SEC’s Operation Shell-Expel Suspends Trading in 128 Dormant Shell Companies

By Patricia Uceda, Spring 2015 Graduate Research Assistant

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Dormant shell companies are often used to implement investment fraud schemes such as pump-and-dump schemes. They are prime targets because of their low share price and low visibility, making them highly susceptible to market manipulation.

Recently the SEC suspended trading in 128 inactive penny stock companies as a preventive measure to ensure that they don’t become a source for pump-and-dump schemes. The dormant shell companies were located in 24 states and Canada. These suspensions are the latest in the SEC’s microcap fraud fighting initiative. Microcap fraud is essentially fraud involving penny stock companies, or companies with low (“micro”) capitalizations.

Operation Shell-Expel, the SEC’s microcap fraud fighting initiative, is an aggressive plan to clean out dormant stocks in shell companies that may be targeted by fraudsters. It was started in 2012 and is intended to stop fraud before it begins, hopefully saving investors from being victims of investment scams. The SEC Enforcement Division’s Office of Market Intelligence uses computers and data mining to scour the marketplace and identify dormant companies ripe for abuse.

Since it began, Operation Shell-Expel has resulted in trading suspensions of more than 800 microcap stocks, or 8% of the market. If an inactive company is suspended, its stock cannot be relisted unless they provide updated financial information to prove they are actually operational. If they do not, the dormant shell company remains suspended and is rendered worthless to any investment scam artists.

FTC National Do Not Call Registry: How Does It Work?

By Patricia Uceda, Spring 2015 Graduate Research Assistant

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Phishing calls are a huge problem for consumers today. Phishing involves using seemingly official communications to obtain confidential information from individuals. Traditionally this was done through the use of spam emails. However, in recent years phishers have turned to the telephone, which many people mistakenly believe are not as susceptible to scams. Continue reading

FTC Sends $2.4 Million in Refunds to Consumers Harmed by Premier Precious Metals Scheme

By Patricia Uceda, Spring 2015 Graduate Research Assistant

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As part of the FTC’s ongoing efforts to stop scammers who target senior citizens, last year the FTC permanently banned a bogus precious metals investment scheme from selling any more investment opportunities. The company was called Premier Precious Metals, Inc., and it allegedly conned consumers into buying precious metals on credit without disclosing significant risks. Continue reading

Update: SEC Approves Proposed Rule Change Regarding Definition of Public and Non-Public Arbitrators

By Patricia Uceda, Spring 2015 Graduate Research Assistant

As you may recall, last year FINRA filed a proposed rule change (SR-FINRA-2014-028) to amend the definitions of “non-public” arbitrator and “public arbitrator” under Rules 12100 and 13100 of the Customer and Industry Codes.

The amendment proposed that persons who worked in the financial industry at any point in their careers would always be classified as non-public arbitrators as would persons who assist parties in certain investment disputes for 20% or more of their professional time (though they could become public arbitrators after a cooling-off period of five years). This latter category would move attorneys who represent investors in securities arbitration matters from the public arbitrator pool. Continue reading

Meet the College of Law’s Newest In-House Clinic

cropped-law_iac.jpgGeorgia State University College of Law received a $250,000 grant from the FINRA Investor Education Foundation to open the first Investor Advocacy Clinic dedicated to serving small investors in the state of Georgia. Since 2013, Georgia State Law students have provided legal services and representation for eligible investors who have disputes with their securities brokers and brokerage firms. Clinic interns also provide financial and investor education for the public.

“The clinic offers a unique educational experience for students while also filling a gap by providing legal services to small investors unable to obtain legal representation,” said Nicole Iannarone, assistant clinical professor, who oversees the Investor Advocacy Clinic’s daily operations.

Students handle most aspects of representation, including client intake, interviewing, claim evaluation and client counseling.  For those matters that move toward the dispute resolution process, the clinic engages in statement of claim preparation, settlement negotiations and advocacy in mediation and arbitration proceedings.

Investor Advocacy Clinic by the Numbers

2,522                      Hours of Service Provided

32                           Investors Seeking Clinic’s Services

$315,250                Dollar Value of Services

21                           Student Interns

7                             Comment Letters Filed

7                             Live Outreach Presentations

373                         Investor Education Pieces Posted on Clinic Blog

71                           Countries Reached by Clinic Blog

Information for Potential Clients: Are You Eligible for the Clinic’s Services?

LAW_IACThe Georgia State University College of Law’s Investor Advocacy Clinic provides legal services to small investors with claims against their broker-dealers who are not able to find legal representation due to the size of their claims. Law students, under the supervision of a faculty member who is a Georgia-licensed attorney, will represent investors in handling disputes with their broker-dealers that are subject to arbitration before FINRA.  Are you eligible for our services? Continue reading