The Financial Industry Regulatory Authority is probing broker-dealer firms involved in taking small foreign companies public, the latest effort by a regulator to crack down on pump-and-dump schemes.
The targeted sweep, posted on FINRA’s website Thursday, compels firms that have served as underwriters, bookrunners or placement agents in small-cap offerings for companies with operations overseas to hand over several key pieces of information to the Wall Street regulator.
FINRA seeks details about written supervisory procedures, compliance policies, training materials and due diligence processes of offerings conducted between between January 2023 and September 2025. The regulator also want firms to provide a list of every small-cap offering in which they’ve participated, the total number of shares sold and to how many customers, as well as how much money the firm earned.
The initiative focuses on initial public offerings that raise $25 million or less with share prices between $4 and $8.
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FINRA’s targeted questions come as regulators zero in on unusual trading patterns and stock price surges and collapses at small companies. FINRA has been warning since at least 2022 that small companies with operations overseas listing on U.S. exchanges are especially vulnerable to pump and dumps.
Some of the pump-and-dumps are fueled by touts on social media or spam text messages, FINRA has flagged.
FINRA regulates broker-dealers, firms that play key roles as underwriters in bringing companies to U.S. public markets. Underwriters essentially vouch for the viability of the companies. They are supposed to conduct due diligence about who’s running the company and what their backgrounds are. Firms earn fees for taking companies public.
The SEC in September launched an enforcement unit focused on cross-border securities fraud, including pump and dump schemes, by foreign companies. In addition to investigating the companies themselves, the regulator said the task force would examine their auditors and underwriters.
The SEC has since forced nine companies to temporarily stop trading, citing unusual price moves and potential social media manipulation of the stocks. All of the recently suspended firms are listed in the U.S. but their operations are primarily overseas.
Earlier in September, Nasdaq said it would revamp its listing rules to raise the bar for companies trying to list on the exchange. The revised rules take aim at wild price swings among small companies, including from Chinese companies. Nasdaq also wants to speed up the process to suspend or kick companies off the exchange.
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