Stock Trading and Stock Investing

Company Online Stock Trading By H. Bernstein - editor, StockPatrol

Online Trading Stock And In a series of administrative proceedings, the SEC has charged several well-known stock touts with selling unregistered stock. It's a good move by the regulators - but is it enough?

Today, only utilities or government agencies can own the lines. A person who wants to invest in utility operations must purchase stock in a publicly traded company. Repealing the Holding Company Act "would allow outside investors to invest in utility infrastructure, " Perry said, touting the change as a good thing. Individual investors would help finance improvements to the electricity grid and enable utilities to deliver more power to consumers and businesses, according to this view.

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There are other ways to invest in stocks. Dividend Reinvestment Plans (DRIPS) allow you to buy a single share of stock. As that share earns dividends, those dividends are used to buy additional shares. There are index mutual funds, in which you own a little bit of every stock traded on a particular index. There are also traditional mutual funds, made up of an array of stocks across many industries.

Stock Investing Game The Internet is cluttered with touts who have been promoting obscure over the counter companies, expressing unjustified optimism about companies' prospects, and minimizing, or simply ignoring, the limitations of those companies and the risks of a potential investment. Often, those promoters disclose that they have been compensated for their efforts with "free trading" shares of the company's stock - purportedly handed to them by an "unaffiliated third-party."

What Is Institutional Sponsorship There' institutional investors. These are the mutual funds, pension funds, banks and other financial institutions that do the bulk of stock trading on any given day. It is estimated institutions account for about 70% of all trading activity. So when institutions target a stock for purchase, it's more likely to go up in price thanks to the increased demand they create. This professional stock buying is called institutional sponsorship.

Market Stock Trading As it turns out, much of that stock is not really "free trading" and those "third parties" may indeed be affiliated with the company issuing the stock.In a series of cases filed earlier this month, the SEC has targeted a group of Internet stock promoters who use "financial websites" and e-mail to pump up the value of obscure, struggling public companies, in exchange for shares.

Online Stock Trading Canada On October 23, 2003, the SEC instituted seven administrative proceedings charging thirty one public companies, stock promoters, and their associates, with engaging in schemes to distribute unregistered shares of stock, and then unloading hundreds of thousands of shares on unsuspecting investors.

Stock Investing Basics The SEC actions do not focus upon the accuracy of the promotions, but on the compensation paid to, and received by, the promoters. They highlight a common abuse; compensating stock touts with so-called "free trading" stock that they dump shortly after they pump up stock prices through aggressive Internet campaigns.As the SEC discovered, this practice involved some of the Internet's most active promoters. Here's a summary of the SEC actions:

Day Online Stock Trading The Equity Alert case

Online Stock Trading Game The SEC instituted proceedings against Equity Alert.com, a Vancouver, British Columbia-based Internet stock promoter; its parent, Innotech Corporation; two principals of those entities (Harmel S. Rayat and Bhupinder ("Bill") S. Mann);
and two public companies (T&G2, Inc. ("T&G") and Virilitec Industries, Inc. ("Virilitec").

Stock Investing Software According to the SEC, Equity Alert was initially retained to promote an over the counter company called International Mercantile Corporation (IMC), T&G2's predecessor. The person who retained Equity Alert was president of a private company that was negotiating to merge with IMC in order to form the company that would become T&G2. That individual arranged for a private company that he controlled to provide Equity Alert with a promissory note that could be converted into IMC stock.Equity Alert accepted the assignment and disseminated an e-mail characterizing IMC as the newest of the "red hot" biometric companies that had begun to thrive after the terrorist attacks of September 11, 2001. That promotional campaign proved successful. In the two days that followed the e-mail, IMC's stock price rose 31 percent, from $1.13 to $1.48, and volume soared.That proved profitable for Equity Alert. One day after the e-mail was distributed, Equity Alert sold its IMC shares for $132,500.

Online Option Stock Trading A similar pattern occurred with Equity Alert's promotion of Virilitec, a Brooklyn, New York company which develops nutritional supplements that purportedly enhance sperm count and sexual virility. In that case, the husband of Virilitec's president arranged for one of the Company's long-time shareholders to transfer 40,000 Virilitec shares to Equity Alert as consideration for promoting the Company.

India Online Stock Trading After Equity Alert began to pump up interest in the Company - using promotional e-mails - Virilitec shares experienced a spike in trading volume, and Equity Alert sold its shares for almost $39,000.

Stock Investing For Dummy The SEC maintains that the IMC and Virilitec shares delivered to Equity Alert were restricted because they were obtained from persons who were directly or indirectly in control positions with those companies. Therefore, the shares should not have been resold by Equity Alert for at least one year.

Software Stock Trading Each of the respondents named in the Equity Alert case agreed to settle the proceedings without admitting or denying these findings.

Online Stock Trading Review The Small Cap Solutions Case

Stock Investing Tip Proceedings were filed against Research Capital, LLC, a Florida venture capital company; its principals, Craig L. Smith, III and R. Craig Hall; and a group of Internet stock promoters - Wayne H. Jenkins; Jenkins' company, IR Specialists; Tyler T. Fleming; SmallCap Solutions, Inc.; Complete Financial and Operations, LLC; Scott H. Wilding; and Research Investment Group, Inc. (RIG).The SEC maintained that Research Capital hired Wilding and RIG to tout a small company that was affiliated with Research Capital and its principals Smith and Hall. In return for those services, RIG promised to give Wilding four million shares of the company, at one third of the market price. In fact, Smith and Hall transferred 3,300,000 of the shares to Wilding.

Comparison Online Stock According to the SEC, the promotion was "subcontracted" by Wilding and RIG to Fleming and his companies, SmallCap Solutions and Complete Financial; and Jenkins and his company IR Specialists.

Online Stock Trading Site The SEC noted that the promotional campaigns that ensued coincided with increased trading in the public company's stock. While the promotion was moving forward, the promoters sold their shares for over $130,000.The complaint also claims that SmallCap Solutions and Fleming were hired to promote another publicly traded company in exchange for 30,000 unrestricted shares. In that case, the public company purportedly directed a shareholder to give the 30,000 shares to SmallCap Solutions, and then rewarded him (or her) with 60,000 restricted shares.

Online Stock Investing Once again, shares of the company's stock rose following the promotion and SmallCap Solutions sold its shares, this time for almost $16,000.

Canada Online Stock Trading As in the Equity Research case, the SEC alleges that the shares received by these promoters were restricted and should not have been sold without registration.Several of the respondents (Research Capital; Smith; Hall; Jenkins; and Jenkins' company, IR Specialists) settled the proceedings without admitting or denying the findings. The other claims are still pending.The First Capital International, Inc. CaseThe SEC filed a set of related proceedings involving First Capital International, Inc.; its president, Alexander Genin; stock promoter Edwin M. Koziol; OTC Live, Inc.; and Mark A. Suleymanov.

Best Online Stock Trading The Sec says that Genin hired OTC Live and a now-defunct stock promotion company run by Koziol, to promote First Capital on the Internet. In order to pay the promoters, Genin arranged to transfer to them a total of 64,500 First Capital shares from a brokerage account he controlled.

Stock Investing For Beginner The promotional campaign apparently began when OTC Live posted a research report recommending First Capital stock. In the days that followed, the Company's stock rose 92 percent, from $0.13 to $0.25 per share. OTC Live later sold its shares for $3,285. About a month later, Koziol's company began to promote First Capital. Koziol's company then sold its shares for approximately $3,300.

Day Stock Trading Here again, the SEC concluded that the promoters received their shares from someone in a control position at First Capital, with a view toward selling them. Consequently, the shares were restricted and should not have been sold without registration.

Online Stock Trading In India First Capital, Genin and Koziol have agreed to settle the proceedings, without admitting or denying the findings. The remaining proceedings still are pending.The Case Involving MicroCap Marketing, Inc., Lorsin, Inc., Russell Management, Inc. and Harold Engel, Jr.The SEC brought proceedings against two publicly traded companies (Energy & Engine Technology Corporation and ProActive Computer Services, Inc.);
Lorsin, Inc.; Loretta M. Lockhart; Craig K. Hjalmarson; Russell Management, Inc; George R. Siembida; Harold Engel, Jr.; MicroCap Marketing, Inc; and Shane M. Nelson.According to SEC, Energy & Engine retained Siembida and his company, Russell Management, to promote the Company, agreeing to compensate them with Energy & Engine stock that was registered on a Form S-8. The shares, however, were not properly registered since Form S-8 may not be used to register shares issued as compensation for stock promotion services.

Finance Investing Stock Market Siembida then subcontracted some of those services to Engel, who operates a stock promotion website, WillyWizard.com, and transferred some of the improperly registered shares to Engel as compensation. The SEC charges that Engel, in turn, subcontracted with two other promoters, Hjalmarson and Nelson, paying them with a portion of the improperly registered stock. Siembida, Engel, Hjalmarson, and Nelson then sold their improperly registered Engine & Energy for a combined total of over $14,000.

Market Stock Tip Trading The SEC also alleges that Nelson and MicroCap Marketing participated in a second illegal stock distribution with another small cap company, ProActive. In this case they purportedly received unrestricted shares of ProActive stock for their efforts from a "third-party" ProActive shareholder. The SEC states that the shares were restricted, and therefore could not be sold without registration.

Stock Market Investing Advice The two companies, Engine & Energy, and ProActive, have agreed to settle the claims without admitting to the factual allegations. The other proceedings are still pending.

Game Online Stock Trading Unfortunately, while these cases draw attention to the improper compensation of Internet promoters, they do not address a second, pressing issue. Did the promoters overstate the prospects of these companies in order to pump up the value of their shares. And, if so, why aren't they being held accountable for that conduct as well?

Canadian Online Stock Trading Reprinted by permission of StockPatrol.com. All rights reserved.

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