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To: Francois Goelo who wrote (1359)	10/17/1999 5:40:00 PM
From: Jeffrey L. Henken	Respond to of 1567

Canaccord Capital has already banned OTC BB shorting. This is a big deal because Canaccord is a big brokerage house and not just in Canada: canaccord.com Founded in 1950, Canaccord Capital is Canada's largest independent investment firm, specializing in small to mid capitalization companies and recognized as a leader in the resource, technology and special situation sectors. With offices in major Canadian centres and affiliated partners in the United States, Britain, Switzerland and Bermuda, Canaccord Capital offers a full range of professional investment services including corporate finance, research, institutional equities, international trading and private client services. Our success, and that of our clients, is based on the quality of our people and their ideas. Give me a few minutes and I'll give you further information. Thanks, Jeff

To: Francois Goelo who wrote (1359)	10/17/1999 5:57:00 PM
From: Jeffrey L. Henken	Respond to of 1567

Canaccord will also only allow sales from house long positions, and ban shorting of bulletin board issues. Vancouver Stock Exchange - Street Wire VSE's top broker worried about SEC crackdown Wed 22 Sept 99 Street Wire FOLLOW MY TEN COMMANDMENTS, SAYS PETER BROWN by Brent Mudry In a strong hint that the wave of United States prosecutions targeting OTC Bulletin Board dealings of Vancouver brokerage firms is far from cresting, the head of the top Vancouver Stock Exchange member firm recently sent a stern and terse in-house memo to all his brokers. In a two-page Sept. 2 memo, Peter Brown of Canaccord Capital warns that more bad news may be coming from regulators south of the border. "In the past week we have fired one investment adviser and suspended another for ignoring our rules in respect to dealing on the US. L Board market. ... Therefore, your executive committee thought it would be useful to reiterate our concerns over trading in a market which is fraught with problems," states Mr. Brown. Vancouver's best known broker notes that United States Securities and Exchange Commission is making a special study of Vancouver firms dealing in the barely-regulated bulletin board market, and the SEC's probes have proved fruitful. "The Board of Governors of the VSE has been informed by their president that there will be several more charges against Canadian registrants over the next several months as a result of L board activity," states Mr. Brown. The memo also confirms the SEC study is particularly broad. "The British Columbia Securities Commission, in co-operation with the SEC, has gathered all the L board trading records of several firms to examine all the activity being undertaken by B.C. registrants in this market," says Mr. Brown. The Canaccord chief also reveals that B.C. brokerages are receiving "multiple requests for trading information on L board stocks" from the SEC. As a reminder that Canaccord is not the only firm worried about the long arm of the SEC, Mr. Brown recounts the bulletin board troubles of three smaller rival Vancouver brokerages. The Canaccord head states that Union Securities has been named in a civil suit filed by the SEC alleging stock manipulation and fraud, two Pacific International brokers have been criminally charged in the U.S. for bulletin-board dealings with an American promoter, and Wolverton Securities has been "named as a defendant" in a U.S. indictment for allegedly operating accounts for several U.S. and offshore companies that engaged in illegal bulletin board dealings and money-laundering transactions. The Union case probably refers to that firm's $320,000 (U.S.) consent settlement last October with the SEC in ex-broker David Gilbert's Members Services affair with promoters Philip Sung and the late Arthur Feher. The P.I. case refers to the arrest of Dirk Rachfall and Michael Patterson, who made their first appearance in a Brooklyn courtroom last week for their alleged roles in a penny stock ring led by members of the Colombo crime family and the Russian mob in 1995. It is less clear whether Mr. Brown is strictly accurate regarding Wolverton, which was named as an alleged conduit, not a defendant, in the recent Stockplayer.com case of ex-Stratton Oakmont brokers led by Vincent Napolitano. Mr. Brown has also unveiled a set of tightened rules to minimize his firm's regulatory and economic exposure in bulletin board deals, and reminded his brokers to be wary of contributing to any odd dealings of U.S. clients and offshore accounts. The Canaccord head reminds his brokers of the importance of the "know your client" rule. "It is imperative that you know the account, know how the client came by the securities and have an understanding whether or not Canaccord's dealings with that client are assisting promoters in circumventing U.S. regulations," he states. Brokers are also ordered to "know the security," and reminded the onus is on them to know if the shares they are handling would be deemed by Canadian regulators to be part of an insider block. Canaccord's interest here is not purely altruistic. Mr. Brown notes that in many cases, bulletin board securities are issued to promoters for their services, and "history has shown" that transfer agents have cancelled such shares in a number of cases and charged back the brokers as much as three years later. Canaccord claims it will now only accept bulletin board securities that are delivered in through a recognized investment dealer. Mr. Brown is also banning the transfer of funds or securities by non-resident clients to third parties. In addition, Canaccord will officially attribute no market value or loan value to any bulletin board issue held in client accounts. As for purchase orders, all client accounts must have sufficient cash and non-bulletin-board equity before trade execution. Canaccord will also only allow sales from house long positions, and ban shorting of bulletin board issues. To keep a tight control on the reins, all bulletin board trades must be entered through Canaccord's order management system, "other than exceptions to be made by management." Canaccord will also officially ban "directed trades," rejecting instructions to direct a buy or sell order to a specific brokerage firm. On the payment front, Canaccord claims it will only accept payment for bulletin board securities when the funds are wired into the account in advance, and no U.S. cheques will be accepted. In the final of Mr. Brown's Ten Commandments, the Canaccord head now decrees that he will tolerate no unusual dominance by his firm in any bulletin board deal. "If our client's trading appears to be the major dominant factor in the trading of any bulletin board issue we may well cease cease trading in that security and close the account," states Mr. Brown. The exact criteria for this subjective action is not specified. "There are so many problems that have occurred with L board trading that it is incumbent on every salesman to take every precaution to ensure that they are meeting all the securities regulations in both the U.S. and Canada. You must thoroughly understand the business your clients are asking you to transact so that you do not find yourself an unwilling participant in a manipulative or law-breaking scheme," warns Mr. Brown. **********************************************************************