasdaq reviewer to date,” noting it intends to disclose any developments while continuing to operate its business.

None of the other 13 companies suspended by the SEC responded to requests for comment.

“A lot of these companies have put out statements saying that they are being fully cooperative with the regulators and with Nasdaq,” Shah said. “Given that the trading might be happening by unrelated persons, I don’t know that you can fully control for that.”