tonto et al: Talk about honest reporting.
February 11, 1998
WSJ - byline Michael Schroeder
SEC Approves Rules to Curb 'Microcap' Fraud;
SMALL STOCK
FOCUS
The following are selected excerpts from today's article: (Verbatim Quotes)
WASHINGTON - The Securities and Exchange Commission approved new rules and proposed closing loopholes in regulations to curb proliferating fraud in "microcap" stocks.
Fraud in these smallest of small stocks usually involves relatively unknown, high pressure brokerage firms that pump up prices with false claims about a company's prospects and investment returns. Brokers and promoters often take advantage of SEC regulations to
sell stock in start-up companies that may have no revenue or operations.
At an SEC meeting yesterday, Lori Richards, director of the agency's office of compliance, inspection and examinations, said her office recently conducted 70 examinations targeting microcap brokerage firms with a large number of customer complaints. The "sweep," which focused on on firms in the high-fraud areas, including
Colorado, New York, South Florida and Utah, hasn't produced any enforcement actions. But historically about 60% of microccap stock examinations have resulted in referrals to the agency's enforcement division for investigation, Ms. Richards said.
The SEC at yesterday's meeting disclosed plans to rein in abuse of a regulation - rule 504 of Regulation D - that exempts companies from from having to register stock offerings of as much as $1 million. The SEC says it is considering requiring companies that use the federal exemption to register the offering with a state and make available a financial statement.
The SEC may also require Rule 504 shares to be held by shareholders for a year or two before they can be publicly traded. Currently, the rule permits shares in the small offerings to be sold immediately, which allows brokers and promoters to sell shares publicly without the investors having access to any company information.
Regulators have found frequent abuses of another rule - Form S-8 - that exempts companies from registering stock that has ben set aside to pay consultants. The SEC found that companies have improperly given shares to individuals to promote the stock.
Any of this sound familiar to anyone. Sorry;there were no references to illegal and naked short sellers, brokers who alledgedly post negative information to slam stocks or encourage investors to dump stocks or "hired guns" to post lies. But I guess the article did allude to companies and promoters who released false and misleading information like some people we all know.
The entire article warrants reading by those interested in protecting their investment
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