In case you have not noticed, the SEC has been very active toward ferreting out fraud ~ and have widely publicized their success. The three enforcement groups they announced this year have been a perfect storm, especially with the fraudulent activities surrounding corrupt microcap companies and their “advisors.”
The three task forces:
- The Financial Reporting and Audit Task Force dedicated to detecting fraudulent or improper financial reporting, whose work will enhance the Division’s ongoing enforcement efforts related to accounting and disclosure fraud.
- The Microcap Fraud Task Force targeting abusive trading and fraudulent conduct in securities issued by microcap companies, especially those that do not regularly publicly report their financial results.
- The Center for Risk and Quantitative Analytics employing quantitative data and analysis to profile high-risk behaviors and transactions and support initiatives to detect misconduct, increasing the Division’s ability to investigate and prevent conduct that harms investors.
The Microcap Task Force focuses on fraud in the issuance, marketing and trading of microcap securities – developing and implementing strategies that detect and fight microcap fraud, especially by focusing on advisors, such as attorneys, auditors, broker-dealers, and other significant participants – including investors. This task force uses the “big data” tools of the Center for Risk and Quantitative Analytics: assisting the Microcap Task Force via delivering analytical techniques and computing capacity with special expertise in big data mining.
The Financial Reporting Task Force will expand the Microcap Fraud Task Force’s ability to identify violations concerning the preparation of financial statements; issuer reporting and disclosures & audit failures.
How we help transparent microcaps:
- You must “Think Mega” to separate your company from the pump-and-dump companies that poison the microcap well. Implement the exact same philosophies and shareholder communications practices of megacap issuers. Yes, that means spending some money on investor relations. Start with a true IR website – not just a couple links off to Yahoo, OTC markets or SEC.gov sites. Remember what we’ve learned (click here). Over half of investors will not take a position in a company that does not have an IR website. We have a specially priced IR website JUST for OTC listed companies.
- Our fleXBRL program assures your company is getting high quality XBRL tagging and filing at a flexible price point that is in concert with a micro-cap’s budget and with how you work. Certainly, there are cheaper providers, but XBRL is very precise and the complexity of error is exponentially higher than straight-up EDGAR. Metaphorically, you need to consider XBRL as “computer code…” and one bad line can be your “glitch” that alerts the SEC’s perfect storm of task forces. You do NOT want that.
2014 is coming. Think Mega!
Have a great day.