American Stock Exchange: More Changes Needed in Screening Emerging
Companies for the Marketplace (Letter Report, 05/25/94, GAO/GGD-94-72).

In March 1992, the American Stock Exchange (Amex) began trading equity
securities on its Emerging Companies Marketplace, which was developed
for companies too small to qualify for a standard Amex listing.  That
same month, an Amex official questioned the Marketplace listing of a
company whose majority stockholder had been barred from Amex trading for
violation of the exchange's trading rules.  Shortly thereafter, media
reports linked persons with criminal and regulatory violations to two
companies listed on the Marketplace.  Although Amex has tried to beef up
its assessments of the companies' management, GAO found weaknesses in
Amex's process for assessing companies' qualifications for Marketplace
listing.  Some qualitative factors have been stressed more than others.
The nature of the company's business, its historical record and growth
pattern, and its financial integrity have been given less emphasis than
the company's commercial prospects and its management's reputation.
Thirteen of 18 Marketplace-trade companies GAO reviewed had no revenues
and earnings, declining revenues and earnings, or negative cash flows.
GAO believes that Amex's failure to disclose the relative important of
qualitative factors could mislead investors about Marketplace
eligibility standards.  Finally, Amex did not always properly document
that Marketplace-listed firms met all quantitative requirements before
being traded.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-94-72
     TITLE:  American Stock Exchange: More Changes Needed in Screening 
             Emerging Companies for the Marketplace
      DATE:  05/25/94
   SUBJECT:  Securities
             Stock exchanges
             Securities regulation
             Brokerage industry
             Small business assistance
             Ethical conduct
             Evaluation criteria
             Eligibility determinations
             Eligibility criteria
             Information gathering operations
IDENTIFIER:  American Stock Exchange Emerging Companies Marketplace
             
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