Berlin-Bremen listings abuse rules
The Financial Times
By Norma Cohen in London
May 14, 2004
The Berlin-Bremen Stock Exchange is being used to circumvent new US regulations aimed at barring a form of share price manipulation, according to several small US companies which have suddenly found their shares listed on it.
The companies say that not only did they not seek a listing on the regional German stock exchange, they neither agreed to, nor were they informed of, the listing.
Moreover, the companies said that when they asked the Berlin exchange to de-list their shares, it refused, saying that only the broker who requested the listing in the first place could remove them.
In recent weeks, shares in several of the companies have fallen sharply as investors apparently dumped shares in what executives say is an abuse of trading rules.
Paul Metzinger, chief executive of Nanopierce Technologies, a Nevada-based manufacturer of patented connection technologies, said his company had learnt of the Berlin listing through the market, and believed it was connected to recent sharp downward moves in the company's share price.
"The listing on the foreign exchanges is coincident with the new rules to regulate short-selling, "Mr. Metzinger said. "It is being utilized on a fraudulent basis to harm our investors."
Todd Noble, chief financial officer at Advanced ID Corp, a Nevada-based manufacturer of radio devices to track cattle, said that the shares in his company had been knocked down sharply in recent weeks, with trading volumes exceeding the company's entire free float.
Because the company only went public last August, a significant proportion of the shares are restricted and unavailable for trading.
Mr. Noble said he had asked the SEC and the NASD to investigate trading in his company's shares.
The Berlin listings came just weeks before a new Securities and Exchange Commission rule on so-called naked short selling. Under the new rules, those seeking to sell shares short must be able to demonstrate that they are able to gain access to the securities within two days.
However, the rules contain a loophole for what are deemed to be genuine arbitrage trades, defined as short sales in shares that are listed on another stock exchange.
According to a spokeswoman for the Berlin-Bremen Stock Exchange, a single broker, Berliner Freiverkehr, asked that 850 US companies that are traded Over The Counter (OTC) be added to the official list during a six-week period beginning in mid-February.
The additional listings bring to 7,000 the number of foreign companies traded on that exchange, she said.
She confirmed that permission of the affected companies was not required under the exchange's rules.
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