Important Folks, I just got this in a PM. This article shows how the SEC is trying to address the issue of NASDAB BB price manipulation, which we have seen plenty of, by making investements in these stocks subject to a one year holding period before resale. My, my, just what we have been advocating: buy and hold! Here is the article, which is only a proposed rule change right now. But if this rule change goes trhoug, goodbye pump and dumpers, goodby MM manipulation, goodby hyping. I would suggest everyone write thier congressperson to support this rule change. Here is the article:
Issue 98-97 May 20, 1998
COMMISSION ANNOUNCEMENTS
SEC PROPOSES RULE CHANGE TO COMBAT MICROCAP FRAUD
The Commission today proposed a rule change that would help reduce
microcap securities fraud. The measure, which amends Rule 504 of
Regulation D, would require that all securities issued under Rule
504 be "restricted securities" and could only be resold after
meeting certain criteria.
"The Commission has taken another important step to address
microcap fraud," said SEC Chairman Arthur Levitt. "This measure strikes a
balance between the need to combat microcap fraud and the needs of
small businesses to raise seed capital in an efficient manner.
Today's rule change is another step on the way to our goal of
shutting down the pump and dump boiler rooms that prey on small
investors. At the same time, it will help protect the integrity of
the capital formation process."
Currently, Rule 504 provides an exemption from Securities Act
registration (e.g. extensive disclosure, including audited
financial
statements and other details) when small businesses make securities
offerings that do not exceed an aggregate annual amount of $1
million. Further, Rule 504 allows stock purchasers to receive
securities that are not "restricted." (As defined under Rule 144,
a restricted security can only be freely traded in the public
markets if it meets certain conditions, including that it be held
for a certain period of time, typically at least one year.)
Purchasers of Rule 504 stock may resell their securities without
registration or other sales limits.
Fraudsters take advantage of Rule 504 in a variety of ways. It has
allowed them to acquire large quantities of cheap unregistered
stock, artificially pump up the share price through false
statements
and other manipulative activity, and then sell the stock at a great
profit.
Today's proposal would help put an end to pump and dump schemes by
reclassifying all securities issued under Rule 504 as "restricted
securities." As such, these securities could only be resold after
a one-year holding period, through registration, or through another
exemption. (Press Rel. 98-53)
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