MLON,(COMTEX)B: The $1M Fax: Do Stock Promotions For Art4Love, Pet Ecology, Wa
l Street Securities, Mellon Research Fit SEC 'Risk Ba
B: The $1M Fax: Do Stock Promotions For Art4Love, Pet Ecology, Wall Street Secur
ties, Mellon Research Fit SEC 'Risk Based' Profile?
(financialwire.net via COMTEX) -- March 4, 2005 (FinancialWire) Are stock
promotions for Art4Love (OTC: ALVI) Pet Ecology Brands (OTC: PECB), Wall Street
Securities (OTC: WLSC) or Mellon Research (OTC: MLON) similar to those that have
resulted in recent U.S. Securities Exchange Commission trading halts?
The SEC has recently initiated a new and aggressive campaign to foil what it
calls suspected pump and dump promoters by suspending trading in the equities of
companies that either participate in or have been targeted by suspicious
promotions.
Some observers believe such a "cooling off period" could "cool the
ardor" for suspect promotions if investors have an opportunity to further
evaluate junk faxes and spam emails they have received, and could prevent some
more naive investors from putting their money into stocks that are the subject
of large-scale promotion campaigns based on questionable substance or
fundamentals.
According to an article by Deborah Solomon of the Dow Jones (NYSE: DJ) Wall
Street Journal, published February 2, 2005, "the SEC's move is part of the
agency's broader attempt to get ahead of possible fraud before it becomes
widespread." The article is at:
online.wsj.com
The SEC has apparently developed a "profile" to determine candidates for
potential trading halts. Solomon said 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.
The SEC recently temporarily suspended trading in Commanche Properties (OTC:
CMCH) and Courtside Products (OTC: CSDP), both of which disclaimed any company
or executive association with the spam email and/or faxes that triggered the SEC
suspensions.
In the case of Courtside, the SEC said it 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," said the Wall Street Journal.
"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.
"The agency is expected to suspend trading in several other companies within
the coming weeks and months, according to people familiar with the matter.
"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," explained the
Journal.
The SEC said that each week, the SEC's internet enforcement division, headed by
John Reed Stark, gets thousands of complaints from investors "about spam
email plugging stocks and other investments."
"We want to head off possible damage to shareholders before it occurs," John
Reed Stark, chief of the SEC's office of Internet enforcement, was quoted as
saying.
Investigators want to determine whether the ultimate goal in many of these
instances is to "artificially stimulate demand for the stock and then dump
shares once the price increased."
The SEC hastened to add that it is not asserting that many of the companies
themselves are involved in the schemes. Often they are just bystanders, but
sometimes it results from stock issued to offshore and even
"promotional" sites and email and fax originators to create
"visibility," and the promoters often violate their promises to the
companies to sit on the shares.
"Under certain circumstances, an improper stock distribution in violation of
SEC regulations can be a prelude to a manipulation," Peter Bresnan, an associate
director in the SEC's enforcement division, was quoted as saying.
Investrend Information's (http://www.investrendinformation.com) Investors
Resource Center has teamed with JunkFax (http://www.junkfax.org), which allows
those receiving unwanted stock promotions to provide the evidence directly to
FinancialWire.
Most but not all have missing or incomplete disclosures under U.S. Securities
and Exchange Commission Regulation 17(b):
"It shall be unlawful for any person, by the use of any means or instruments
of transportation or communication in interstate commerce or by the use of the
mails, to publish, give publicity to, or circulate any notice, circular,
advertisement, newspaper, article, letter, investment service, or communication
which, though not purporting to offer a security for sale, describes such
security for a consideration received or to be received, directly or indirectly,
from an issuer, underwriter, or dealer, without fully disclosing the receipt,
whether past or prospective, of such consideration and the amount thereof."
"The SEC has told FinancialWire) that Regulation 17(b) means full and
complete compensation for research and any other services provided, including
amounts and sources, must be disclosed in 'every press release' as well as other
published documents, including emails or faxes. The SEC states that third party
compensations must include the relationship of the payer to the issuer.
"In an email to FinancialWire, John J. Nester, a spokesperson for the U.S.
Securities and Exchange Commission, confirmed that regulators interpret 17(b) to
mean that specific compensation information must be contained in all such
communications to the public, and that a link to a disclosure somewhere else,
for example, is a violation of the regulation. He further stated that the
compensation disclosure required by the SEC includes "amounts and
sources" in any and all communications mentioning the company.
Hot Stock Alert!!!, a fax broadcast by The Corporate & Investor Relations Group,
touted Wall Street Securities and Mellon Research for an undisclosed number of
shares of MLON from an undisclosed and unnamed "third party investor of
MLON."
Stocks to Watch set a 5-day target of $2 on Pet Ecology. Four days later it was
dropping 47.50% to $0.42. Stocks to Watch said it was compensated ONE MILLION
shares of PECB from an unnamed "third party," worth in the neighborhood
of $1 million for a fax distribution before 3,169,569 shares traded Thursday,
dropping the bottom out of the stock. Stocks to Watch did warn that it could
sell its shares at any time.
Wall Street News touted Art4Love, with a "potential target" of $4.50, in
return for $41,620 paid by an undisclosed "third party." The publication
did disclose that the "third party" might buy or sell "at any
time."
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