- In a tweet posted on Tuesday, Hester Peirce criticized the broad penny stock bars imposed by the U.S. Government.
- Peirce also questioned the absence of an explanation as to why this level of restriction was necessary.
- In her written statement, the commissioner suggested a more appropriate alternative.
In a tweet published on Tuesday, Hester Peirce, a commissioner on the Securities and Exchange Commission (SEC) expressed her dissatisfaction with the U.S. government’s decision to impose penny-stock bars to resolve four long-pending adjudication matters. Peirce also outlined her reasons for opposing these penny stock bars in a written statement.
Peirce emphasized that administrative proceedings, such as the ones in question, are intended to be remedial rather than punitive. The purpose of imposing bars is to protect the public from potential future harm by preventing individuals from engaging in activities that could pose risks to investors.
The Steadman v. SEC case, which outlines relevant factors for assessing the likelihood of future law violations, is typically used as a guide by the Commission. Meanwhile, in this particular case, all four respondents faced permanent penny stock bars that restrict them from participating in any penny stock offerings, including acting as promoters, finders, consultants, or agents.
Peirce noted that such an absolute prohibition, especially encompassing the respondents’ own trading activities, requires exceptional circumstances to justify it. While acknowledging the respondents’ involvement in misconduct such as unregistered offerings, Peirce argued that these actions do not automatically warrant permanent penny stock bars.
The commissioner also emphasized that none of the opinions provided a clear link between the respondents’ unlawful conduct and the necessity of a penny stock bar to protect the public interest. Peirce suggested that narrower bars, specifically tailored to limit the respondents’ participation in the penny stock markets to trading in their own accounts with their own money, could have been a more appropriate alternative.
Ultimately, Peirce criticized the lack of a reasoned basis for imposing the broad penny stock bars, particularly those preventing the respondents from trading in penny stocks using their own accounts and funds. She also highlighted the absence of an explanation as to why this level of restriction was necessary to protect the public from harm.
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