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The Almighty Buck

SEC: No Stocks Allowed on Ebay 47

Rude Turnip writes "What won't people try to sell on Ebay? First it was 16 year old girls, then the planet earth then Ebay itself! In the latest round of auction hijinks, the SEC has issued a cease and desist order to prevent three people from selling *gasp* stocks on the popular auction site. Apparently, the individuals violated some regulations having to do with the sale of unregistered stock. Was this the case of another online investment scam or a bona fide attempt to conduct corporate finance in cyberspace? CNNfn has the scoop. "
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SEC: No Stocks Allowed on Ebay

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  • by fugue ( 4373 )
    Perhaps it's time to try to auction off the SEC...
  • Surely the American SEC can't have anything to say about non-US stock offered on auction sites?

    Or if they do, what about non-US stock on non-US acution sites? ;-)
  • Yes, I'm sure that people sitting at a computer checking the Public list of items for sale at ebay and other Aution sites are going to read your email.

    Since when does a company searching ebay for "Stock for sale" or "Company for sale" read your email.

    Not all surveillance is underhand.
  • > We would also see instances of ceo's selling
    > a bunch of stocks anonymously before the
    > quarterly report goes out...

    Oh, yes, just like what the COREL head-honcho did a while back, and for which he is now under scrutiny...
    -- ----------------------------------------------
    Vive le logiciel... Libre!!!

  • ...it appears the SEC and regulation were basically regulatory mechanisms that arose into place to prevent abuses occurring during this transaction. Somehow, regulatory mechanisms have a way of becoming default laws, irrespective of how relevant they are.

    Indeed. The 1929 crash precipitated the bulk of the regulation, leading to the formation of the National Association of Securities Dealers (NASD). In conjunction with the SEC, they are charged with making sure such a crash, generally understood to be a Bad Thing for Everybody Worldwide, cannot recur. The NASD licenses all securities dealers in the USA, and the examinations are not trivial.

    It wouldn't surprise me if the stock market underwent as earth shaking a change as the retail world is undergoing, simply due to the unleashing of millions of people being able to freely trade with each other. It also wouldn't surprise me if the powers that be try to hold this back.

    Well, the NASDAQ is very, maybe too closely affiliated with NASD. However, the competition between the different exchanges is fierce, and could well lead to newer technology being utilized to achieve competitive advantage, just like NASDAQ revolutionized over-the-counter trading with its computerized "stock floor." But due to the stakes of worldwide economic stability, you can be really sure such developments will occur within the existing regulatory frameworks.

  • You can legally sell stock that is a registered stock (SEC has all the filings and approved, and the corporation has made available the prospectus, etc). You can sell the stock outside of the exchanges and brokers if you have the certificates. You can get them from your broker.

    And if you already own at least 1 share in a corporation, that corporation can usually sell you additional shares directly without a broker being involved (though not all corporations elect to do this).
  • The SEC is the regulatory agency in the US and has authority within the US, obviously. They do have authority (but I'm not sure what rules apply) over any stock trade conducted within the US (if you are in the US when you post it on any web site, or sell it by accepting cash in the US, or send cash from the US to buy it, or send or receive stock in the US, the SEC has authority over it) over non-US stock traded inside the US. Their rules do apply to public trading (if you advertise it, then it is public, and posting on a web site or ebay is considered advertising it). Completely private exchanges generally are not covered by SEC rules. But if you offer it in a public way, it's no longer private.
  • Yes, I'm sure that people sitting at a computer checking the Public list of items for sale at ebay and other Aution sites are going to read your email.
    That was my first thought as well. But after a bit of consideration I began to wonder if this is actually the case. "Stock for sale" or "company for sale" are specific phrases, and ones that would be hard to search for; when you consider not just variations of the phrase but the scale of the search operations (they can't just be checking ebay) something begins to smell fishy.
    I don't think it is a conspiracy-level snooping operation, but I would like to know how they found out.
  • What precisely is the difference between selling stocks on Ebay and selling them in those cattle market places
    For years we've been clamouring for equal opportunity for the internet; if it's allowed IRL it should on the internet. If this were true encryption, censorship and pretty much everything would be lovely.
    Conversely, if it's not allowed in meatspace, its shouldn't be allowed in cyberspace (whether it should be disallowed in the first place is another argument). The SEC stops scam artists (to a certain extent), and this has to be done in (another metaphor for outdoors) as well as cyberspace.
  • Was the people were trying to sell private company stock over the internet. The stock wasn't registered with the SEC and there was no public information on the company to make a valid basis for valuation purposes.

    If it would have been EBay stock, or Intel, Microsoft, Johnson & Johnson, or any other publicly traded company then the SEC probably wouldn't have intervened unless it was sold for more than the present market value.

    Andy
  • Was this the case of another online investment scam or a bona fide attempt to conduct corporate finance in cyberspace?

    This was a scam and illegal, even if the internet wasn't involved. In at least one case, the person offering to sell stock in the company, had no actual incorporation. That means that the stock didn't exist. "Corporate finance in cyberspace"? Give me a break.

    To sell securities, anywhere , you must comply with certain simple regulations. In plain english here are some of the things they did wrong:

    • Did not have a corporate entity (You can't sell shares in a partnership)
    • Made outragreous claims (aka lies)
    • Did not disclose that the sale would be for a restricted unregistered security
    • Committed out and out fraud
    I could go on with this list, but it's pretty obvious that all three of these acts were not about "corporate finance". Of course there are hundred of "paper cut" regulations that you still have to abide by in selling registered securities, or when generally soliciting, but that isn't what we are talking about here.

    The sad thing is that as a result of these three, eBay has been closed off as an avenue for the sale of companies that are planning legitimate registered offerings.

    The implications that the SEC is anti-internet that I see both in this post and in many of the replies are just puzzling. They have been bending over backwards with things like the U7 to make sure that small companies aren't shut out of public fund raising. They have been issuing No Action letters left and right for things like NIPHIX, and rule504. I guess a lot of this is just left over venom from those shutout from Red Hat.

    With all the slamming that takes place on the securties market of late here on /. , how about Slashdot invites someone like Richard Wulff for an interview?

  • of course, the weird thing is you CAN buy a woman online...but not stocks on ebay.
  • Maybe stock isn't allowed, but one thing you could actually buy on eBay would be the MOON.

    Sorry, but I already put dibs on the moon and the stars when I promised them to my girlfriend one night.

  • >What precisely is the difference between selling stocks on Ebay and selling them in those cattle market places where everyone has to wear a stupid coloured jacket?

    On ebay, the price the seller sells is the price the buyer buys.

    On the markets the market makers get a piece of the action. (e.g. for each share - Seller sells for $9.95, Buyer buys at $10.00, Market maker makes $0.05 risk-free)

    This is why its possible to make commission-free trades.

    This is BIG money for the guys in the funny-looking jackets, so it is in their interest keep it to themselves.

    Also, getting a company to go public or selling a large portion of a company also involves a big profit margin.

  • >Think of the havoc it would cause if wealthy individuals were to purchase enough shares of a company anonymously that would result in them suddenly being the controlling member.

    If a wealthy individual wanted to do this they could as the system stands now. All they would have to do is to open up X off-shore trusts/accounts/companies, have each one buy 3% of the company shares. The individual owns 3xX% of the company and never has to report anything.

    >possibly the biggest nightmare this would open up for the SEC (and insider traders everywhere) would be a 24hour market

    There _is_ already a 24 hour market. SP futures trade all the time. Instinet offers afterhours trading. European/Japanese markets are open during our after-hours.

    >the big boys would no longer have the edge over the rest of us, knowing exactly where a stock will open at the next day.

    Then why are the major markets (NYSE, NASDAQ) extending their hours? I don't think that they know anymore what the market is going to open up at than what the SP futures will tell you.

  • >The key issue here is that these were "unregistered" stocks.

    Good point.

    >Disclosure documents may often be close to indecipherable, but experts should be able to interpret them at least.

    How would that help? If I was buying part of a company in a private transaction I would at least get a lawyer to look at it, if not my accountant, to make sure I'm not getting screwed.

    >Selling stock in new or unkinown corporations, with no approved disclosure documentation, in a forum of largely clueless buyers is not a good thing.

    Most stock traders _are_ clueless, even if they have the documentation. Either they don't read it at all or ignore the important parts for the exciting parts (e.g. - Planet Hollywood)

    "Everytime a trade is made, someone is wrong."
  • The SEC got involved because the stocks themselves were illegal. In one case, the company didn't even EXIST yet.

    Form what I've read from the SEC, I don't think they would actually care about legitimate sales of legitimate stocks on eBay. All three of these cases, however, were not legitimate.

    The SEC is prosecuting for selling stock that would be just as illegal if sold by any other means.

    eBay has "outlawed" all sale of stock through their site, because there's no way they could keep up with what is, and what is not a legal sale.

    It looks like everyone's doing their job pretty well IMHO.
  • Maybe stock isn't allowed, but one thing you could actually buy on eBay would be the MOON. I take it's property of some old american madman who claimed it a while ago :P


    What the heck is this echeleon thing everybody's talking about? Is the NSA auctioning it on eBay? ;)

  • I hate replying to my own comment, but I found the story on Wired's website and I had it mixed up with another story I'd heard...but it's relevant so here's the link:


    http://www.wired.com/wired/ar chive/6.02/wallstreet.html [wired.com]


    numb
    ?syntax error

  • I knew that some people would be saying "Screw The SEC" but they forgot that it was eBay that is at fault here. Where does the lunacy on eBay stop? eBay and other online auctioning places have already become the breeding grounds for "grey area" capitalists. All sorts of media of copyrighted material is being heavily sold. Rare pieces of equipment and hardware show up without an explaination of where it came from. We've heard about other escapades(selling people, or things that no one can really own).

    Would someone sell a kidney or organs on eBay? How about Urianium? How about drugs? The problem is that eBay take almost no responsiblity for what it features. Sotheby's and Christie's would always take the time to inspect the auctioned lots to make sure that the sale is legal...why doesn't eBay?
  • Its hard to believe that the things which made Ebay exciting and a fun place to check out are being removed by none other than the company itself. Anyone notice eBAY sucks lately?
  • Forget stocks, they'll probably crash.Forget the 16 year old girl, shes probably ugly. What I'm interested in buying on eBay is this planet earth thing.I hear this planet is the wave of the future. There's water as far as the eye can see, and the streets are paved with gold and are driven on by futuristic auto-mobiles. Does anyone have any further information about this dream planet and where i can bid on it?
  • You forget that traders want to sleep, and you can't sleep, while you have some hot shares in your depot.
  • You know, back in the day, a man would help another man shingle his house for.... a meal or another favor of equal value. I say we all start using this same system again. Would make it hard for a tax audit no? The SEC amoung other bloated corporate/government agencies are doing business as usual to keep the rich people rich and in power and the poor people poor and out of power. Anyone read Animal Farm recently?


    SL33ZE, MCSD
    em: joedipshit@hotmail.com
  • Given the recent 'news' articles (*front page* in my local paper!) about bogus or weird Ebay auctions within the last two months, and the recent judgements that selling body parts over the web is illegal, selling drugs over the web is illegal, and scalping tickets over the web is illegal, I think the SEC put 2 and 2 together, and said "hey, we're next!".

    I see nothing fishy about SEC's actions. (IMO, they are one of the few least-internet savvy government braches, if they've basically taken action against Ebay just now).

  • We already have "millions of people being able to freely trade with each other". It's called online stock trading. Actually, we already had it before that, too: it's called over-the-phone stock trading.

    The only difference between then, and now, is that you can do it with a point and click interface instead of a highly-compensated broker in the middle. Nevertheless, this simple change has largely fueled the stock boom of the last several years, leading to price inflation and a more volatile market. And a lot of uneducated investors losing money, too.

    The difference between a stock trade done via Etrade and a stock trade done with Joe Blow via Ebay is that the former is a licensed broker with the proper oversight and communication so that the stock trade is registered correctly and honestly. It's one thing to privately sell your brother some stock; it's another thing to buy stock from somebody you don't know on the other side of the country. The securities markets are highly regulated for good reason, and knee-jerk "nanny-state" responses are simply ignorant. Without oversight, the little investor is blindsided by insider trading and price scams.
    There is nothing in the regulations that prevents you or I from buying the stocks we want; it prevents abuses.

    The most important shift in the stock market in the last generation, by the way, has been the 401(k) plan: an artifact of an obscure banking regulation that turned out to permit employer-managed tax-deferred investment, which since its creation in the early 80s has poured $billions into the stock market. There are more stock owners today than there ever have been, and with mutual funds and IRAs and the like the obstacles to stock ownership are few indeed. And you call this a "nanny state"?
    ----
    Lake Effect [wwa.com], a weblog
  • as part of their

    "regular surveillance of securities trading activity in cyberspace"

    they found this? I appreciate the fact that it might be prudent in terms of stock trading, but what next? As part of their regular surveillance, they'll read my mail too perhaps. Mmmmf. Same old same old.

    --Remove SPAM from my address to mail me
  • What The Heck!?! [whattheheck.com]

    Here are lots of things that show up... my buddies and I once posted one of our girlfrineds as "One Captive Girl"... things like that don't get pulled until they are pointed out, ours was "offensive" (our sale [uswest.net])

    A

  • I read a story a couple years ago about this guy set up a website to trade "stock" in his microbrew beers--for entertainment purposes only. Suprisingly, frequent visitors really got into it--to the point that they actually started offering each other real money for the fake stock.

    IIRC this led to him setting up an online trading system with genuine "fake" stock certificates that he would send out to patrons of the system--clearly stated that it was for entertainment purposes.

    Last I heard he was being hounded by the SEC. This was quite a while ago, but I was able to find the links on Yahoo's index where it mentions the "common stock" thing--however his site makes absolutely no mention of it anymore except for a jpg somewhere that says "take stock in your beer."

    http://search.yahoo.com/search?p=wit-tra de [yahoo.com]

    Anyone else remember this story or know whatever happened to the guy? It says nothing about it on the site anymore. I know theres quite a bit more to the story, but honestly I can't remember the rest.

    numb

    I'd love to sit at a bar for a couple hours with the President and get bombed. I have a feeling he's the type of dude that really knows how to party.
    ?syntax error

  • I can understand eBay prohibiting stock sales on their site, even without the SEC's involvement. If they continued to allow trades (by not addressing this), they'd probably be overwhelmed by volume.

    Stock auctioning in an environment where the auction runs a couple of days is very risky. No sensible bidder will bid more than the national market price. However, if the stock price drops before the auction ends, the seller will make out nicely. It's like the bank-end of shortselling, and a nasty gamble for the buyer. Again, I understand why eBay wouldn't want this taking place.

    What I don't get (help me out here) is why the SEC is involved. Does this mean that I can't sell my stock certificates to anybody I want to?
    I personally think the SEC was camping eBay, waiting for someone to try and sell stock. Why else would it be noticed so quickly?
  • by anthonyclark ( 17109 ) on Thursday October 21, 1999 @01:06AM (#1597605)
    What precisely is the difference between selling stocks on Ebay and selling them in those cattle market places where everyone has to wear a stupid coloured jacket? I can accept Authorisation/registration arguments, but this IS the internet we're talking about here... Can't the SEC provide a system (preferably open :-) that allows people to determine whether or not a sale is Legal? Surely being able to trade 24/7 is a Good Thing (tm) to those people out there making money off of Stocks?

    On a different note, can anyone post an url to a story about the attempted 16-yr old sale?

  • by Lucius Lucanius ( 61758 ) on Thursday October 21, 1999 @01:15AM (#1597606)
    It's a place for people to freely swap pieces of a company that they own in exchange for cash.

    IANA-stock-market-historian, but it appears the SEC and regulation were basically regulatory mechanisms that arose into place to prevent abuses occurring during this transaction. Somehow, regulatory mechanisms have a way of becoming default laws, irrespective of how relevant they are.

    It wouldn't surprise me if the stock market underwent as earth shaking a change as the retail world is undergoing, simply due to the unleashing of millions of people being able to freely trade with each other. It also wouldn't surprise me if the powers that be try to hold this back.

    Of course, it's entirely possible that scams and unwholesome activities will run wild on the scary beast known as the "internet" (or "cyberspace" for the buzzword impaired). But ultimately, I think the reins will be lost. And ultimately, massive dergulation may be more productive than well-intentioned regulation.

    Of course, it won't be idiot proof or conducive to a nanny-state. Any bets on how long it will be before a pensioned school teacher loses his life savings on e-bay stock trading?

    L.
  • by MEK ( 71818 ) on Thursday October 21, 1999 @02:38AM (#1597607)
    The key issue here is that these were "unregistered" stocks. A corporation cannot sell "stock" that is not either registered or exempt from registration. One of the primary purposes for registration is ensuring that the corporation has made adequate disclosure as to its financial situation and future expectations. Disclosure documents may often be close to indecipherable, but experts should be able to interpret them at least. Stocks can be exempt from registration when the potential buyers are limited to persons expected to have the ability to assess the corporation's financial situation without need of full-scale disclosure and registration procedures.

    Selling stock in new or unkinown corporations, with no approved disclosure documentation, in a forum of largely clueless buyers is not a good thing. By preventing it, the SEC is behaving responsibly. Not all government regulation is beneficial, perhaps, but knee-jerk opposition to legitimate consumer protection seems foolish.

    Michael Kerpan
  • by miracles ( 93948 ) on Thursday October 21, 1999 @01:30AM (#1597608)
    the SEC has to make sure that certain individuals are not purchasing more than x% of a company without declaring it to both the company and the SEC. Think of the havoc it would cause if wealthy individuals were to purchase enough shares of a company anonymously that would result in them suddenly being the controlling member. the SEC with all its faults needs to maintain control so publicly held companies have some sort of stability.
    We would also see instances of ceo's selling a bunch of stocks anonymously before the quarterly report goes out... (granted that could be monitored since the amount of their assets is public knowledge).

    possibly the biggest nightmare this would open up for the SEC (and insider traders everywhere) would be a 24hour market (which i am all for). the big boys would no longer have the edge over the rest of us, knowing exactly where a stock will open at the next day. if they make the market 24/7 then nobody will sell stocks on ebay, since they can just as easily(and legally) sell on the market.

    today's the 21st? i should mention echelon then, huh? i wonder how the nsa feels about the market?

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