Missouri’s Secretary of State is demanding answers from Finra over its December 2022 halt in trading of meme stock MMTLP, a move that left many investors holding valueless shares after the company went private.
The Financial Industry Regulatory Authority is facing a renewed call for answers regarding its December 2022 decision to halt trading of a meme stock – a move that left many investors stuck with worthless shares.
Missouri Secretary of State Denny Hoskins has sent a letter to Finra President and Chief Executive Officer Robert Cook on behalf of investors in Meta Materials Inc. Series A preferred stock, a spokesperson for Hoskins’ office confirmed.
In the letter, dated Aug. 25, Hoskins said he has received “numerous complaints” from Missouri residents who suffered losses when Finra shut down trading of Meta Materials’ Series A preferred shares, which traded under the symbol MMTLP.
Meta Materials was an advanced materials and nanotechnology company based in Dartmouth, Nova Scotia, according to its website. The MMTLP offering was issued in 2021, when Meta merged with Torchlight Energy Resources, a Plano, Texas-based oil company, according to a Securities and Exchange Commission filing.
Meta Materials later announced plans to convert MMTLP shares to shares of a nonpublic company called Next Bridge Hydrocarbons, the filing shows. On Nov. 23, 2022, Meta Materials announced that the share conversion would occur on Monday, Dec. 12, 2022.
Meanwhile, MMTLP, which traded between $1.40 and $1.55 per share throughout the month of September 2022, soared as high as $12.26 in November of that year, amid social media buzz of an impending short-selling frenzy ahead of the Dec. 12 redemption.
On Friday, Dec. 9, Finra halted trading of MMTLP, citing “an extraordinary event … that has caused or has the potential to cause significant uncertainty in the settlement and clearance process for shares in MMTLP!’
The self-regulator said in a later explanatory statement that “trades executed after December 8 would not have settled in time for the purchaser to become a holder of the MMTLP shares by December 12.” Thus, anyone who purchased the stock after Thursday, Dec. 8 would have been left with valueless shares in Meta Materials, rather than Next Bridge Hydrocarbons.
MMTLP investors who didn’t get the message suffered the same outcome. “Missouri families have lost their savings and their faith in our financial system because of this experience,” Hoskins, who is also Missouri’s chief securities compliance officer, wrote in his letter to Cook.
Hoskins has called for a comprehensive review of Finra’s decision-making process in the matter, asked the self-regulator to consider remedial actions for investors and demanded implementation of procedural safeguards to prevent similar events in the future.
“I call upon FINRA to do the right thing: thoroughly review this matter with fresh eyes, provide complete transparency to affected investors, and take whatever steps are necessary to restore faith in our markets;’ Hoskins wrote.
A spokesperson for Hoskins’ office declined to provide further comment.
Finra, meanwhile, has twice published FAQs explaining its thought process in the MMTLP halt, most recently in November 2023. The self-regulator noted that it published notices on its website – on Dec. 61 2022, and Dec. 8, 2022 – warning that purchases of MMTLP after Dec. 8 would not settle in time for the investor to receive the Next Bridge Hydrocarbons share redemption.
Finra Chief Legal Officer Robert Colby told The Wall Street Journal for an article published in June 2023, “If we hadn’t halted trading, we would have had investors rightfully complaining about having been badly hurt.”
A Finra spokesperson told FA-IQ that the self-regulator had not received Hoskins’ letter as of last week and would review it upon receipt.
Despite Finra’s repeated explanations, conspiracy theories persist, with some suggesting that Finra was motivated to protect hedge funds and others who were short-selling shares of MMTLP. Change.org in January petitioned Congress and President Donald Trump, calling for actions including an investigation of “online activity on X … for evidence of influencers being paid by third parties to manipulate public narratives, intimidate individuals, or discourage participation in litigation and investigations!’
Attorney David Harrison, whose firm represents customers in claims against the financial services industry, told FA-IQ that Finra did not do enough to ensure that MMTLP investors were aware of the true cutoff date for trades.
Harrison, of Studio City, California-based Bakhtiari & Harrison, suggested that Finra, when it approved the share-redemption plan, should have warned Meta Materials that trading would be halted several days prior to the redemption deadline.
“This was known for a while. So why did Finra wait two days before then to automatically come in there and say, ‘We’re shutting this down?”‘ Harrison told FA-IQ.
One of Harrison’s clients, a Miami-based investor who bought into MMTLP through an earlier investment in Torchlight Energy Resources, told FA-IQ that he missed out on the redemption because he had been informed by his brokerage that shares could be sold until Dec. 12.
Houston-based attorney Sam Edwards, a former president of the Public Investors Advocate Bar Association, said his firm received “a ton of calls” from MMTLP investors. Edwards told FA-IQ that, though Finra may have been well-intentioned in its decision to halt MMTLP trading when it did, “the net result of this did more harm than did good.”
Edwards also said that Meta Materials ideally should have warned investors against holding MMTLP shares past Dec. 8.