Thursday, May 04, 2006
Pink Sheets proposes new SEC rule
- Promotional materials must not just disclose that consideration was paid for the promotion but identify the promoters and their sponsors accurately, as well as provide current contact information for those entities.
- Adequate current information regarding the issuer must be publicly available at the time the promotion takes place.
- All securities held by promoters and their sponsors at the time the promotion takes place is restricted and cannot be sold without registration or an appropriate exemption.
- Stock promoters must provide issuers of the stock that is being promoted with a copy of all promotional materials.
- Promoters, their sponsors and issuers must inform transfer agents and broker-dealers that stock that is held by or on behalf of promoters and their sponsors is restricted.
Here's an interesting part of the proposed rules:
The term "securities promotion" shall mean "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."Fortunately, they included the section I put in bold above. Otherwise, this blog would be considered a stock promotion and I'd be stuck with restricted stock, having to register whatever I owned, and limitations on my activities.
I worry somewhat about rules like this. Good rules are things like GAAP and anything that levels the playing field for people who have some basic common sense and do some basic dilligence. Paternalistic regulations are generally bad rules, in my opinion.
When you look at something like the Sunwin promotions, it's very easy to see that Sunwin paid the promoters. I don't need someone to tell me that.