SEC Suspends 3 More OTC Stocks Over COVID-19 Concerns

By Dean Seal
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Law360 (April 8, 2020, 5:02 PM EDT) -- The U.S. Securities and Exchange Commission's investor protection efforts in the face of the COVID-19 pandemic have recently concentrated on issuing temporary trading suspensions for lightly traded over-the-counter stocks that dubiously surged in recent weeks.

On Tuesday, the agency halted trading for Prestige Capital Corp., Key Capital Corp. and Wellness Matrix Group Inc., noting possible investor confusion of the former company with N95 mask maker Prestige Ameritech Ltd. and questionable claims by the latter companies about taking efforts to combat the COVID-19 crisis.

"The commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above-listed company," the SEC said in each of three separate orders.

The orders call for the three companies' shares to stop trading on over-the-counter markets Wednesday morning and remain suspended until the morning of April 23.

The SEC, which has the authority to suspend any stock for up to 10 trading days if it deems it to be in the interest of the investing public, has issued five suspensions in the last week that were explicitly linked to the coronavirus pandemic. The regulator stopped trading Monday morning for dental supply company No Borders Inc. and apparel company Sandy Steele Unlimited Inc., citing unsupported claims that they were developing COVID-19 testing kits and protective masks, respectively.

In one order Tuesday, the regulator said it would suspend trading for shares of Prestige Capital, a Utah-based emerging growth company that had its shares trading for well under $1 until a surge that has kept it above $1 per share since March 23. The company did not respond to a request for comment Wednesday.

The order highlights concerns about the adequacy and accuracy of available information about Prestige Capital's financial condition and "operations, if any, in light of concerns about investors confusing this issuer with a similarly-named private company that is a manufacturer of N95 masks and the subject of increased media attention during the ongoing COVID-19 pandemic."

The agency is presumably referring to Prestige Ameritech, a private company in Texas and the largest producer of surgical masks in the U.S.

In another order, the SEC suspended trading for Key Capital over concerns about statements the company, based in Phoenix and purporting to specialize in "fintech social media marketing," made in press releases March 5 and March 10 about developing a mass-marketable COVID-19 vaccine.

The March 5 press release stated that Key Capital is looking for partners in the development of KV-C19, a "collaborative therapeutic vaccine candidate" for treatment of COVID-19 and acute respiratory distress syndrome. The March 10 announcement again advertised the KV-C19 "treatment development opportunity." The company's purported chairman did not respond to a request for comment.

The final suspension order issued Tuesday was for Wellness Matrix Group, a California-based "wellness technology organization based on a philosophy of wholistic [sic] health and longevity," according to its website. After months of trading below 5 cents per share for months, the company has traded around the 10-cent mark since March 23.

Since March 19, the company has made unverified statements through affiliated websites and a consultant about selling at-home COVID-19 testing kits that had received approval from the U.S. Food and Drug Administration, the SEC said. An email to the company's website bounced back Wednesday.

A spokesperson for the agency declined to comment on Wednesday's suspensions.

The SEC has pumped up relief efforts for public companies affected by the COVID-19 crisis in recent weeks and issued its first trading suspensions explicitly related to the pandemic March 23 — the first to a health care company that claimed it'd made a large quantity of medical protective masks and the second to Zoom Technologies Inc. over fears it was being confused for a booming video communication services provider with a similar name.

--Editing by Abbie Sarfo.

For a reprint of this article, please contact reprints@law360.com.

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