A member of the U.S. Securities and Exchange Commission has made a plea for tougher regulation of the over-the-counter microcap market, saying current rules aren’t sufficient to ensure investors are properly informed.

The SEC has a task force that investigates fraud surrounding the thinly traded securities of small companies, including pump-and-dump schemes. Commissioner Luis Aguilar’s remarks at a meeting on Wednesday of a regulatory advisory panel suggest the agency is gearing up to change the microcap rule book.

“Investors need to have confidence that the quotes for these securities are fair and accurate,” Aguilar said, according to a Reuters report. “Without this confidence, a fair and liquid secondary market for these securities will not exist.”

Under a rule known as “15c2-11,” brokers are required to review the accuracy and adequacy of a small company’s financial statements before they can publish an initial quote for unlisted stocks. Aguilar expressed concern about an exemption that allows other broker dealers to “piggyback” on previously published quotes, even if those quotes are stale.

The piggybacking brokers also are not required to undertake the same rigorous review of a company’s financials before publishing stock quotes. And, Aguilar noted, brokers who initially publish the first quote for a microcap company are not obligated to go back later and confirm that the information they first relied on is still valid, he said.

“This is hardly an effective way to create a fair and efficient market and it’s a poor way to instill trust in this market,” he said.

In their crackdown on microcap fraud, regulators have also been focusing on transfer agents, the back-office businesses hired by companies to keep track of shareholder records and changes in ownership.

“To date, the industry has been lightly regulated, despite its critical role in keeping track of stocks as they change hands, and the issuance of shares,” Reuters reported.

In December, Aguilar said the investing public “needs capable, honest, and reliable transfer agents to help the capital markets function properly and effectively” and “It is past time that the Commission … modernizes the rules regulating transfer agents.”

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