NASD wants authority to police small stocks
Ability to halt over-the-counter shares is the issue
From staff and wire reports
WASHINGTON: The National Association of Securities Dealers may seek authority to halt trading of over-the-counter shares, as part of its effort to crack down on fraud in small-company stocks.
''Halts are an effective remedy and it would give us the ability to do something quickly,'' said Barry R. Goldsmith, an executive vice president at NASD's regulatory arm.
Currently, only the U.S. Securities and Exchange Commission can stop trading in shares on the OTC-Bulletin Board, a loosely regulated electronic quote service operated by the NASD.
The NASD staff is studying whether the association itself ought to be able to move to stop trading or quoting of OTC-Bulletin Board securities when NASD suspects those shares are being manipulated, Goldsmith said.
The NASD and SEC both have made a top priority of the fight against fraud in markets for small, ''micro-cap'' stocks, which officials say are particularly prone to manipulation.
In a high-profile case, investors lost $2.9 million when Comparator Systems Corp. executives tried to boost the stock price by inflating the value of the company's assets, the SEC has charged. Shares of the fingerprint identification systems maker rose 30-fold during three days in May 1996 -- before collapsing.
The SEC halted trading of 13 stocks in fiscal year 1997.
Among them was Akron-based Interactive MultiMedia Publishers Inc., which the SEC is investigating. IMP's share also soared briefly in 1996 before falling sharply and eventually becoming virtually worthless as the company failed.
So far in 1998, the agency has stopped trading in 12 stocks -- 11 are OTC-Bulletin Board issues. |
