News Release

Released: 07/25/00 Contact: Dean Pelkey
NR #00/31 (604) 899-6880 or
(BC only) 1-800-373-6393

Vancouver -- If you've received a hot stock tip involving a company trading on the U.S. Over the Counter Bulletin Board, the British Columbia Securities Commission is warning you to think carefully before opening up your wallet and investing.

"Companies trading on the Over the Counter Bulletin Board tend to be small, high-risk ventures seeking to raise capital on a market where regulation is less stringent than conventional stock exchanges," said Stephen Wilson, BCSC executive director.

"Limited regulation means limited protection. B.C. investors should carefully research bulletin board companies before buying shares."

The Over the Counter Bulletin Board (OTCBB) is a stock quotation service operated by the National Association of Securities Dealers for companies too small to list on the association's better known NASDAQ Stock Market.

With the increasing popularity of the internet as a tool for investing, trading in OTCBB companies has gained a higher profile. Unfortunately, novice investors often confuse the bulletin board with NASDAQ -- something unscrupulous promoters have been known to encourage. And because most companies listing on the OTCBB are small and thinly traded, they have recently become favourite targets for stock manipulation scams, many of which involve internet chat rooms and touts who talk up the value of a little known company.

The most recent example of this problem surfaced in June when U.S. authorities charged 120 people in connection with a $50 million securities fraud scheme involving two companies traded on the OTCBB. The FBI alleged that organized crime had moved into the OTCBB and was involved in illegal trading, inflating the value of shares, and money laundering. Documents filed in U.S. court also allege that individuals involved in the fraud funnelled cash and stocks in one of the OTCBB-listed companies through an account held at a Vancouver investment dealer.

The BCSC is urging caution because of concerns that innocent investors may unwittingly be purchasing stocks that have been manipulated by scam artists. Since the OTCBB market is outside the jurisdiction of Canadian regulators, there is little recourse for innocent investors who get taken, Wilson said.

"Only investors with a high tolerance for risk should consider the OTCBB. And with evidence indicating that crooks and con artists are abusing and corrupting the OTCBB, everyone involved in trading its securities needs to be extra cautious," he added.

Earlier this month, the BCSC and the Investment Dealers Association sent a joint letter to all B.C.-registered investment dealers reiterating the need to apply extra care in strictly adhering to trading rules and regulations when dealing in OTCBB securities.

"Investment dealers have a duty to know their clients and to recommend investments suitable to their clients' investment needs and preferences," Wilson said. "They must also be alert to the possibility of illegal activity associated with trading in OTCBB securities."

Wilson suggested that investors should always consider the following points before committing to any type of investment:

• ·Get the facts and know the source of the information.

• ·Beware of internet postings hyping the stock of obscure companies.

• ·Don't believe the hype - watch out for fantastic claims or promises of extravagant returns.

• ·Check the credentials of the person selling you the stock.

• ·Ask how the person selling you the stock is being compensated.

• ·Get as much information as possible in writing.

• ·If in doubt about the legitimacy of the investment, don't buy it.