The Pitfalls of Concentrated Stock, Trade Suspensions, and Trade Halts

At Position Wealth, we define Concentrated Stock as any individual stock that represents more than 10% of your portfolio. By holding more than 10%, you could be putting yourself in a precarious situation should something happen to that stock. There are many factors that can lead to a stock’s rapid decline: negative earnings reports, public perception, industry trends, and bad news are just a few of them. Unwinding concentrated stocks can be tricky depending on the type of account they’re held in, but Position Wealth is here to help you navigate this issue.

If you trade on your own, it’s crucial to understand the rules of trading stock so that you don’t find yourself unable to sell your shares (concentrated or not). The Securities Exchange Commission (SEC), the federal governing body that oversees investor safety, can suspend trading in a stock when they feel that it’s required to protect investors and the public interest. Some reasons for suspension of a stock include inaccurate corporate filings, questions about the accuracy of press releases, as well as insider trading and market manipulation. See the attached PDF from the SEC for more information on Trade Suspensions.

Furthermore, stock trading can be temporarily halted by either the stock exchange or the brokerage agency you’re trading through. Some reasons for a trading halt include extreme trade volume, government sanctions on the company, as well as the solvency of the brokerage agency. The account opening paperwork you’re required to sign will most likely mention the brokerage agency’s ability to halt trading.

By keeping individual stock positions under 10%, and by understanding how trade suspensions and halts can affect your ability to trade, you’re going to be much better prepared for success. Please contact us if you would like to discuss your financial future.

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