These trading suspensions raise significant concerns for foreign issuers, particularly because most of the SEC’s orders state that the potential manipulation was “effectuated through recommendations made to investors by unknown persons [emphasis added] via social media.” Thus, companies that may themselves be victims of third-party manipulation now face the compounding harm of being treated as suspected wrongdoers and having their trading halted, along with potential collateral consequences, such as reputational damage, SEC inquiries and shareholder lawsuits. In addition, Nasdaq recently proposed a new rule that would allow it to delist stocks where the SEC has imposed trading suspensions, effectively cutting off a company’s access to the US capital markets.
As of March 17, the Securities and Exchange Commission (SEC) has suspended the trading of 14 Asia-based companies that conducted their initial public offering (IPO) on Nasdaq or the New York Stock Exchange (NYSE) within the last two years due to potential market manipulation.
The SEC’s focus on foreign issuers is consistent with the Trump administration’s “America First” policy. On Feb 12, SEC Chairman Paul Atkins highlighted the trading suspensions in his testimony before the Senate Committee on Banking, Housing and Urban Affairs, noting: “I am working within the securities laws to protect investors from those who seek to use international borders to evade and undermine US investor protections. Markets are global. Investor protection must be as well.”
