SEC Agents Will Visit Comparator to View New Device

Federal investigators are expected to visit Comparator Systems Corp.’s offices today to examine the company’s new fingerprint identification device, a product that has been under intense scrutiny since a trading frenzy erupted in Comparator’s stock earlier this month.

Investigators from the Securities and Exchange Commission requested a demonstration of the device at Comparator’s offices in Newport Beach, said Robert Rogers, chief executive of the controversial company.

The visit by SEC investigators marks the second time in the past two weeks that Comparator officials have demonstrated the new product to stock market regulators. Earlier this month, officials from the National Assn. of Securities Dealers, which oversees the Nasdaq stock market, witnessed a similar demonstration.

Comparator has been under investigation since the company’s long-dormant stock set three consecutive trading records on the Nasdaq market and soared 30-fold in value from about 6 cents to $1.87 per share. Trading in Comparator’s stock was suspended by the SEC on May 14, and cannot resume before May 29.

Rogers and other executives at Comparator have said that the trading surge in their company’s stock may have been prompted by the release of the new high-tech fingerprint identification system at an Atlanta trade show last week.

Rogers said the SEC asked for a demonstration of the device “despite the fact that they had a number of people in Atlanta” looking at the product. When asked why regulators wanted a private look, Rogers said with some exasperation, “I have given up on speculation. I’m just following the policy of ask me a question and I’ll give you an honest answer.”

Officials from the SEC declined to comment. It is rare for regulators to request such demonstrations, but sources said investigators want to be sure Comparator has a working product.

For their demonstration almost two weeks ago, NASD officials reportedly hired an expert in fingerprint technology to examine the device, which is designed to be used for identity verification in, among other things, credit card transactions.

The NASD and SEC investigations, however, are focusing on Comparator’s finances and possible evidence of stock manipulation. A week ago, NASD compelled Comparator to acknowledge that it does not have the money to manufacture its fingerprint device, the company’s first new product in years. Comparator also admitted that its financial filings with the SEC may have overstated the value of 77% of the company’s assets.

The surge in trading of Comparator’s stock--which has traditionally sold for pennies per share--also appears to have prompted Nasdaq to launch an extensive review of its market trading requirements.

Meanwhile, Rogers said he was pleased with the reception his company received at the CardTech SecurTech trade show in Atlanta last week. “It was an extraordinarily successful show with lots of compliments,” he said. “I think the only negatives we got were from several reporters.”

He acknowledged that the company still has made no sales of its new device, but said that because of the trade show, “the leads are pouring in.”