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Microcap & Penny Stocks : TGL WHAAAAAAAT! Alerts, thoughts, discussion.

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To: CIMA who wrote (8449)	8/30/1999 10:13:00 PM
From: Jim Bishop	Read Replies (2) of 150070

Squelching Microcap Stock Fraud By Todd Woody The Securities and Exchange Commission on Friday moved to regulate the sale of unregistered securities popularized by the Internet. The SEC said it would now require that so-called Rule 504 offerings be registered in states that mandate "substantive disclosure" to investors. Rule 504 offerings allow entrepreneurs to raise up to $1 million with little government oversight. Previously, securities regulations allowed only wealthy or experienced investors to purchase these "private placements," which typically were available only in local markets. The advent of the Internet, however, permitted private placements to be offered globally. Unlike other securities, private placements required no disclosure to prospective buyers and could be immediately traded. As a national market for Rule 504 securities developed online, the SEC became concerned that scam artists were selling fraudulent offerings or manipulating the price of legitimate "microcap" stocks. "As more and more first-time investors enter the markets and the Internet plays a greater role in people's investment decisions, the commission continues to be vigilant in the fight against microcap fraud," said SEC Chairman Arthur Levitt in a statement Friday. The commission, however, backed away from a proposal that would have restricted the resale of Rule 504 stock for a year after the initial purchase. Los Angeles securities attorney Russell Frandsen called Friday's action "a potentially large blow" to entrepreneurs seeking to raise startup capital. "It means that a company is going to have to spend $15,000 to $50,000 on disclosure documents and get those documents approved by a state," he said. Frandsen has advised online investing sites that offer Rule 504 securities.

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