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SEC acts to block securities scams

From Times Staff and Wire Reports

The Securities and Exchange Commission on Thursday froze trading in shares of 26 companies that the agency said apparently usurped the identities of defunct or inactive firms to defraud investors.

The suspensions are part of a crackdown on “corporate hijackings,” in which con artists form a business with the same name as a publicly traded company, then take over its ticker symbol to mislead and cheat investors, the SEC said.

The agency in October created a task force focusing on so-called microcap stocks and last March froze trading in shares of 35 companies over suspected links to spam e-mails campaigns.

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“Keeping this tier of the market honest and free of fraud is every bit as important to investor confidence as our regulation of the world’s largest companies and exchanges,” SEC Chairman Christopher Cox said in a statement.

“Hijackings are a burgeoning problem,” SEC Enforcement Director Linda Thomsen said. She said the suspensions were “aimed at putting the market on notice about the risks associated with acquiring nonoperational or ‘shell’ companies, and with investing in micro-caps.”

Closely held companies sometimes acquire publicly traded shell firms to conduct a “reverse merger.” The transactions let buyers sell shares to investors without holding an initial public offering.


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