Securities Lawyer 101 l Brenda Hamilton

Securities Lawyer 101 l Brenda Hamilton

Thursday, February 13, 2014

Zombie Tickers 101

The Securities and Exchange Commission (“SEC”) has continued its trend of instituting administrative proceedings to revoke the registrations of hundreds of dormant issuers. The issuers are being suspended pursuant to the Securities Exchange Act of 1934, after being delinquent in the filing of their periodic financial reports required by the Commission.
The SEC has been proactive in preventing corporate hijackings of dormant shell companies for reverse merger transactions and has suspended hundreds of issuers.  We expect to see many enforcement actions arisng from corporate hijackings of dorman shells in the near future.

When the SEC seeks to revoke the registration, usually it first suspends the companies it has targeted.
Many of the suspended companies did, however, file initial registration statements with the SEC.  Many failed to respond to delinquency notices from the Division of Corporate Finance requesting compliance with their periodic reporting obligations.
The SEC correctly concludes these dormant public shells have been abandoned by their owners, and so are ripe for attacks from corporate hijackers.
Corporate hijackings have been around over a decade but over the past few years, the SEC has been systematically eliminating dormant public shell companies from active public trading, or, if they can, removing them from the market altogether.
Operation Shell Expel is part of an SEC program to eliminate dormant shells. The program extends to both reporting and non-reporting stocks to prevent the companies from being used in reverse merger transactions by fraudsters who illegally obtin control of the vehicles.  The Pink sheet stocks are suspended and delisted to the Greys; the reporting issuers’ registration is revoked.
Hijackers of public shells typically seize upon companies whose corporate status has been revoked in their states of domicile.  The perpetrators, often transfer agents and attorneys, file for custodianship or receivership in those states – their motive being to profit from the sale of vehicle in a reverse merger transaction.  If their (bogus) verified petitions are granted—and they almost always are—they’ve succeeded in taking over the public shell.  Most often receive uncontested default judgments. They then install themselves or their co-conspirators as officers and directors. When a transfer agenty is complicit, the scheme is much easier to complete. Complicit transfer agents use their position as a fiduciary to exploit the issuers whose interests they are bound to protect.  They locate dormant issuers by reviewing their own records to locate issuers with little or no shareholder actiivty and no management interaction.
The hijackers arrange a reverse merger transaction for the shell or use it for a  promotional campaign.  In the petition to the state judge, the hijackers make a laundry list of fraudulent statements including that the action is being pursued for the best interests of the shareholders and/or that the purpose of the action is to resolve a deadlock.
The object of Operation Shell Expel is to prevent this from happening.  It is an easy and relatively inexpensive way to take vulnerable shell companies out of the marketplace.
More information about corporate hijackings can be found here:
For further information about this blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton Florida, (561) 416-8956, by email at or This memorandum is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information concerning the rules and regulations affecting the use of Rule 144, Form 8K, FINRA Rule 6490, Rule 506 private placement offerings, Regulation A, Rule 504 offerings, SEC reporting requirements, SEC registration on Form S-1 and Form 10, Pink Sheet listing, OTCBB and OTCMarkets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, go public direct transactions and direct public offerings please contact Hamilton and Associates at (561) 416-8956 or Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855

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