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Китай Норд ист Пет Message Board

  • lo_octane lo_octane Sep 26, 2012 9:48 AM Flag

    Registration with the SEC required or not?

    Can somebody please clear this up for me.
    The Securities Act of 1933 says:
    "In general, securities sold in the U.S. must be registered. ... In general, registration forms call for:
    a description of the company's properties and business;
    a description of the security to be offered for sale;
    information about the management of the company; and
    financial statements certified by independent accountants.
    ......Not all offerings of securities must be registered with the Commission. Some exemptions from the registration requirement include:
    private offerings to a limited number of persons or institutions;
    offerings of limited size;
    intrastate offerings; and
    securities of municipal, state, and federal governments."
    ---------------------------------------
    BUT, OTC markets says that when adequate current information concerning the issuer is not publicly available, OTC Markets will label a security as "Caveat Emptor." And it continues to trade under that label.
    So the SEC says that securities sold in the US must file certified financial statements, while the OTC says securites that don't provide public information can be traded but "Buyer Beware". To me, these two statements seem to be in conflict with each other. Help, anyone?

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    • CNEP stock *is* registered stock. When they went dark, they violated the SEC's annual filing rules. Those rules are meaningless - there's no enforcement and no punishment for foreign-domiciled companies.

      You're confusing a stock's *initial* offering SEC registration requirements with regular stock trading. The first part - offerings - occur in the primary market. A dealer or institution buys directly from the company and writes them out one huge check. They turn around and sell those shares on the secondary markets - those are the shares everyone buys and sells every day.

      NEP does not lose a dime by going dark. They already got hard cash for the initial shares years ago. The owner - Wang - doesn't lose a cent regardless of what his U.S. stock is worth. He still owns 100% of the Chinese company and all the profits it ever made or will make. He's simply ignoring that the U.S. stock company ever existed and could care less what happens to CNEP from now on. He's not subject to any U.S. laws in China and will never be held accountable for his crimes.

      The SEC's registration requirements for NEW registered stock are pretty strict. The requirements for stock that trades in the secondary markets are quite a bit looser and relatively unenforced. Companies like NEP can go dark for years before the SEC ever revokes their stock registration. NEP can't do anything as a U.S. public corporation because they are delinquent in their (usually fake) filings. They can't legally issue more stock and sell it in the primary markets.

      The existing stock trading in the secondary market is not owned by NEP and is not affected by SEC non-compliance (late filings, fraudulent past statements, etc.)

      Older regulatory models depended on listed exchanges to enforce an additional set of rules on listed stocks. That (somewhat) assured a company's legitimacy. All of that went out the window when the exchanges started consolidating. NYSE bought AMEX, which was full of fradulent, garbage companies by then. NYSE didn't enforce much of anything - they just waited until the frauds blew up and then kicked that stock off the exchange. "Not their problem"

      The SEC does not regulate *trading* that much. It regulates corporate issuers and the stock they issue in the primary market. Once the stock trades on the secondary markets though, it's up to the exchanges to keep the companies in line. When a stock is booted off an exchange, it's pretty much unregulated (for all practical purposes).