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Microcap & Penny Stocks : Microphonics Inc. (mrps) -- Ignore unavailable to you. Want to Upgrade?

To: Gutterball who wrote (2671)	3/7/1999 4:14:00 PM
From: Mitch	Read Replies (1) \| Respond to of 8189

OH NO!! Not 15c2-11. WE'RE DOOMED!!! RUN! RUN!

To: Gutterball who wrote (2671)	3/7/1999 4:20:00 PM
From: Mitch	Read Replies (1) \| Respond to of 8189

In case anyone really gives a damn. Reproposal of Amendments to Rule 15c2-11 Fact Sheet 2/19/99 PROBLEM: Quotations can be integral to fraudulent schemes involving microcap securities. Retail brokers "hyping" a microcap security may point to a market maker's quotation as indicating the security's value to a potential customer. The Commission is concerned about the role of these quotations because most market makers for unlisted securities may publish quotations without reviewing information about the issuer. * Microcap securities often are thinly-traded and their issuers have minimal or no assets. Many of these securities trade in the unlisted over-the-counter market, i.e., they are not listed on an exchange or Nasdaq, but are quoted in systems like the NASD's OTC Bulletin Board or the National Quotation Bureau's "Pink Sheets".RESPONSE: In February, 1998, the Commission proposed amendments to Rule 15c2-11 under the Exchange Act to require all market makers initiating quotations for unlisted securities in a quotation medium to review information about the issuer, and to review updated information annually if they are publishing priced quotations. The Commission is now reproposing amendments that are substantially similar to the original ones, but they will apply to a smaller group of securities -- ones that are more likely to be prone to fraud and manipulation. Also, the reproposal applies primarily to priced quotations. This narrowed scope responds to commenters' concerns and should reducecompliance costs. HOW RULE 15c2-11 WORKS NOW: Rule 15c2-11 requires market makers to review basic issuer information prior to publishing quotations for that issuer's securities. Market makers must have a reasonable basis for believing that the information is accurate and from reliable sources. The Rule describes the kind of information that the broker-dealer must review. The problem with the current Rule is that once one market maker has published quotations for a security for at least 30 days, other market makers can publish quotations for the security without reviewing any information (i.e., they can "piggyback" onto the quotes of the first market maker). Market makers then can quote indefinitely without reviewing any updated information (unless the Commission suspends trading in the security). REPROPOSED AMENDMENTS: The reproposed amendments will require market makers to review issuer information before initiating priced quotes for unlisted securities (i.e., "piggybacking" would be eliminated). In short, they will have to "stop, look and listen" before starting to place priced quotes for an unlisted security in a quotation system. In addition, market makers publishing priced quotations will have to review updated information annually. Market makers will also have to document their review and record information regarding any significant relationships that they have with the issuer or others, including the receipt of --more-- 15c2-11 Fact SheetPage 2any compensation to make a market. In one respect, the reproposal does not differ from the current Rule; the first market maker to publish a quote, priced or unpriced, will have to review the specified issuer information. The reproposal also limits the scope of the Rule to securities that are more likely to be targets of microcap fraud. Under the reproposal, market makers quoting the following securities would not have to comply with the Rule: * securities with a worldwide average daily trading volume value of at least $100,000 during each of the six full calendar months immediately preceding the date of publication of a quotation, and convertible securities where the underlying security satisfies this threshold; * securities with a bid price of at least $50 per share; * securities of issuers with net tangible assets in excess of $10,000,000, based on audited financial statements; and * non-convertible debt, non-participatory preferred stock, and investment grade asset-backed securities. The Commission also is publishing an Appendix to the reproposal that gives guidance to broker-dealers on their review obligations under the current rule and lists "red flags" that they should look for when reviewing the issuer information under the reproposal if adopted. These red flags should alert market makers to the potential for fraud involving the issuer of thesecurity. The issuer information that market makers would need to review is readily available for issuers that file periodic reports with the Commission (i.e., reporting companies). For non- reporting companies, market makers would have to obtain more information than Rule 15c2-11 currently requires, including more information about the issuer's insiders, control persons and promoters and about recent significant events involving the issuer. Importantly, market makers will have to provide non- reporting issuer information to customers that request it. The proposals generally target the unlisted securities market. By requiring all market makers to review issuer information, they may be deterred from becoming knowing or unwitting participants in fraudulent schemes.