OTC Aktien zurück an die Nasdaq!

Rural/Metro to Resume Trading on NASDAQ SmallCap Market

SCOTTSDALE, Ariz., Dec. 22 /PRNewswire-FirstCall/ -- Rural/Metro (Nachrichten) (BULLETIN BOARD: RURL) announced today that with the opening of business on Monday, December 27, 2004, its common stock will resume trading under the symbol "RURL" on the NASDAQ SmallCap Market.

The Company was informed by the NASDAQ Listing Qualifications Department that the Company's listing application had been approved based on its compliance with all requirements for initial listing on the NASDAQ SmallCap Market.

The Company submitted its application for new listing last month, following notification from the NASDAQ Listing and Hearing Review Council that it had reversed an earlier decision by the NASDAQ Listing Qualifications Panel to delist the Company's securities from the SmallCap Market based on events subsequent to the Panel's decision. Accordingly, the Company was required to meet all criteria for initial listing, except that it had to demonstrate a minimum bid price of $1, instated of the $4 initial minimum bid price normally required. The Company's common stock closed at $4.80 per share on Tuesday.

Rural/Metro Corporation provides emergency and non-emergency medical transportation, fire protection, and other safety services in 23 states and more than 400 communities throughout the United States. For more information, visit the company's web site at http://www.ruralmetro.com/.

This press release may contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include, among others, the company's ability to maintain compliance with all NASDAQ SmallCap Market continued listing standards, the company's ability to collect its accounts receivable; competitors' actions; litigation matters; and the company's ability to sustain operating cash flow; secure new contracts; and retain existing contracts. Additional factors that could affect the company are described in its Form 1 0-K for the year ended June 30, 2004 under the caption "Risk Factors" in the Management's Discussion and Analysis section, and other factors as described from time to time in the company's SEC filings. The company disclaims any obligation to update its forward-looking statements.

CONTACT: Liz Merritt, Rural/Metro Corporation 480-606-3337 Jim Byers, Financial Dynamics (Investors) 415-439-4504

Rural/Metro Corporation
 

 

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Special Report:

Dirty Tricks in US OTC Bulletin Board Stocks

PART ONE - Short Selling
 
 

 
   
June 2002     So much has happened in the OTCBB market since I first wrote this report it is hard to know where to begin. Those that have checked here regularly have seen some updates on everything from the addition of Limit Order protection to the crackdown of Regulation S shares. Fortunately, things are changing for the better both on the regulatory side and on the market/investor side, including perhaps the biggest change in years--the end of the OTC Bulletin Board in 2003 and the establishment of a new, more highly regulated venture exchange operated by NASDAQ which will, if everything goes as planned, will eliminate most of the problems with OTCBB stocks described in this report while offering investors and listed companies better opportunities to raise money and grow their business (see below).

In terms of regulations, the SEC and other agencies, including the NASD, US Justice Department, FBI, Canadian agencies, etc have really been making a concerted effort to crackdown on OTC fraud. One of the biggest was an operation back in the fall of 2000 where a stock promoter, in conjunction with the management of OTCBB companies, would use a network of brokers, market makers and promoters to manipulate stocks upward so they could dump their shareholdings on the public in a classic "pump and dump". What the network didn't know was that the promoter was cooperating with the Government, and the entire operation was orchestrated by the FBI and US Attorney's Office. Every movement in the stock arranged by the promoter through the network was orchestrated by the Feds. Not only is it a fascinating example of how management and insiders, with the help of crooked brokers and certain market makers and promoters, "pump and dump" stocks (with almost all names provided), but it also demonstrates that what I wrote here about "Dirty Tricks in the US OTCBB" is still going on. Kudos to Stockwatch for covering the operation and subsequent follow-up operations where most media has ignored what may be one of the best examples of how micro-cap stock fraud is conducted. Now that the broker featured in the above sting operation has pled guilty and may be cooperating, there has already been other cases linked to that one.

This may just be the tip of the iceberg as the regulators have been showing a greater interest in small-cap stock fraud as of late. When I wrote the original report, stock fraud using Regulation S (offshore) stock sales was pretty common. Since then, the SEC and other agencies have done a pretty good job of closing a lot of those loopholes and making it more difficult to move the shares back into the US market. Instead, a lot of Reg S buyers have moved their operations to fleece non-US investors as fraudulent offshore resale of Reg S shares using boiler rooms to push the restricted shares onto unsophisticated investors who do not realize the shares are restricted has grown. In addition, many fraud artists are now using other methods, including the wider use of consultant shares in pump and dump operations. Lately, the regulators have moved against some of those fraudsters as well, but even if they succeed in shutting them all down, I am sure the criminals will find something new.

Still, venture stock investors might be getting a break. After years of discussion and brainstorming among the regulators and industry, it is official. The OTCBB is being phase-out and replaced by what looks to be a much better, higher quality market. In 2033 the new Bulletin Board Exchange, or BBX, will become fully operational. Although they are not describing it as such, the BBX will be a de facto third tier of NASDAQ. The market will be operated by NASDAQ while rules and regulations will be a combination of NASDAQ NMS and Small-cap rules and some current OTCBB rules. In creating the exchange, the regulators are making a serious attempt to stop many of the abuses and fraud that has run through some OTC issuers while maintaining a venture capital oriented market to allow small and growing companies to attract investors and capital while maintaining a liquid are fairer market for everyone.

Unlike the current OTCBB, the BBX will have listing requirements. Currently, the OTCBB only requires that a company file registrations and required periodic and annual reports with the SEC and have market makers file some simple paperwork. As long as they maintain minimum requirements, they can trade on the OTCBB forever. The BBX, on the other hand, will be a regulated market with both NASDAQ and NASD Regulation taking an active role in regulating the exchange. These include initial listing standards which includes the "Public Interest Standard". The BBX can deny a listing or delist an issuer to protect investors and will include a review of all officers, directors, and major shareholders for past or current regulatory issues. As many of the OTCBB "scams" are perpetrated by the same groups of people over and over, this will hopefully mean those people known to have a history of fraudulent activities will be barred from the market. If the dirty 5% of the market participants are taken out of the market, it would probably clean up 95% of the market's problems, assuming the regulators remain vigilant against both past and future offenders. There are other requirements for listed companies, including requiring shareholder approval for certain transactions, including the grant of stock options to officers and directors and large or below-market issuances of stock. That will also help end one of the most common problems with OTCBB. The new regulations will also end the disenfranchisement of the voting rights of existing shareholders. Any investor in a Nevada Corporation that has seen the management legally do an end-around current shareholders knows what this means and will NOT be allowed in BBX listed companies.

Besides the regulations relating to listed companies, there will be some major changes for market makers as well. The trading system will be fully automated, much as the current NASDAQ SelectNet used for the NMD and SmallCap market. The system will allow for immediate execution of orders at the Best Bid or Offer and will no longer require traders to shop trades via phone as they do on the OTCBB today. Besides the speed difference and better order visibility, the BBX will require all market makers to maintain a continuous, two-sided market. That has been a problem with OTCBB issuers in the past. Marginability of BBX stocks will be limited by a 100% margin maintenance requirement. Finally, in a big change compared to the OTCBB, BBX market makers will be required to report short interest on a monthly basis, just as they do for NASDAQ securities. This new requirement should, hopefully, end the ongoing claims by hype mongers that their favorite stock is going down due to market maker's "naked" shorting instead of what is usually really going on--endless dilution.  

Unfortunately, the new BBX will not totally eliminate all the "Dirty Tricks" that go on, as most of the current OTCBB stocks will not qualify for the new BBX and will shift to the Pink Sheets which will probably remain as unregulated as it is today. BUT, it will provide a new market for serious companies to grow and, we can hope, a more level playing field for all investors.

The report below and on the next page is still the original "Dirty Tricks" as I wrote in several years ago. However, the long-awaited update is getting closer to finished. In the meantime, I have posted an excerpt from the new edition on a new page of the website. A part of the new section on "Toxic Convertibles" (also known as "Death Spiral" or "Death Ride") convertibles. Unfortunately, the (mis)use of these instruments is on the rise among OTCBB companies. They constantly are finding new ways to issue these dirty securities and are now under new names, including "equity lines of credit" or "reset provisions". The excerpt is available HERE.

"Dirty Tricks on the US OTC Bulletin Board"

This has been a difficult piece to write. I have spent about 2 weeks trying to put all of this into a usable form that not only would hopefully educate people about what actually goes on in the US OTC BB market, but also would not make too many people furious with me. It's OK if people dislike my opinions - it's a free country. The observations in this piece come from hard won experience. Much of my business is in smaller growth and venture companies, but almost all of it is US exchange listed, NASDAQ or Canadian stocks. I conduct very little OTC BB business these days except for my specialized 144 and restricted share business as well as some unsolicited trading for clients. I  almost never recommend BB stocks to clients - almost all of my venture business is in Canadian stocks. Why? Because I (as well as most everyone else in the brokerage industry) consider the OTC BB to be the most corrupt stock market anywhere - certainly in North America.
    Before people start howling over my last statement, please allow me to qualify it a little bit. Some estimates say 50% of OTC BB volume is related to fraudulent activity. My observations and experiences lead me to believe the number is probably closer to 70%. This is not to say that 70% of the companies on the BB are frauds - there absolutely are some good, honest companies traded there. Instead, I believe 70% of the trading volume is circumspect. Yes, there are good, honest companies listed on the BB. However, they typically don't trade as much as the hyped or "pumped and dumped" shares, which is why so much of the trading volume is questionable.
    I also want to say that OTCBB traded stocks that are listed (and regulated) elsewhere, such as overseas or in Canada, and generally not included in the following discussion. This is because the are more closely regulated by their home authorities and most of their volume is conducted on exchanges elsewhere. Many of them are traded on the OTCBB in order to comply with US Blue Sky Laws which allows US brokers to more easily trade their securities. In fact, I encourage foreign issuers register their stock in the US, even if it is only the Bulletin Board. This is especially true of Canadian companies, where filing the required paperwork can do wonders in helping to grow their shareholder base in the States. So, if you own a foreign company, such as a Japanese or Canadian stock which just happens to be OTCBB traded, then most of this discussion does not apply to you or your shares.
    Why is the Bulletin Board so corrupt? Because it is an almost totally unregulated market. The mechanics of the OTCBB are very different from every other market around. Individual investors have many misconceptions about the OTCBB, and many assume it is similar to NASDAQ. That is not at all true. For instance, the SEC's NASDAQ "Order Handling Rules" which were designed to give the small investor better executions for stock trades DO NOT APPLY to OTCBB securities. If you are active in OTCBB stocks, I highly recommend that you educate yourself in the nuts and bolts of the market. The OTCBB itself publishes a good source of good, basic information but naturally does not talk about the dark side of the market. That is something most investors only learn from experience.
    I am assuming that most of the people reading this are already somehow involved with Bulletin Board stocks and have some understanding with how they work, so I won't go into too much detail about why it is so sleazy. Most people recognize that many of the stocks traded in this market are small and highly speculative. In addition, not all of these companies are honest. The market attracts dishonesty, not only because of its speculative nature but because the laws regulating it do little to discourage that type of activity. Until July 2000, not all OTCBB companies have to file financial reports to the SEC. They can issue stock almost at will for such vague reasons as "consulting", which could be anything from stock promotional services to fixing the plumbing at company headquarters. As an example, I just read a quarterly report from an OTCBB company that issued 10,000 shares of their stock to cover a $10 debt! They can also issue stock at a discount overseas through Regulation S and existing shareholders almost never know until it is too late. Because there is often very little factual information available to the average investor, scam artists have an easy time hyping these stocks. The internet has only made their jobs easier as they can now reach more investors more cheaply with less effort. I can go on and on, but I will say that the problems are not limited to just bad companies and dishonest promoters.
    My work in the OTCBB, especially with restricted stock, has given me unique insights and experience that many people don't have. This has led to my firm belief that much of the market's problem lies with the structure of the market, including market making and transfer agents. On the transfer agent side, most of the OTCBB stocks use smaller, mom-and-pop type agents. Some of them are very professional and are as good or better than the biggest, better known agents. Some, however, are not. Since it is the companies who are ultimately the bosses of their transfer agent, some definitely lean toward doing what the companies tell them do to the detriment of investors even when it contradicts securities regulations. My experiences tell me quite a bit of fraudulent activity can be traced to this source, although the transfer agents are not necessarily willing participants. The problem lies in some poorly organized agents, ineffectual laws and, again, lack of enforcement. I certainly feel this is an area in which the SEC should review for changes would go a long way to help stamp out small stock fraud. I could go on and on about this subject, but that lies outside of the scope of this particular discussion. It is definitely an interesting and little known aspect of the business, so I may talk about it more at a later date.

For a discussion of manipulation of OTCBB stocks via shorting, please click on to the next page.   FOR THE NEXT PAGE, CLICK HERE  

Questions? E-mail me at steven@taylorstock.com



 

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