What Was Up With the Recent SEC Crackdown on Small Cap OTC Stocks? SLCO, LIFS, NVGC, GGBL & MDDD

Small cap OTC stocks Sovereign Lithium Inc (OTCMKTS: SLCO), Life Stem Genetics Inc (OTCMKTS: LIFS), Nevada Gold Corp (OTCMKTS: NVGC), Guar Global Ltd (OTCMKTS: GGBL) and Makism 3D Corp (OTCMKTS: MDDD) all saw their trading halted late last year by the SEC, but now all of these stocks are trading again. So what's going on and why the sudden crackdown? First, here is a quick look at what happened to the following five small cap stocks:

Sovereign Lithium Inc. An "Order of Suspension of Trading" of Sovereign Lithium's stock was issued on November 15, 2013 with the company issuing a press release stating: "The Company has not participated, financed, or benefited from any Mass Campaign and was not aware of its activity or implementation." Sovereign Lithium closed at $1.06 on November 14th and sank to $0.19 when trading resumed on December 2nd – basically the level shares were trading at in early November. On Wednesday, Sovereign Lithium fell 7.41% to $0.250. Life Stem Genetics Inc. Trading of Life Stem Genetics' shares was halted around November 22nd when shares were already sinking thanks in part to a Seeking Alpha article and closed at $0.64. When trading resumed on December 10th, Life Stem Genetics closed at $0.15. On Wednesday, Life Stem Genetics closed at $0.300. Nevada Gold Corp. On November 26th, Nevada Gold Corp closed at $0.416 with the SEC halting share trading. When trading resumed on December 12th, Nevada Gold Corp's shares closed at $0.18. The company had also issued a statement on December 3rd, noting: "While we cannot comment on the information provided by third parties in regards to our Company, we are of the view that our disclosure documents and press releases accurately describe our assets, operations and proposed activities." In a shareholder update on December 12th, Nevada Gold Corp stated: "We recommend that our shareholders and any prospective investors rely solely upon the information filed by our Company with the Securities and Exchange Commission, and to visit the Company's website, and not to rely on information provided by third parties." On Wednesday, Nevada Gold Corp closed at $0.110. Guar Global Ltd. Trading of Guar Global's shares were halted around December 6th at $0.75 a share only to resume on December 20th when shares closed at $0.195. Guar Global then issued a statement saying it "has learned of unauthorized third-party promotional activities" and that: "The aforementioned promotional activities are attributed to third parties not associated with the company's officers, directors, insiders, or investor relations firm, and the Company has no involvement with the promotional activities nor does the Company endorse or condone any such promotional activities." On Wednesday, Guar Global rose 10% to $0.22. Makism 3D Corp. On December 12th, Makism 3D Corp closed at $0.90 with the SEC halting shares in time for Friday the 13th. According to the SEC issued statement:

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It appears to the Securities and Exchange Commission that the public interest and the protection of investors require a suspension of trading in thesecuritiesofMakism3D Corp. ("Makism3D") because of concerns regarding the accuracy and adequacy of information in the marketplace and potentially manipulative transactions in Makism3D's common stock…. 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. Therefore, it is ordered, pursuant to Section 12(k) of the Securities Exchange Act of1934, that trading in the securities of the above-listed company is suspended for the period from 9:30 a.m. EST on December 13, 2013 through 11:59 p.m. EST on December 27, 2013.

Trading resumed on December 30th and to no-one's surprise, Makism 3D Corp lost around half its value to close at $0.46 a share; but yesterday, shares rose 10% to close at $1.10.

Considering the above, it appears that only Makism 3D Corp or rather its investors have gone unscathed in the SEC crackdown as its shares are above the level of what they were at when trading was halted. That might tell you something about which of these small cap OTC stocks are actually worth considering.

However, it should also be mentioned that Makism 3D Corp and the four other small cap stocks all appear to have been the subject of some sort of paid promotions campaign or investor relation type of activities, but paid promotions or investor relation activities are required to be disclosed in investment newsletters or alerts – something experienced investors and traders alike are fully aware of and often use to their advantage to make profitable trades.

And while a trading halt of small caps being promoted could be justified by saying you are trying to "protect" inexperienced investors from losses, then why not halt the trading of, let's say Dot.com stocks or every small cap biotech stock that has no revenues or profits yet? Sure, many inexperienced and experienced investors and traders alike have gotten burned by both dot.com and small cap biotech stocks, but its not like their financials and business models are not readily available in public filings filed with the SEC and the same goes for many OTC stocks as well.

So why the sudden SEC crackdown on promoted OTC stocks? Perhaps a promoter or two upset some SEC bureaucrats with the latter deciding to take some revenge or punish them by hitting them where it hurts. That would not be a big surprse given the overall behavior of the current administration and the heavy handiness of the Federal bureaucracy under it to try and grab even more power for themselves (think Obamacare being rewritten by fiat or the IRS targeting of conservative enemies of the state or take a look at a recent Opinion Journal segment from the Wall Street Journal about how OSHA bureaucrats are now going after even small family owned farms).

In other words, experienced investors and traders alike who understand how the OTC market works will just have to take into consideration the risks associated with the SEC deciding its time to look like they are doing something to protect ordinary investors.