Investment Banks Asked To Make Private Exchanges More Compatible

from the network-effects-baby dept

Wed, Aug 15th 2007 10:16pm — Joseph Weisenthal

We've been following the recent rise of private electronic stock exchanges established by the major investment banks for the purpose of offering companies a place to sell stock without being subject to SEC regulations. While there seems to be interest in this model, a potential complication would arise if the various exchanges were incompatible. It would hamper liquidity if a company going "public "on Goldman's exchange, for example, was only open to investors participating on that exchange. According to Dealbook, listing firms are prodding the banks to open up their exchanges to promote liquidity. If this does happen, there's a much better chance of these markets having a significant impact. One other problem that won't be solved easily arises from an SEC rule which states that any company with more than 499 public shareholders is necessarily a public company and thus compelled to abide by the full spate of regulations. If participation is limited to a handful of large investing institutions, this might be okay, but the rule will prevent this system from getting too popular.

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Filed Under: investment banks, private stock exchange, sec
Companies: goldman sachs

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Overcast, 16 Aug 2007 @ 6:50am

Ahh, yes - protect big corporate interests, as always.

So if it's just a small group of elite investors, they can keep it all to themselves.

They'll just funnel it all through trusts and other mechanisms, I'm sure.

Seems to me, any company with 'stock' should have to abide by the regulations. I'm not sure why some get a pass.

Oh, I know why - it's because that's where congress has most of it's money tied up! And they are, of course, above the law.
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Anonymous Coward, 16 Aug 2007 @ 1:09pm

499

One other problem that won't be solved easily arises from an SEC rule which states that any company with more than 499 public shareholders is necessarily a public company and thus compelled to abide by the full spate of regulations.
So 499 is the magic number? I was wondering how they managed to get around SEC regulation. So all any fraudulent investment scammer would have to do would be to limit the number of victims per bogus investment scam to fewer than 499, right? I wonder if American 499 scams will ever rival Nigerian 419 scams.
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