SEC PUBLISHES LIST OF UNREGISTERED SOLICITORS
The SEC has begun publishing its “PAUSE” list of unregistered firms that solicit securities transactions and that have been the subject of investor complaints. The SEC announced the PAUSE program (aka Public Alert: Unregistered Soliciting Entities) last year in an effort to combat boiler room and advance fee schemes. Often, unregistered solicitors impersonate legitimate firms and falsely claim endorsement by governmental agencies. The SEC noted that it would give firms targeted for the PAUSE list two days’ notice and an opportunity to respond before public listing.
OUR TAKE: Camouflaged as an investor education effort, the SEC is rendering judgment and a penalty before a hearing. An investor complaint does not mean a violation of securities laws. And, two calendar days to respond also seems a little tight. Nevertheless, this Scarlet Letter approach may be the only way to stop the quick-moving boiler room operations that the SEC, by its own admission, has trouble chasing down.