Introduction

Indeed, the Internet is changing society. The Internet has forced legislators and agencies to think hard about how the Internet will be able to influence any particular industry. Perhaps in no place is the Internet having a more profound impact than in the world of finance. Although computers have long been a standard fixture within the financial community, current technology has allowed even the most primitive investor to gain access to the most advanced investment tools and techniques by way of the Internet. 1996 has allowed that same primitive investor to build a diversified portfolio at the helm of a personal computer in virtually any given household.

As of May, 1996, there is intense general interest with regard to how the U.S. Securities and Exchange Commission (SEC) will officially react to the topic of securities trading on the Internet. The SEC has been refining Concept Interpretations 1 and Proposed Rules 2 that attempt to permit the use of electronic media for delivery purposes. EDGAR 3, the Electronic Data Gathering, Analysis, and Retrieval system of the SEC, currently performs the automated collection, validation, indexing, acceptance, and forwarding of submissions by companies and others who are required by law to file forms with the SEC.4 According to the SEC, already nearly three-quarters of the publicly traded domestic companies already use EDGAR to make the majority of their filings.5 Beginning on May 6, 1996, all domestic registrants whose filings are subject to review by the Division of Corporate Finance must electronically file on the Commission's EDGAR system.6 May 6, 1996, is also the phase-in date after which registration statements for all initial public offerings must be filed electronically, unless the filing is made at one of the Commission's regional offices.7 Once a company becomes a mandated electronic filer, all filings made with respect to it by third parties (for example, Schedules 13D and 13G8) must be made electronically.9 After May 6, 1996, all domestic registrants not previously phased in, and third parties filing with respect to such registrants, will become subject to the mandated electronic filing requirements, as outlined in Regulation S-T.10

Internet Investing

Internet investing currently takes place in a number of formats. Aside from the traditional schemes of investing through a broker, an individual investor now has the opportunity to research virtually any registered stock via one of the many investment research tools on the Internet. Further, that same investor is now able to read a stock registration and other SEC filings through the use of EDGAR. Online services such as America Online (AOL)11 and Prodigy (both through PC Financial) offer a variety of investment research tools and forums, also allowing individuals to find out almost everything about nearly any stock or mutual fund. Most major full service and discount brokerage firms have a presence on the Internet including Charles Schwab, Fidelity Investments, Merrill Lynch, Prudential Securities, and Smith Barney. In addition, there are various Internet trading brokerages including Lombard Institutional Brokerage, E*Trade, and PAWWS.

The presence of these brokerage firms has caused quite a stir amongst the financial securities community. However, many of the common "Internet concerns" need to be remedied before there can be unlimited trading. Security is a vital concern as well as the transfer of money and data. Until investors can be certain that the electronic exchange of money 12 can be done safely, many Internet brokerages will continue to use common money transfer vehicles. A survey by the American Association of Individual Investors in January of 1996 revealed that some cyberbrokers, including Jack White13 and National Discount Brokers, don't permit selling short by computer and don't handle "versus purchase" orders.14 In contrast, E*Trade will handle items such as "short sales" via computer even though they will then have to process the trades manually.15 Brokerages are also finding regulatory problems because the industry's regulators have not necessarily kept pace with the Internet's development. For example, "No [securities] firm lets their brokers use E-mail," says Pim Goodbody, vice-president of the Securities Industry Association. 16 The industry is unsure whether to treat E-mail messages to brokers like phone calls, which are not monitored, or like regular mail, which must be read by a broker's branch manager under industry regulations.17

The brokerage firms are not the only ones to make a presence on the Internet. Many large businesses are also setting up Internet pages that not only describe the company and products, but often offer direct links to the company financial reports and SEC filings. Mobil Oil Corporation is one such company wherein a visit to their Internet address reveals not only the scope and vision of the company, but also offers a "Prospectus" for the Mobil "Stock Purchase and Dividend Reinvestment Plan." This plan includes general investment information as well as an "Enrollment Form" with "Detailed Shareholder Information" and Mobil Stock Price History. An individual investor can download and print the prospectus and fill out the required information. The forms then must be sent to either Mellon Bank 18, which serves as the transfer agent and registrar in the United States, or Montreal Trust Company of Canada,19 which serves as the transfer agent and registrar in Canada. No e-mail or electronic currency transfers are presently used in order to facilitate these transactions, but Gordon Garney, the director of shareholder services at Mobil Oil Corp., is optimistic. While no one is selling shares on the Net just yet, the mechanics are in place and investors are starting to show some interest.20 In the past four months since Mobil posted a prospectus and order form on its Web site, about 975 investors have downloaded the form: that's roughly one for every seven 'hits' on the Mobil site.21

Investment communication on the Internet is not limited to just large corporations. On the contrary, perhaps the best suited to the Internet are the smaller companies. The small companies now have an inexpensive way to get exposure and to pass on information about company products and developments. Because of the vast size and mixed content of the Internet, it is not efficient for a company to wait for someone to stumble onto a company website (especially a small company). However, mix the Internet address with a little cheap and common media exposure, and many more hits will inevitably occur.

One of the newest and most innovative uses of the Internet has been occuring in the venture capitalization of small businesses. Many say that the financing market is ready to grasp the Internet and low cost stock offerings. In the last year, the number of firms offering broker-skirting investment programs has tripled to 94, and the pace is picking up.22 "I expect 500 or 600 by this time next year," says Jim Volpe, who monitors such plans.23 SEC Commissioner Steven Wallman sees whole new trading systems evolving as start-ups, consumer giants and Internet intermediaries try to capture dollars from traditional transaction-fed brokers.24 As expected, more than one company has attempted to use the Internet as the central marketplace for financing it's business operations.

Internet Public Offerings

The beginning of 1996 marked the first ever Internet Initial Public Stock Offerings as several bold small companies tried to sell their stock over the Internet. This paper will analyzed two such offerings, Interactive Holdings Corporation and Spring Street Brewing Company, the latter of which is currently and voluntarily non-operational while under SEC investigation. These two companies are generally regarded as two of the original of the thus far brief life of Internet stock offerings and both have filed with the SEC under a registration exemption found under Regulation A25 of the Securities Act of 1933. A major problem with an Internet public offering is that once an individual buys a share of an IPO made exclusively through the Internet, there is no standard secondary market in which to sell the shares. Therefore, at the present risk is high. However, several companies have aggressive ideas to change this hindrance in order to create more liquidity.

Interactive Holdings Corporation

On March 28, 1996, Interactive Holdings Corporation (IHC),26 a New York-based owner and developer of interactive Internet and television programming,27 announced that the Offering Statement it had filed with the SEC for its initial public offering (IPO) had been qualified. David Loring, IHC president-founder and Stanford Law School graduate, immediately stated that [IHC] would use the Internet to (1) publish, (2) deliver, and (3) promote the offering. IHC proceeded to publish the entire Offering Statement, its Exhibits, SEC Form 1-A, an Offering Circular, Financial Statements, and all other documents in the public record filed with the SEC.

IHC allows the public to purchase company stock directly from IHC through the use of a Subscription Agreement. The Subscription Agreement must be downloaded, filled out, and sent to IHC accompanied by either a check, money order, or wire transfer made payable directly to IHC or to the IHC escrow agent. IHC will then transfer any proceeds from the sales of stock shares to the Bank of New York by noon the next business day following receipt of the proceeds.28 IHC will then send written confirmations by U.S. Mail to notify subscribers of the acceptance of their subscriptions within ten (10) days of the acceptance of the signed subscription agreement.29 Common stock certificates will then be sent to investors by a delivery service within two weeks after the Minimum Offering has been achieved and thereafter within thirty (30) days of the acceptance of the subscription by IHC.30 IHC will act as its own Stock Registrar and Stock Transfer Agent.31

IHC priced the stock shares arbitrarily and offers a minimum investment of 100 shares at $10.00 each, or a minimum total investment of $1000.00. The maximum investment allowed, subject to waiver by IHC, is $50,000 (or 5000 shares at $10.00 each). In accordance with its "Plan of Distribution," the Company plans to hold funds received from investors in an escrow account at the Bank of New York until the Minimum Offering ($50,000 in common shares) is sold. In the event the Minimum Offering has not been sold by September 1, 1996, (possibly up to December 1, 1996) the funds will be returned to investors without interest. In the event that the Minimum Offering is sold, then at that time the escrow account funds will be released to IHC and operations will begin as described under "Use of Proceeds" in the Offering Circular.

The structure of the offering materials includes several versions of an important notice that "Investment in small business involves a high degree of risk, and any investors should not invest any funds in this offering unless they can afford to lose their entire investment."32 This is to address the concern of Internet IPOs that results from the lack of a secondary trading market and the possibility of a non-liquid investment. IHC further discusses the issue more thoroughly in the offering circular, highlighting the fact that there may never a regular public trading market for IHC shares.33 It is additionally stated in the offering circular that, following the completion of the offering, IHC will be considered a "non-reporting issuer" whose securities are not listed or subject to regulation under the Securities Act of 1934.34 A final note of interest that IHC also places in the offering circular is the statement that, "Additionally, purchasers of the Shares have no right to require [Securities Act of 1933] registration in the future."35 This is to prevent the shares from collectively voting to force IHC to register the securities under the Securities Act of 1933, and allow the shares to become readily transferable on a major secondary market stock exchange (which is costly).

IHC also plans to seek the support of NASDAQ member firms which are recognized market makers with the intention of creating a viable market for IHC stock. The Company may also use finders in order to assist in communicating with appropriate market makers, for which such finders would be paid commissions that are commensurate with current market practices.36 Under Rule 15c2-11 of the Securities Act of 1934, broker-dealers acting as market makers must have certain information about the company in order to make the market, and IHC plans to furnish such information to enhance the chances of making a market in IHC stock. In addition to the Internet offering, IHC will also pursue tombstone advertisements to high net worth mailing lists and to investor publications.37

Spring Street Brewing Company

Spring Street Brewing Company (SSB), founded by Harvard Law graduate Andrew D. Klein, is generally recognized as the first true Digital Internet Public Offering. SSB, using a Team of Master Brewers, specializes as an American Microbrewer of Belgian Recipe Beers and has used the Internet as fully as possible in raising capital for business operations. On February 26, 1996, SSB announced that it had completed it's public offering and had raised nearly $1.6 million primarily from the sales of SSB stock on the Internet to over 3500 individual investors. The average price for the 844,581 shares of common stock sold was $1.85. Essentially, the SSB initial public offering was fully sold and went very well. However, SSB went a step further and tried to produce a secondary market exchange in which the SSB shares could trade. SSB created Wit-Trade, named after a SSB Product (Wit Beer), in order to facilitate a bulletin board based market mechanism through which the SSB shares could publicly trade.

On February 29, 1996, SSB announced that Wit-Trade would begin trading on March 1, 1996. However, on March 20, 1996, SSB voluntarily and temporarily suspended the Wit-Trade mechanism after only a few short weeks due to SEC concerns. Finally, on March 25, 1996, the SEC gave preliminary approval to the Wit-Trade mechanism pending a few minor modifications to the system. As of May 1, 1996, SSB and the rest of the financial community are patiently awaiting the final approval of the modified Wit-Trade mechanism from the SEC so that Wit-Trade can again provide the first bulletin board based market mechanism on the Internet.

Wit-Trade

Wit-Trade is a bulletin board based mechanism through which persons seeking to buy or sell shares of SSB common stock can meet prospective trading partners. In addition, through Wit-Trade persons can access recent trading activity in SSB common stock on bulletin boards as well as view financial information. By using Wit-Trade, SSB imposes no fees or charges upon transactions so that investors can trade shares of SSB without having to pay and brokers' fees or commissions. However, due to the possibility of an illiquid market for SSB shares (similar to IHC), several boldface warnings are present within the Wit-Trade mechanism including, "Investing in [SSB] common stock is speculative, involves substantial risks and should be considered only by persons able to bear the economic risk of the investment for an indefinite period of time." This notice is especially applicable to the present since trading activity on the Wit-Trade mechanism has been temporarily suspended and SSB shareholders currently have little option regarding the trading of SSB shares. Also present in the Wit-Trade mechanism is a unique notice stating, "…The [SSB] role in this mechanism is limited to facilitating transactions between parties that have agreed through direct correspondence to enter into a trade."38 A further notice attempts to more fully separate SSB from the trading of SSB shares through the Wit-Trade mechanism: "[SSB] does not trade directly or indirectly in its common stock and nothing herein should be construed to mean that the company offers to buy or sell, or guarantees any purchase or sale, of common stock.."39

The Wit-Trade stock market mechanism consists generally of two bulletin boards, one for selling (Seller's Bulletin Board), and one for buying (Buyer's Bulletin Board). In order to participate in the trading mechanism every individual must first Register with Wit-Trade through a form that is available at the website. Individuals are required to provide a name and either an e-mail address or a telephone number, and must also select a user name and password. Additional information can also be included on the registration form.

The Seller's Bulletin Board allows holders of SSB common stock seeking buyers to post their names, e-mail and/or telephone numbers, the number of shares they seek to sell and the price at which they are asking for such shares. The Buyer's Bulletin Board allows persons seeking to buy shares of SSB common stock to post their names, e-mail and/or telephone numbers, the number of shares they seek to buy and the price at which they are willing to pay for such shares. This information is provided for the benefit of the individual investors so that they may contact each other40 and buy and sell directly to one another. Wit-Trade (and SSB) assumes no responsibility to match buyers with sellers and vice versa. Prospective traders must initiate direct communication with prospective trading parties that they themselves find on the bulletin boards. Through e-mail, telephone, or other communication medium, the parties must then negotiate directly until they agree to buy or sell shares at a particular price or not at all. Wit-Trade provides an Offer and Acceptance Form 41 for the benefit of parties reaching an agreement so that they can document their agreement exclusively through the use of e-mail. Further, the Offer and Acceptance Form outlines an easily understandable procedure by which parties can conclude their trading transaction.

Once registered with Wit-Trade, individuals can enter information to the bulletin boards by accessing the bulletin board and submitting the information. At any one time a party may maintain only one posting to each bulletin board. Because there is no way to be certain as to whether a party will respond to a message, parties are free to initiate communications with as many parties as they believe is appropriate. Wit-Trade states that "Posting to a bulletin board does not mean that the posting party has 'offered' in the legal, contractual sense to buy or sell shares."42 Wit-Trade particularizes that a posting to any bulletin board is intended to be an indication of an interest to trade and that an actual trade can only come about as a result of direct negotiation between a buyer and seller.43 The prices submitted to the bulletin boards should not be considered the only price at which a party is willing to trade and posting parties should expect that responses to postings may be at terms other than those made by the posting party. The bulletin board postings remain online until either a transaction has been executed or until the posting party removes the posting.

The Offer and Acceptance Form supplied by Wit-Trade consists of two parts. The first part, Part 1, when completed and signed by the seller, constitutes an offer to sell a specified number of shares at a stated price. This form requires the seller to specify a period of time that the offer shall remain open. The form is to establish a binding contract between the parties if the buyer accepts the seller's terms before the offer period expires. The second part of the Offer and Acceptance Form, Part 2, constitutes the buyer's acceptance of the seller's offer when the form is completed and signed by the buyer.

The Offer and Acceptance Form also sets out a procedure through which the seller and buyer can close their trade. Briefly, the buyer agrees to send a check made payable to "Spring Street Brewery, Inc." in an amount equal to the total agreed upon price for the shares being traded in the transaction. At the same time, the seller agrees to send to SSB the certificate(s) representing the shares of stock being traded after causing the registered holder of such shares to execute the stock transfer that is attached to the certificate. The buyer and seller also must agree to send SSB a copy of the written agreement used to memorialize the transaction.44 Upon the receipt and clearance of the buyer's check and receipt of the seller's properly endorsed stock certificate(s), SSB will then transfer the shares on it's books and issue to the buyer a new stock certificate representing the purchased shares. SSB will also send a check to the seller for the full amount of the purchase price.

The entire negotiation can be completed using several methods. The seller can print the Offer and Acceptance Form, fill out Part 1 with ink, sign it, and then send the form to the buyer by fax, express mail, regular mail, etc. The buyer would then complete Part 2 of the form and sign it also. When the buyer returns the executed form to the seller, the parties then have a binding agreement to trade the shares.45 Alternatively, the seller and buyer can use a completely digital method to execute an agreement which incorporates the Offer and Acceptance Form and the use of e-mail. The seller can e-mail the Offer and Acceptance Form to an appropriate e-mail mailbox and fills out Part 1 of the form using either a digital signature46 or by typing a name. The seller then re-directs the e-mail message to the buyer's address and the buyer completes Part 2, again signing it with either a digital signature or by typing a name. When the buyer returns the e-mail message to the seller, the parties have a fully completed form and a binding agreement for the sale of the shares.47

Closing the digital trade is similar to closing the previous method wherein the seller sends the executed stock shares and a copy of the fully executed Offer and Acceptance Form to SSB, along with instructions for SSB to transfer the shares on SSB's books to the name of the buyer. The buyer must also send a copy of the fully executed Offer and Acceptance Form along with a check made payable to "Spring Street Brewery, Inc." in the correct amount of the total purchase price for the shares being traded. SSB then deposits the buyer's check immediately and as soon as the check clears, SSB records the transfer of the shares on the SSB books and sends the buyer a new certificate representing the shares purchased in accordance with the Offer and Acceptance Form. SSB will also send a check to the seller for the full amount of the purchase price.

Securities and Exchange Commission Concerns

The SEC has begun modernizing some of its rules, and in 1995 removed barriers to let mutual funds communicate with their investors through the Internet. The SEC has responded equally as efficient to the advent of the Internet IPO. Thus far, the Internet IPOs have been done under Regulation A.48 This regulation exempts the offer or sale of qualifying securities from the registration requirements under Section 3(b) of the Securities Act of 1933. Regulation A generally allows qualification of securities based on the type of company and its business,49 the aggregate offering price limits,50 limited integration with other offerings,51 and compliance with the offering conditions52 (including the filing of a Form 1-A offering statement with the SEC) set forth. Rule 253 of Regulation A sets forth the requirements for the offering circular which mandate that companies using this exemption must post a boldface notice stating that the SEC does not formally approve of the security being offered.53 Both IHC and SSB had this notice on the cover page of their respective offering circulars.

While many of the SEC pubic offering rules require very limited pre-registration communication, Rule 254 of Regulation A allows a qualified issuer to publish or deliver to prospective purchasers a written document or scripted radio or television broadcasts to determine whether there is any interest in a contemplated securities offering.54 Most likely, at this time an Internet document would be described as a written document whereas audio and video files would be radio and television scripts, respectively. Rule 255 of Regulation A also allows the use of preliminary offering circulars in order to facilitate further communication before the offering statement formally becomes qualified.55 This can be a very useful tool as interest could be spread throughout the Internet community with feedback being received through the use of e-mail.

The SEC also reserves the right to enter an order temporarily suspending a Regulation A exemption for a number of reasons under Rule 258.56 An important reason for Internet IPOs is under Rule 258 (3) which allows the SEC to order suspension when "the offering is being made or would be made in violation of section 17 of the Securities Act."57 Section 17, which deals with the unlawful use of interstate commerce, may be readily available to the SEC in the event that an Internet published IPO circular contains fraudulent information or seeks to perform another unlawful act as listed under Section 17.58

A most important concern of the SEC is to ensure the honesty and integrity of any security and to protect investors from fraud. These concerns are amplified when a registration exemption allows a security to be sold to the public without going through the more rigorous process of registration and the heightened disclosure that it requires. Thus, the SEC requires the warnings that show the SEC does not formally endorse the Regulation A securities as it commonly does with a registered security.

Further regulation occurs when the issuer of an exempt security files with a particular state in which the issuer seeks to sell exempt securities. Every state has its own securities regulations (known as "Blue Sky Laws"). Under federal statutes (especially under the Securities Act of 1933) the SEC has little power to review the substantive merits of a proposed offering, provided that full and honest disclosure are made. However, most state blue sky laws do not follow the "disclosure only" approach and instead allow the state securities administrator to prohibit an offering if the administrator believes that the issue is substantially undesirable. This can have a tremendous impact on Internet IPOs. As of May 1, 1996, the IHC offering was only registered in New York but had plans to register in several other states. The SSB offering was registered in 22 states and probably had a much better chance of becoming fully sold than if it registered in a lesser number of states.

State registration also plays a role in another registration exemption for "intrastate offerings."59 This exemption generally applies to securities wherein all of the offerees must be residents of a given state, the issuing corporation is incorporated within and does substantially all of its business in the given state, and all stock resales must occur within the same given state. When a stock is offered on the Internet, there can be little certainty as to which state a prospective investor resides. Proving residency would be such a hassle that the cost of compliance may currently make this a non-feasible option (although it may be of use in the future).

Securities and Exchange Commission and Wit-Trade

So-called self-regulating organizations like the New York Stock Exchange and the National Association of Securities Dealers (NASDAQ) now take responsibility for policing much of the trading on more conventional securities markets. As trading on the Internet increases, there is currently no authority other than the SEC to monitor the systems. However, the SEC has taken such responsibility seriously. After less than three weeks of operation and with only four trades being completed, Wit-Trade suspended its operation in order to give the SEC time to review the system. Although the SEC final approval for Wit-Trade is still pending, the SEC did act quickly and gave a letter of preliminary approval for Wit-Trade pending several modifications. SEC concerns centered primarily around investor protection.

To begin with, the SEC's largest concern is to ensure the careful handling of the investors' funds. Since Wit-Trade uses a self-clearing function, there is the potential for manipulation. A further consideration is the fact that SSB is not registered as a "broker-dealer,"60 and thus is not subject to broker-dealer accountability. In order to comply with these issues, SSB has the option of either registering as a broker-dealer or else using an independent agent, such as a bank or escrow agent, to receive checks from the buyers of securities.

Another SEC concern is the importance of warnings to investors that the securities being traded are potentially illiquid and speculative. The SEC feels this is necessary in order to prevent confusion about the role of the system. The Regulation A requirements (as discussed above) impose such warnings and the compliance with the offering statement should take care of this issue for postings to the Internet. Problems may occur if issuers leave such warnings off of the Internet disclosure in an effort to mislead investors or potential investors, but the SEC has vowed to monitor this type of behavior.

Yet another SEC concern is to allow investors to make more informed investment decisions. The SEC believes that disclosing a complete transaction history showing the price and number of shares for each recent transaction will help both to prevent manipulation and to make investors more informed. Further, the SEC wants Wit-Trade to keep records of all quotations posted and of all securities transactions effected through the use of the system and be able to make them available to the SEC upon request.

A final major consideration of the SEC is to ensure the quality and integrity of the financial information provided through Wit-Trade. This goal will be accomplished by some sort of SEC oversight, although the capacity of which is not yet clear. This could mean some light and periodic examination of a system or it could mean quasi or even full compliance with the registration requirement under the Securities Exchange Act of 1934.61

On the Horizon

SSB and Wit-Trade have since modified the Wit-Trade mechanism to comply with the SEC modifications and are currently seeking a "no action letter" from the SEC. In the mean time, the high level of interest and speculation has led several companies to develop entities dealing with Internet IPOs and other small capitalization ventures. Probably at the forefront of this movement is Wit Capital, an offshoot of SSB and Wit-Trade founded by SSB president Andrew D. Klein. Wit Capital was founded to become the world's first investment bank and brokerage firm dedicated to arranging the public offering of securities through the Internet. "The company also plans to develop and operate on the World Wide Web a digital stock exchange through which secondary trading of securities will occur."62 Wit Capital also plans to expand the Internet IPO idea by developing, operating, and promoting a "financial marketplace" on the World Wide Web. The ambitious plan involves a "public offering mart" through which potential investors can view the official offering documents of new issues that go public through Wit Capital. The company plans to profit from client companies paying fees and commissions as well as transaction charges for using the Wit Capital digital exchange. On April 22, Wit Capital announced a joint venture agreement with New York technology firm M/B Interactive and its advertising agency affiliate Mezzina/Brown Inc. In the deal, Wit Capital equity will be exchanged for M/B Interactive to develop Wit Capital's World Wide Web programming and systems architecture, while Mezzina/Brown will create and manage Wit Capital's marketing and advertising activities. These plans are still in the development stage and the direction of Wit Capital will no doubt turn on the pending SEC rulings.

Other companies have also been setup to take advantage of this new financial marketplace. Direct IPO has a website set up which announces that it will be opening for operations in June, but currently it is not active. Virtual Wall Street, a "state of the art Internet Site devoted to online stock offerings" claims to be ready for action pending the SEC rulings also. For $1000, companies can get a "starter package"63 which allows them to open an account with Virtual Wall Street and use the dedicated bulletin board mechanism for the offering. Virtual Wall Street also produces an "Online Stock Offering Newsletter," thought to be the first of its kind, which is published weekly and delivered by e-mail for 50 cents per issue.

Another approach that has been developed in order to take advantage of small capitalization on the Internet is from SCOR-NET. This company vows to continue to develop new capabilities that entrepreneurs can access to raise capital through the Internet on bulletin board services due to the "anticipated pullback in restrictive regulations from the SEC." SCOR-NET's approach is to soon begin offering "virtual seminars" on varying techniques such as qualified investor alert notification programs, joint ventures with bulk e-mail services, and video and audio capable servers to produce company briefings.

Conclusion

Computers are now becoming affordably fast and efficient so that it is more feasible than ever to compile large amounts of corporate data. The SEC is recognizing this and is making the necessary changes to existing regulations in order to take full advantage of the benefits of computers and the Internet. Notwithstanding, the SEC has made it clear that they will scrutinize new technologies in an effort to protect investors. "It is possible that a computerized market-trading vehicle could be misused, and we have to think in terms that this might just be the first of many such systems,"64 says Robert Colby, deputy director of the SEC's market-regulation division. Perhaps he depicted a more accurate picture in the following: "We want to encourage innovative trading systems, but ensure that they operate in a way that is consistent with securities laws and protects the participants. And wherever the trading goes, we have to follow."65