This makes for instant profits.
Let's take the example of Life Stem Genetics, Inc. LIFS.
I received in the mail a promotional brochure telling me that buying LIFS is like owning stock in the fountain of youth.
Checking the chart, I found that the stock was making a steady climb, indicating a successful promotion.
However, things seemed to have gone astray:
SECURITIES EXCHANGE ACT OF 1934
Release No. 70933 / November 25, 2013
The Securities and Exchange Commission ("Commission") announced the temporary
suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the "Exchange Act"), of trading in the securities of Life Stem Genetics Inc. ("Life Stem"), of Beverly Hills, California, commencing at 9:30 a.m. EST on November 25, 2013, and terminating at 11:59 p.m. EST on December 9, 2013.
The Commission temporarily suspended trading in Life Stem because of questions regarding the adequacy and accuracy of information about Life Stem, including, among other things, its business operations.
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Oops!
Here is the chart, courtesy of those nice folks at Stockcharts.com:
Naturally, an aggressive, professional short seller will be happy to inform the regulators of the fruits of its research.
However, this does not always work. In fact, it may be more often that it does not work. Regulators are overloaded and may not feel motivated to attack your particular stock. Companies fight back and will be ready to counter any presentation you may make. You may even be sued by the company for slander.
Nonetheless, informing the regulators of a documented fraud is a good thing to do. It serves the public good and your pocketbook. There is little downside risk and the profit potential is enormous.
