NASD to Begin Delisting Certain Bulletin Board Stocks

As many as 65 small-company stocks could be delisted from the Bulletin Board electronic trading system Thursday, in the first phase of the National Assn. of Securities Dealers’ plan to remove high-risk companies from that marketplace.

The NASD decided last year to require that the 6,500 Bulletin Board-listed companies file regular financial statements with regulators--primarily the Securities and Exchange Commission--to maintain their listings.

Companies that can’t afford to file statements or that otherwise choose not to do so will have their stocks relegated to the so-called Pink Sheets, home of the smallest and riskiest U.S. stocks. Individual investors can’t track Pink Sheet stocks electronically.

As many as half the current Bulletin Board stocks may end up delisted.

Many legitimate small companies trade on the Bulletin Board. However, regulators have long worried that sham companies have taken advantage of the lax financial reporting requirements to list on the Bulletin Board, where their stocks can be easily touted to, and purchased by, unsuspecting investors.

The Bulletin Board has for years been home to thinly traded stocks that don’t qualify for the more prestigious Nasdaq Stock Market, which is also run by the NASD.

Though some companies and investors praise the NASD’s intent, some say the new rules could hurt investors and legitimate firms.

Indeed, the plan has already spooked some shareholders, causing them to steadily dump some Bulletin Board stocks in recent months, critics say. Early this month, for example, an “E” was added to the ticker symbols of companies in danger of being delisted.

“Ever since that ‘E’ was put on the end of our symbol, people have been selling,” said Leon Kline, chief executive of Anderson Computers/Tidalwave Corp., a Florida company that sells computer equipment over the Internet and will soon offer online mortgage services.

Some companies say their share-price slides have nixed planned acquisitions or stock offerings.

Many Bulletin Board companies complain that they haven’t been given enough time to complete the process of hiring lawyers and accountants to prepare financial filings.

“For a small company, it’s a lot of man-hours and manpower,” said Steven Meyer, chief executive of Arc Communications, a New Jersey Web-page design firm.

Some companies also argue that the NASD’s delisting schedule is unfair. Each month through June 2000, a batch of companies will be reviewed alphabetically based on ticker symbols. For example, most firms being delisted this week have tickers starting with A through AD.

“Here I am effectively being denied access to the capital markets and there’s the same kind of company down the alphabet just riding along,” said the chief financial officer of a Southland firm who asked to remain anonymous.

Several firms, such as Anderson Computers and Arc Communications, say they recently filed the necessary documents and will return to the Bulletin Board once the SEC sifts through a crush of late filings in the next few months.

For investors, there is little question that it will become harder to trade stocks once they are pushed onto the Pink Sheets.

Also, the NASD’s plan will do little to remove fraudulent companies because those firms will do whatever they must to keep their listings, argues Jack Norberg, chief of Standard Investment Chartered, a Tustin-based brokerage specializing in thinly traded stocks.

“In some ways, the risky and volatile issues the NASD and SEC are trying to protect us against will still be there,” Norberg said.

The NASD disagrees. “The driving force behind the new eligibility rule is to provide investors with better protection,” said Wayne Lee, an NASD spokesman. “Accurate information is the foundation for good investment decisions.”

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California Delisting Candidates

These California-based companies, whose shares now list on the electronic Bulletin Board market, are in danger of losing their listings Thursday if they fail to meet new financial-reporting requirements. Thousands of Bulletin Board stocks may be delisted over the next year. The list is being culled in alphabetical order.

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Ticker Stock price % Stock symbol May 28 Tues.* chng. Admor Memory ADMRE $0.05 $0.04 -20% Advanced Biotherapy ADVBE 0.06 0.06 unch. Advanced Definition ADEFE 0.63 0.44 -30% Advanced Detectors ADETE 0.02 0.02 unch. Alliance Consumer ACILE 0.53 0.44 -17% Amer. Custom Compon. ACCME 0.38 0.11 -71% American Cytogenetics ACYGE 0.01 0.01 unch.

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* Or last trade

Sources: National Assn. of Securities dealers; Bloomberg News