Reproposal of Amendments to Rule 15c2-11
                           Fact Sheet
                             2/19/99
                                

PROBLEM:  Quotations can be integral to fraudulent schemes
involving microcap securities.  Retail brokers "hyping" a
microcap security may point to a market maker's quotation as
indicating the security's value to a potential customer.  The
Commission is concerned about the role of these quotations
because most market makers for unlisted securities may publish
quotations without reviewing information about the issuer.

* Microcap securities often are thinly-traded and their
  issuers have minimal or no assets.  Many of these securities
  trade in the unlisted over-the-counter market, i.e., they are not
  listed on an exchange or Nasdaq, but are quoted in systems like
  the NASD's OTC Bulletin Board or the National Quotation Bureau's
  "Pink Sheets".

RESPONSE:  In February, 1998, the Commission proposed amendments
to Rule 15c2-11 under the Exchange Act to require all market
makers initiating quotations for unlisted securities in a
quotation medium to review information about the issuer, and to
review updated information annually if they are publishing priced
quotations.  The Commission is now reproposing amendments that
are substantially similar to the original ones, but they will
apply to a smaller group of securities -- ones that are more
likely to be prone to fraud and manipulation. Also, the
reproposal applies primarily to priced quotations. This narrowed
scope responds to commenters' concerns and should reduce
compliance costs.

HOW RULE 15c2-11 WORKS NOW:  Rule 15c2-11 requires market makers
to review basic issuer information prior to publishing quotations
for that issuer's securities.  Market makers must have a
reasonable basis for believing that the information is accurate
and from reliable sources. The Rule describes the kind of
information that the broker-dealer must review.

     The problem with the current Rule is that once one market
maker has published quotations for a security for at least 30
days, other market makers can publish quotations for the security
without reviewing any information (i.e., they can "piggyback"
onto the quotes of the first market maker).  Market makers then
can quote indefinitely without reviewing any updated information
(unless the Commission suspends trading in the security).

REPROPOSED AMENDMENTS:  The reproposed amendments will require
market makers to review issuer information before initiating
priced quotes for unlisted securities (i.e., "piggybacking" would
be eliminated). In short, they will have to "stop, look and
listen" before starting to place priced quotes for an unlisted
security in a quotation system.

     In addition, market makers publishing priced quotations will
have to review updated information annually.  Market makers will
also have to document their review and record information
regarding any significant relationships that they have with the
issuer or others, including the receipt of

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15c2-11 Fact Sheet
Page 2


any compensation to make a market.  In one respect, the
reproposal does not differ from the current Rule; the first
market maker to publish a quote, priced or unpriced, will have to
review the specified issuer information.

     The reproposal also limits the scope of the Rule to
securities that are more likely to be targets of microcap fraud.
Under the reproposal, market makers quoting the following
securities would not have to comply with the Rule:
     
      * securities with a worldwide average daily trading volume
        value of at least $100,000 during each of the six full calendar
        months immediately preceding the date of publication of a
        quotation, and convertible securities where the underlying
        security satisfies this threshold;

      * securities with a bid price of at least $50 per share;

      * securities of issuers with net tangible assets in excess of
        $10,000,000, based on audited financial statements; and
      
      * non-convertible debt, non-participatory preferred stock, and
        investment grade asset-backed securities.

     The Commission also is publishing an Appendix to the
reproposal that gives guidance to broker-dealers on their review
obligations under the current rule and lists "red flags" that
they should look for when reviewing the issuer information under
the reproposal if adopted. These red flags should alert market
makers to the potential for fraud involving the issuer of the
security.

     The issuer information that market makers would need to
review is readily available for issuers that file periodic
reports with the Commission (i.e., reporting companies).  For non-
reporting companies, market makers would have to obtain more
information than Rule 15c2-11 currently requires, including more
information about the issuer's insiders, control persons and
promoters and about recent significant events involving the
issuer.  Importantly, market makers will have to provide non-
reporting issuer information to customers that request it.

     The proposals generally target the unlisted securities
market.  By requiring all market makers to review issuer
information, they may be deterred from becoming knowing or
unwitting participants in fraudulent schemes.

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