SEC Oversight – Helping Investors during a Time of Uncertainty and Confusion

As companies and investors try to adapt to the many challenges presented by the COVID-19 pandemic and economic crisis (“COVID-19”), the SEC is adapting to fulfil its mission to protect investors. The SEC is actively monitoring the markets for fraud, schemes or instances related to COVID-19 in which investors can be potentially misled. As of April 30, 2020, there have been at least 24 instances where the SEC halted trading of companies in connection to COVID-19 for reasons that include:

  • Statements about distribution of tests to detect COVID-19 antibodies 
  • Confusion over similarly named publicly traded companies
  • Press releases and other public statements relating to customer orders of COVID-19 tests
  • Statements about the development of drugs and vaccinations related to COVID-19

One example of a cause for suspension was related to popular videoconference company, Zoom Video Communications (ticker: ZM). As a result of increased reliance on technology during a massive global switch to working remotely, Zoom Video Communications saw a surge in daily users. Investors looking to capitalize on this increase rushed to the markets to invest in what they thought was the video communication software company that everyone was talking about. Little did they know, some were investing in Zoom Technologies Inc. (ticker: ZOOM) which saw its stock rise 56,000% in the month leading up to when ZM made its debut on the NASDAQ on April 18, 2020. The SEC halted trading of ZOOM, as it was discovered that there was investor confusion due to similarly named stock.

As we all try to adapt to the new normal, we have to be increasingly skeptical of the world around us. Investors in both public and private companies need to have a heightened sense of professional skepticism, and thorough research can play a critical role in whether you make the right or wrong investment. More information regarding the SEC response and potential enforcement measures related to COVID-19 can be found at the U.S. Securities and Excange Commission.

Please visit our Coronavirus Resource Center for related content.


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