|
SEC charges 82 with fraud
|
 |
August 3, 1999: 1:04 p.m. ET
Microcap schemes reap $12M; agency wants tougher enforcement laws
|
NEW YORK (CNNfn) - The U.S. Securities and Exchange Commission charged 82 people with conducting fraudulent microcap investment schemes Tuesday, and called for even tougher enforcement measures to slow the spread of illegal trading practices to the Internet.
In the 26 separate judicial and administrative actions filed against the defendants, the SEC alleges the schemes ultimately reaped profits of more than $12 million while bilking investors in the thinly-traded microcap stocks out of "untold millions." The SEC essentially has sued each of the 82 defendants, seeking an undisclosed amount in damages.
Microcap stocks are defined by the SEC as low-priced capital securities, generally costing $5 or less, that trade as pink sheet or bulletin board issues. Many microcap companies don't file reports with the SEC, making information on the companies difficult to obtain.
"This is the largest and most comprehensive effort to date to fight microcap fraud," said Richard Walker, director of the SEC's enforcement division.
The indictments follow a similar action last fall when the SEC charged 41 people with bilking investors out of more than $25 million in fraudulent microcap trading schemes.
The SEC also brought enforcement actions against 44 individuals last October in its first ever sweep to fight securities fraud over the Internet.
Walker said eight individuals cited in the cases announced Tuesday also were charged during the SEC's initial microcap fraud sweep last October.
Those cases highlight the need for stronger enforcement penalties against stock promoters, or stock peddlers who aren't affiliated with a broker/dealer and currently are outside the strict enforcement arm of the SEC, Walker said.
"This is a difficult situation for us," he said. "We obviously don't like to see it when people disregard prior orders. But it highlights the need for stricter and stronger regulations."
Four of the actions also involved fraudulent Internet schemes, a growing trend that worries SEC officials.
With online fraud schemes becoming more common and a House committee recommending a 7.6 percent cut in the SEC's budget last week, Walker said resources are becoming more scarce at a time when enforcement needs to become stronger.
"Clearly, the movement is going toward the Internet," he said. "There's really no way of quantifying the size of the problem. I think we've made great progress. But if we had more resources, we could bring more cases."
Instead, SEC officials are talking about cutting their workforce by up to 10 percent if the House version of their budget request is approved. The Senate Appropriations Committee passed a budget with the $351 million requested by the SEC in tact.
The House version "would have very serious consequences for enforcement actions," Walker said. 
|
|
|
|
|
 |
|
