The Securities and Exchange Commission (SEC) suspended trading of 26 microcap companies, but the microcap exchange traded funds (ETFs) don’t appear to be affected.
The suspensions will be in effect until March 27, and they’re part of the SEC’s increased effort to address fraud in microcap securities. There are questions about the accuracy of information regarding the companies’ status as publicy traded, reports The Associated Press.
The SEC cautions investors be be aware of the risks associated with microcaps and to consider these suspensions and any information currently available or released by them in the future.
Microcaps are seen as particularly risky because they’re not regularly researched by analysts, information can be hard to come by and they are thinly traded. The majority of these companies, which have a market capitalization of $250 million or less, are highly volatile, according to Microcap Markets.
The ETFs that contain microcaps are:
- First Trust Dow Jones Select Microcap (FDM), down 12.2% year-to-date
- iShares Russell Micorcap Index (IWC), down 15% year-to-date
None of the suspended companies appear to be major holdings of these ETFs.
The suspended companies are: Andros Isle
Development Corp.; Asante Networks Inc.; Beluga Composites Corp.; Cobra
Energy Inc.; Complete Care Medical Inc.; Disability Access Corp.; El
Alacran Gold Mine Corp.; Extreme Fitness Inc.; Gaming Transactions
Inc.; Global Equity Fund Inc.; HealthSonix Inc.; IQ Webquest Inc.; JSX
Energy Inc.; Kensington Industries Inc.; Kingslake Energy Inc.; L
International Computers Inc.; Let’s Talk Recovery Inc.; Mobilestream
Inc.; Mvive Inc.; Native American Energy Group Inc.; Paramount Gold and
Silver Corp.; Regal Technologies Inc.; Remington Ventures Inc.;
Straight Up Brands Inc.; Transglobal Oil Corp.; and Turquoise
Development Co.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.