Here's the skinny-----------------------------------------------------
Friday December 12 6:02 AM EST
NASD to Toughen Listing Standards for Micro-caps
By Joanne Morrison
WASHINGTON (Reuters) - The National Association of Securities Dealers wants to clean up its electronic trading system, where some
6,800 lower-priced stocks are traded, by throwing off companies that do not provide information about their financial condition.
"Our real concern is with companies that are not even willing to provide current public information to investors. We don't think that we
should take the risk," said Richard Ketchum, NASD's chief operating officer.
Under the proposal, which must now be approved by the U.S. Securities and Exchange Commission, any companies that wish to trade their
shares on the so-called electronic bulletin board must file regular reports of their financial condition with federal regulators.
The bulletin board gives electronic trading quotes on many securities, but the stocks are not technically listed on either the Nasdaq National
Market or the Nasdaq's second-tier SmallCap Market. Under current rules, these stocks do not have to meet certain listing requirements
or file financial reports with the SEC.
These lower-priced stocks, known as micro-caps, have been a big concern for regulators and lawmakers, who fear investment scams are
on the rise in this market segment.
"There has been a dramatic increase in the number of micro-cap securities in the public market place," Frank Zarb, chairman of the
NASD, said Friday.
Currently, more than 6,800 securities are quoted on the bulletin board, of which only half report their financial information to the SEC.
Under the new proposals, and after a phase-in period for existing bulletin board stocks, all companies that do not report to the SEC or
banking and insurance regulators would be eliminated from the bulletin board.
"These companies would be eligible to be quoted in other mediums, such as the pink sheets," the NASD said.
Under the latest proposal, brokers would be required to take additional steps prior to recommending or conducting a transaction.
Dealers in bulletin board stocks would be required to provide investors with a standard disclosure statement, emphasizing the difference
between over-the-counter securities and other market-listed securities.
"We think that greater disclosure has to be helpful in just simply alerting investors to the fact that there may be less information out there
about these companies," Ketchum said.
He said the NASD consulted with the SEC on the proposal and hopes the agency will act quickly on the matter.
"Our hope is they will take action this winter." Ketchum said. |
