Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Investment Chat Board Lawsuits -- Ignore unavailable to you. Want to Upgrade?

To: scion who wrote (7146)	2/2/2005 11:13:17 PM
From: scion	Read Replies (1) \| Respond to of 12465

THE SECURITIES AND EXCHANGE Commission, trying to head off potential stock-fraud schemes before investors get hurt, has started to halt trading in companies whenever illicit stock touting is suspected. The Wall Street Journal (Copyright (c) 2005, Dow Jones & Company, Inc.) THE SECURITIES AND EXCHANGE Commission, trying to head off potential stock-fraud schemes before investors get hurt, has started to halt trading in companies whenever illicit stock touting is suspected. The move is part of the agency's broader attempt to get ahead of possible fraud before it becomes widespread. Over the past week, the SEC temporarily suspended trading in two companies when regulators believed a campaign to artificially inflate the price of shares was under way. The agency is expected to suspend trading in several other companies within the coming weeks and months, according to people familiar with the matter. On Monday, the SEC halted trading in Commanche Properties Inc., a Tucson, Ariz.-based motion-picture company, and last week halted trading in Courtside Products Inc., a family-run business in Spokane, Wash., that sells sporting-equipment bags. In both cases the companies were listed on the pink sheets -- where small stocks are traded over the counter -- but hadn't registered as public companies. The trading suspensions last for 10 days. A phone call to Commanche wasn't returned. At issue is the potential for so-called pump-and-dump schemes, whereby speculative investors, company insiders or others try to inflate demand for a stock by trumpeting positive-sounding information about a company -- typically via e-mail -- and then cash in their shares at the higher price. Often the information is false and the stock quickly declines again. Investigators said the suspensions were prompted by numerous complaints about spam e-mail campaigns touting the companies' stock. Each week, the SEC's Internet enforcement division gets thousands of complaints from investors about spam e-mail plugging stocks and other investments. "We want to head off possible damage to shareholders before it occurs," said John Reed Stark, chief of the SEC's office of Internet enforcement. In the case of Courtside, the SEC is investigating whether Courtside was misled by stock promoters who advised the firm to go public by relying on an SEC rule that allows companies to issue shares and raise money without registering with the commission, if certain conditions are met. The conditions include issuing a portion of the shares to "accredited" investors. Federal securities laws define an accredited investor as certain entities or individuals, such as banks, insurance companies, registered investment companies or trusts. The SEC is looking into whether the stock promoters, who agency officials declined to identify, may have falsely portrayed themselves as accredited investors in order to gain shares of Courtside. The promoters may have then sought to sell their shares to investors and later drive up the price through spam e-mail and faxes. Investigators want to determine whether the ultimate goal was to artificially stimulate demand for the stock and then dump shares once the price increased. "We are not asserting that either Courtside or Commanche were engaged in stock manipulation. But we have suspended trading in their stock because we are concerned that their securities may have been distributed improperly. Under certain circumstances, an improper stock distribution in violation of SEC regulations can be a prelude to a manipulation," said Peter Bresnan, an associate director in the SEC's enforcement division. The agency has implemented a "risk based" approach to help identify potential problems, and last year took the unusual step of halting trading in the securities of 26 "shell" companies that failed to file timely financial disclosures with the agency. Tolan Furusho, an attorney for Courtside, said the firm was approached by stock promoters who convinced the company to go public and promised a cash infusion of up to $1 million. In exchange, Courtside gave 7.5% of its shares to the promoters. "This was a mom-and-pop shop and they saw it as an opportunity to expand production and marketing and go a little deeper into the sports-equipment business," said Mr. Furusho. The promoters gave Courtside a legal opinion stating that the company could rely on the SEC exemption and avoid registering with the commission, Mr. Furusho said. Courtside then issued shares to the promoters but received no cash and soon learned that a fax and e-mail campaign touting its stock was under way. --- The Pump And Dump How the schemes work: -- Investors or company insiders circulate positive-sounding information about a stock -- The price rises as trading picks up -- The investors then cash in their stock -- Often the original info is false, so the price falls again