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TOPIC: New Shell Rules Proposed

New Shell Rules Proposed 14 years 3 months ago #756

  • dooklaw
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That makes two of us! I know there are more. Of course, I only wonder when this will take affect. I have some cash in a fe shells that I can see this already happening (the S-8 cycle). I just hope that it will not be years down the road.

jruell
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New Shell Rules Proposed 14 years 3 months ago #755

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[I'm all for stricter rules...]
Yes, there are some shells owned by individuals that announce a reverse merger, issue S-8 stock to "consultants," who then sell it on the open market. Then they cancel the reverse merger due to some problem, reverse split the stock, and do it again.
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New Shell Rules Proposed 14 years 3 months ago #753

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[New Shell Rules Proposed]
=DJ SEC Proposes Tighter Rules For Shell Companies

04/13/2004
Dow Jones News Services
(Copyright © 2004 Dow Jones & Company, Inc.)



By Judith Burns
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)--Securities regulators floated proposals Tuesday to clamp down on shell companies that sometimes are used to defraud investors.

Regulators propose to define what a shell company is, require such firms to supply financial reports when they merge with a private operating company, and restrict their ability to issue stock without regulatory review.

Securities and Exchange Commission officials said they want to address persistent problems with shell companies, including their use in schemes to sell stock to unsuspecting investors while insiders are dumping it.

SEC commissioner Harvey Goldschmid said he thinks the SEC is right to act "as markets are heating up."

Final approval of the new rules requires a second vote by the five-member SEC.

As proposed, the SEC would define a shell company as one that has little or no assets or operations. It also would require shells that merge with a private operating company to supply audited financial statements quickly, a move the SEC said would curb abuses in these "backdoor" reverse mergers. Legitimate shell companies should be happy to supply such information, SEC officials said.

A final safeguard would ban shell companies from using SEC stock-registration forms designed for companies offering stock to employees. SEC corporation finance division director Alan Beller said he sees "no reason" for shells to use such forms.

Regulators worry improper use of this form, known as an S-8, allows shell companies to raise capital while avoiding SEC oversight because such applications become effective upon filing and undergo no review by the SEC.

-By Judith Burns, Dow Jones Newswires, 202-862-6692; This email address is being protected from spambots. You need JavaScript enabled to view it.


(END) Dow Jones Newswires

04-13-04 1323ET
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