Subject: [Fwd: Comment: Re 504 rule changes] S7 14 98 Author: "Tim R. Watt" Date: 2/12/99 12:53 AM Dear Sirs and Madams: A little late, but thought I would weigh in with a few comments regarding the proposed rule changes. There has been a great deal of lip service given to creating an environment wherein small entrepreneurs might have a better shot at getting financing. As a practical matter, there is a stigma attached to small cap companies fostered by the SEC. Most brokers refuse to trade them due to all the hassle. A small cap company, even with a NASDAQ listing, is a second class citizen. If the free trading aspect is removed from the 504, it places the budding entrepreneur in an even more disadvantaged position in raising capital. The investor will have no easy exit (not that easy as in all probability there will not be much of a market) for whatever time period is prescribed. Who needs it. Europeans, and presumably many institutional and other investors, don't like to buy stocks unless they can "punch" up the numbers. Yes, it might prevent someone from losing a little money ( Did not your investigations determine that the average investment in a 504 was about $2,000?) But, I am sure, the crooks, thank you, will be doing very well whatever rules you may adopt. Me thinks the dye is cast. The powers that be are establishing turf. Lets impose minimum stock prices, barriers which make it difficult for the entrepreneur to raise financing from the public sector while fostering the enrichment of accountants and lawyers, and make Canada the only source for getting small amounts of capital via the public for start ups. By all means, make it as difficult as possible for the little guy in order that the VC's can drive harder bargains. For God's sake, lets not let the market dictate such matters. Forget the concept of full disclosure. It is easier to regulate potential failure of making full disclosure out of existence than enforce. The fewer the number of small entrepreneurs that raise money, the easier it is for the SEC. Very truly yours, Tim Watt