FINAL REPORT OF THE SEC

                  GOVERNMENT-BUSINESS FORUM ON

               SMALL BUSINESS CAPITAL FORMATION*















                             JUNE 1997






*  This report has been compiled by the staff of the Division of
Corporation Finance, U. S. Securities and Exchange Commission.
The views and recommendations in this report, however, are those
of the Forum participants and not the Securities and Exchange
Commission, the Commissioners or any of the Commission's staff
members.


                            PREFACE



     In 1996, the Government Business Forum on Small Business
Capital Formation met in Washington, D. C.   The recommendations
from the 1996 Forum follow.  We believe that many worthwhile
proposals are evidenced.  The participants gave careful
consideration to a wide variety of issues, including, once again
the recommendations of the 1995 White House Conference on Small
Business.


     One purpose of the Forum is to give the capital-raising
needs of small business greater attention, with the hope that
these needs may be accommodated, in balance with appropriate, and
necessary governmental regulations to safeguard the public
interest.  It is apparent from the following recommendations of
the Forum participants, that this purpose has been well served.
We thank them for their efforts and are pleased to present this
report.






               The Executive Committee for

               the Fifteenth Annual SEC

               Government-Business Forum on

               Small Business Capital Formation



                      EXECUTIVE COMMITTEE

Chairman:             Albert S. Dandridge, III
                      Associate Director
                      Division of Corporation Finance
                      U. S. Securities & Exchange Commission

Mary E. T. Beach      Consultant

E. Olena Berg         Assistant Secretary (Pension and Welfare Benefits
                      Administration)
                      U. S. Department of Labor

Janice Booker         Director, Community Development Division
                      Office of Comptroller of the Currency

Michael S. Caccese    Senior Vice President & General Counsel
                      Association for Investment Management & Research

Chip Cooper           Executive Director, Missouri Innovation Center

Gregory Dean          Assistant Chief Counsel for Advocacy
                         U.S. Small Business Administration

Jerry Feigen          Adjunct Professor, Georgetown University Law
                           Center; President, Jerry Feigen Associates

John Paul Galles      Executive Vice President
                      National Small Business United

Bruce Gamble          President
                      National Association of Investment Companies

Bruce Goldberg        Entrepreneurial Advisory Services Group
                      Coopers & Lybrand

Barry C. Guthary      Director, Massachusetts Securities Division

John J. Huntz, Jr.    Senior Vice President
                      Vista Resources, Inc.

Daryl Jackson         Daryl Jackson Associates

Charles Ludlam        Executive Director, Biotechnology Industry
                      Organization

James McCall          President, California Capital Access Forum



E. Burns McLindon     Councilor, Buchanan & Mitchell
                      (Representative of the American Institute of
                      Certified Public Accountants)

Peter McNeish         President, National Association of
                      Small Business Investment Companies

Marc H. Morgenstern   Kahn, Kleinman, Yanowitz & Arnson
                      (Representative of the American Bar Association)

John J. Motley, III   Vice President
                      National Federation of Independent Business

Allen Neece           Neece, Cator & Associates, Inc.

Karen O'Brien         General Counsel
                      North American Securities Administrators
                      Association

Douglas F. Parrillo   Senior Vice President, Communications
                      National Association of Securities Dealers

Martha Scanlon        Deputy Associate Director, Division of Research and
                      Statistics, Board of Governors of the Federal
                      Reserve System

Herbert Spira         Tax Counsel
                      Independent Bankers Association of America

Wayne Upton, Jr.      Project Manager
                      Financial Accounting Standards Board

Clay H. Womack        President
                      Direct Stock Market, Inc.




                       CORE PRESENTERS

TAXATION ROUNDTABLE

Moderator        :    Daryl Jackson
                      Daryl Jackson Associates
                      11 South Oak Street
                      Falls Church, VA 22204

Along with       :    Charles Ludlam
                      Executive Director
                      BioTechnology Industry Organization
                      1625 K Street, N. W.
                      Suite 1100
                      Washington, D. C. 20006-1604

                      Russ Orban, Assistant Chief Counsel
                              for Tax Policy
                      Office of Advocacy
                      U. S. Small Business Administration
                      409 Third Street, S. W.
                      Washington, D. C. 20416

                      Benson Goldstein, Esq.
                      Goldstein & Associates
                      3 Bethesda Metro Center
                      Suite 750
                      Bethesda, MD 20814



CREDIT ROUNDTABLE

Moderator        :    Gregory Dean, Assistant Chief Counsel For
                      Advocacy
                      U. S. Small Business Administration
                      409 Third Street, S. W.
                      Washington, D. C. 20416

Along with       :    Raphael W. Bostic
                      Division of Research and Statistics
                      Federal Reserve Board
                      20th Street & Constitution Avenue
                      Washington, D. C. 20551

                      Roger Tufts, Senior Economic Advisor
                      Office of the National Bank Examiner
                      Office of the Comptroller of the Currency
                      Washington, D. C. 20219

                      Michael Dowd, Director
                      Office of Loan Programs
                      U. S. Small Business Administration
                      409 Third Street, S. W.
                      Washington, D. C. 20416

                      Maurice Zeitler, Program Coordinator
                      Community Development Division
                      Office of the Comptroller of the Currency
                      Washington, D. C. 20219

                      Michael Schwartz
                      MidAtlantic Business Finance Company
                      Bethesda, MD 20816

SECURITIES I ROUNDTABLE

Moderators       :    Marc H. Morgenstern, Esq.
                      Kahn, Kleinman, Yanowitz & Arnson
                      The Tower at Erieview
                      Suite 2600
                      Cleveland, Ohio 44114-1824

                      Mary E. T. Beach, Consultant
                      6543 Jay Miller Drive
                      Falls Church, Virginia 22041

Along with       :    Brian J. Lane, Esq.
                      Director, Division of Corporation Finance
                      U. S. Securities and Exchange Commission
                      450 Fifth Street, N. W.
                      Washington, D. C. 20549

                      Karen M. O'Brien, General Counsel
                      North American Securities Administrators
                      Association, Inc.
                      One Massachusetts Avenue, Suite 310
                      Washington, D. C. 20001

                      David A. Sirignano, Esq.
                      Associate Director
                      Division of Corporation Finance
                      U. S. Securities and Exchange Commission
                      450 Fifth Street, N. W.
                      Washington, D. C. 20549

                      Roland M. Machold
                      Director, New Jersey Division of
                      Investment; former Vice President, Morgan
                      Stanley & Co.


SECURITIES II ROUNDTABLE

Moderators       :    Jerry Feigen
                      Jerry Feigen Associates, Inc.
                      2000 Century Plaza, Suite 308
                      10632 Little Patuxent Parkway
                      Columbia, MD 21044

                      Lee Petillon, Esq.
                      Petillon & Hansen
                      1260 Union Bank Tower
                      21515 Hawthorn Boulevard
                      Torrence, CA 90503

Along with       :    Kenneth J. Berman, Esq.
                      Assistant Director, Division of Investment
                      Management
                      U. S. Securities and Exchange Commission
                      450 Fifth Street, N. W.
                      Washington, D. C. 20549

                      Joan Sweeney
                      Allied Capital
                      1666 K Street, N. W.
                      Suite 901
                      Washington, D. C. 20006

                      Bruce Shewmaker
                      New Century Management Inc.
                      12 Briarwood Drive
                      Short Hills, NJ 07078

                      Mark Heeson
                      National Venture Capital Association
                      1655 North Fort Myer Drive
                      Suite 700
                      Arlington, VA 22209

                      Lee Mercer
                      National Association of SBICs
                      1199 N. Fairfax Street
                      Suite 200
                      Alexandria, VA 22314

                      Terry Bibbens
                      Entrepreneur in Residence
                      U. S. Small Business Administration
                      409 Third Street, S. W.
                      Washington, D. C. 20416

                      Donald Christensen, Associate Administrator
                      for Investments
                      Investment Division
                      U. S. Small Business Administration
                      409 Third Street, S. W.
                      Washington, D. C. 20416


                            1996 FORUM STAFF

                            Regina Baker
                            Anthony Barone
                            James Budge
                            Christina Chalk
                            Maureen Dallman
                            Edsel Guydon
                            Barbara Jacobs
                            John F. Murphy
                            Jay Pitts
                            Michael Ryan
                            Antonio Stanco
                            William Toomey
                            Jacqueline Walker
                            Donald Wiland
                            Richard K. Wulff
                            Twanna M. Young





                           TABLE  OF CONTENTS









   I. SUMMARY OF FORUM RECOMMENDATIONS...........................  1

  II. INTRODUCTION............................................... 22

 III. RECOMMENDATIONS FROM THE WHITE HOUSE CONFERENCE............ 25

  IV. TAXATION .................................................. 27

   V. CREDIT .................................................... 33

  VI. SECURITIES REGULATION ..................................... 38

 VII. MISCELLANEOUS.............................................. 52

VIII. FORUM PARTICIPANTS......................................... 53




I.   SUMMARY OF FORUM RECOMMENDATIONS


RECOMMENDATIONS FROM THE WHITE HOUSE CONFERENCE

     That the Forum reaffirm endorsement of Recommendation 14 of
the 1995 White House Conference on Small Business
Recommendations, as follows,

     To increase the availability of growth capital to invest in
small businesses, Congress should:

     a) Further privatize the Small Business Investment Company
(SBIC) program, now administered by the SBA, by creating a new,
government sponsored, but privately managed, corporation named
Venture Capital Marketing Association or "Vickie Mae" which would
function similar to the Federal National Mortgage Association
(Fannie Mae);

     b) Extend the capital gains tax deferment currently afforded
investments rolled into Specialized Small Business Investment
Companies (SSBICs) to include investments in SBICs to encourage
more investment in new SBICs;

     c) Remove barriers to pension funds, foundations and
endowments wishing to invest in SBICs and SSBICs; eliminate the
"unrelated business taxable income" (UBTI) tax on all such
activities; and

     d) Reduce the minimum capital size requirements for
establishing SBICs owned by regulated financial institutions,
thereby encouraging them to provide equity to small businesses
provided that no leverage is utilized by such SBICs until current
minimum capitalization for leverage is achieved.

     As was adopted in the March 1996 Final Report of the SEC
Government-Business Forum on Small Business Capital Formation,
this year's forum reaffirms and believes that proposition 286
warrants further consideration:

     286.  The U.S. Small Business Administration is vital to the
     growth of small business in America.  Efforts to make the
     SBA's programs more cost effective and efficient should be
     continued and encouraged.  The SBA's "independent" agency
     role as the primary supporter of small business within the
     Federal Government should be enhanced by:

               a) Elevation of the U.S. Small Business
          Administration to a congressionally approved cabinet
          level position.

               b) Budget allocations to maintain, increase, and
          enhance the 7(a) Loan Guaranty Program.

               c) Budget allocations to maintain, increase, and
          enhance the 504 Loan Program.

               d) Budget allocations to make permanent the Small
          Business Development Center Program which provides
          business assistance to small businesses nationwide.

               e) Permanent maintenance of the "independent role"
          of the U.S. Small Business Office of Advocacy.

               f) All other SBA programs should be reviewed with
          substantial input from the private sector.  Any
          programs deemed to be ineffective should be eliminated.


TAXATION

Preamble

     Small business recognizes the rationale for taxes and
understands the need to pay tax to support government.  However,
we are opposed to taxes that have the result of diminishing the
capital that provides growth needs of small business to generate
GDP and jobs.  Simplified, fair, understandable taxes are
necessary.  Any administrative action that burdens small business
is counterproductive to profitability of business needed for
continuance.  We feel these recommendations target the source of
these objectives and will resolve many, but not all, of the
current problems.

Primary Recommendations

Fundamental Tax Reform

     It is the consensus of the Forum that current tax law and
regulations promulgated thereunder unduly hinder the ability of
small business to attract and maintain the capital necessary for
formation and growth.  It is for this reason that the Forum
submits the following recommendations to promote fundamental tax
reform and totally abolish the complicated present system.
Congress should enact legislation that replaces the present
system with a single comprehensive simple tax for individuals and
businesses that eliminates double taxation.  We recommend a
system that encourages savings and is not difficult or costly to
comply with.

Social Security Fundamental Reform

     We urge the Congress enact legislation to reaffirm the
stability of the existing Social Security System and to guarantee
the commitments for all current participants.  In the interests
of increasing capital formation in the U.S. and assuring a more
productive national retirement system, we recommend that an
optional system be designed to eliminate intergenerational
funding.  This system would eventually replace the existing
Social Security system.

Overall Capital Gains Reform

     Congress should reinstate a 50% capital gains exclusion on
sales of capital assets held more than one year.

Estate Tax Reform

     Estate Taxes negatively impact small business in capital
formation, job creation and business continuity; therefore, our
Forum calls on Congress to repeal the Federal Estate and Gift
Tax.

Secondary Recommendations

Targeted Capital Gains Reform

     Congress should enact a targeted capital gains law that
promotes the long-term investment in qualified small businesses.
This law should include the following provisions:

A)   A capital gains exclusion of at least 50% of the regular
     capital gains tax rate for an investment in a qualified
     small business which should include all forms of business
     entities, including pass-throughs.

B)   The exclusion should increase as the holding period
     increases to promote the concept of "Patient Capital".

C)   A tax of not more than 10% (preferably zero tax) should be
     imposed on the sale of a majority interest in a qualified
     small business held for more than 15 years.

D)   A deferral of the gain on the sale of an interest in a
     qualified small business if the proceeds are reinvested in
     another qualified small business within two years.

E)   A qualified small business should be an active operating
     business.

Independent Contractor Reform

     The definition of an independent contractor must be
clarified.  Congress should recognize the legitimacy of an
independent contractor.

     a) The 20-factor test is too subjective.  The number of
relevant factors should be narrowed with more definitive
guidelines for implementation.  Realistic and consistent
guidelines should require one of four criteria plus a written
agreement.  The criteria are (1) realization of profit or loss;
(2) separate principal place of business; (3) making services
available to the general public; or (4) paid on a commission
basis.

     (b) Safe-harbor provisions should be established that would
protect the hiring business from the burdensome penalties
currently being assessed by the IRS.  De minimis rules based on
dollars paid, hours worked, years in business, and/or specified
closed-end projects should be established.

     (c) The IRS should eliminate back taxes for
misclassification when Form 1099's are filed and there is no
evidence of fraud.

     (d) Congress should specifically allow employers and
independent contractors to provide joint technical training and
to jointly utilize major specialized tools without jeopardy of
reclassification of the independent contractor to employee
status.

     (e) Changes and implementation processes should be
formulated by a joint committee of legislators and small business
people.

IRS Reform

     To prevent excessive taxpayer expense and erosion of capital
to small business, we recommend that a reform be instituted to
hold the IRS accountable for its actions as a unified body at all
levels.  We recommend that a training program and a communication
network be put into place which would ensure that all levels of
the agency operate in compliance with all laws and regulations
that are in place such as the 1996 Small Business Regulatory
Reform Fairness Act.  The standard for this should be set that
institutes a training and development relationship with
taxpayers.  "Punitive" penalties should not be unreasonable to
the "offenses" they address.  Congress should review the
collection penalty rates named in Section 6656 of the Omnibus
Budget Reconciliation Act of 1989 (Public Law 101-239).

     We suggest that an independent agency be available at the
election of the taxpayer as a mediator in instances where the
taxpayer feels "unregulated" authority has been exercised.  The
agency would be empowered to resolve disputes.  This would not be
applicable in cases of prior offense taxpayers.

     This recommendation would also include special provisions
for an innocent party or to a sincere hardship case.

Qualified Pension Fund Reform

     The Congress should modify current law to allow an
individual to invest under current limits, his or her own self
directed qualified pension or profit sharing plans in his or her
own small business.  These funds could be used as a direct
investment or as collateral to obtain debt financing.

ERISA Reform

     In order to create and preserve capital for small business
and its employees, Congress shall reform ERISA so as to allow
employers to design qualified employee plans to suit employers
and employees goals and needs, including but not limited to
liberalization of vesting schedules, repeal of top heavy
restrictions and adoption of reasonably prudent investment
policies.

Investment Reform

     In order to enhance the attractiveness to investors of small
business investment, Congress should authorize a new investment
instrument known as the Small Business Participating Debenture
which could provide two components of "interest", a guaranteed
portion at a stated rate, and a participation contingent upon an
agreed share in issuer profits.  The participating component of
"interest" would be taxed to the investor as long term capital
gain, but deductible by the issuer as interest.  Investor losses
would be deductible against ordinary income similar to Section
1244 stock.


[NOTE:  ADDITIONAL TAX-RELATED RECOMMENDATIONS ARE OFFERED IN THE
SECURITIES REGULATION -- INVESTMENT COMPANY ACT OF 1940 SECTION
OF THIS REPORT]


CREDIT

     Congress should establish and implement a cost-benefit
analysis method of evaluation to review the loan programs and
Business Assistance Programs of the SBA.  This analysis should
identify program costs and the ultimate benefits generated by
these programs in terms of job creation and retention, tax
revenues generated, and the economic impact on the local and
national business environment.

     Congress should evaluate action to facilitate:

               - the investment by mutual funds and public and
          private investment funds into investment grade
          securities of securitized small business loans; and

               - examining credit enhancement mechanisms to
          further facilitate small business loan securitization
          by public and private resources.

     A program should be developed by the SBA, the lending
industry, the SEC and/or Congress that will further leverage the
SBA secondary market by providing a mechanism for the pooled
securitization of the unguaranteed portion of SBA loans.

     The SBA should continue to evaluate the nature and character
of long term technical assistance provided by the Women's
Business Development Programs, as well as the pre-qualification
programs, in order to further preserve and enhance such programs.

     The SBA should continue to evaluate and expand upon the
reach of and incentives for the SBA micro-loan program.

     The banking regulators should permit financial institutions
to utilize credit scoring as a tool but not as the major
consideration in loan lending.  Credit scoring should not be used
in a manner that results in racial discrimination.  In this
regard, area and zip codes, as well as any other information that
may result in racial discrimination, should not be used as a
determinant in credit scoring models.

     Environmental lender liability concerns of lending
institutions should not exist where such institutions have only
taken a financial position in real estate related loans (i.e.
either directly or as collateral) and not in a
managerial/administrative capacity.

     The SBA should examine the costs and benefits of using
alternative rate structures (e.g. alternative to the prime rate
stipulated in the law) as the index rate for alternative-rate
loan arrangements.  Alternative rates could include Treasury bill
rates or other money market rates.  Long negative cash flow
amortization structures should also be examined, accordingly.  In
this regard, it should be noted that over the past several years,
the prime rate has become more rigid in adjusting downward when
market rates decline.  Small business borrowers with adjustment-
rate loans have not benefited from declines in the market rates.
More flexible index rates may help.

     The SBA's Business Information Center programs ("BIC's")
should be maintained and enhanced.  A data base of business
assistance programs made available by the SBA and other federal
agencies should be maintained at each BIC.  Entrepreneurial
training programs should be fostered through these BIC's,
providing business plan development and loan packaging training
on an international and domestic level to potential business
clients and lenders.  Use of technology to maintain and
disseminate information via the internet in conjunction with the
SBA's web site should be encouraged at each of these centers.

     In our ever changing global economy, international sales
provide a significant growth opportunity to small businesses.
New market penetration and profit potential benefit the
entrepreneur while the government is encouraged by resulting
employment growth, reinvested domestic earnings and improved
balance of trade deficits.  Unfortunately, banks, especially
those lending with an asset based orientation, effectively
exclude financing such international sales and/or resulting
receivables.  Efforts should be made to encourage or even mandate
to some degree that banks avail themselves of the several
guarantee/insurance programs already in place by the Department
of Commerce, SBA, Export-Import Bank and many of the states.
Such programs generally provide financing for these export
contracts/sales while leaving the banks' collateral and security
intact.


SECURITIES REGULATION

Securities Act of 1933

     The Commission should increase the transaction amount
ceiling of Rule 504 to $5 million from $1 million.

     The Commission and the states should implement a national
"test the waters" provision for small business offerings.

     "Test the waters" materials should be permitted for all Reg.
D offerings.

     The Commission should eliminate the general solicitation
restriction for all Regulation D offerings.

     General solicitation and advertising for accredited
investors should be permitted without restriction.

     The prohibition on general solicitation for Rule 505 and 506
offerings should be relaxed in order to allow small businesses to
find accredited investors.  One possibility would be to create a
safe harbor for communications with anyone that the offeror
reasonably believes to be accredited.

     The intrastate exemption should be expanded to states
contiguous to the principal place of business of the company.

     The Commission should reexamine Rule 147 with a view towards
modernizing the safe harbor, including the elimination or
relaxation of the triple percentage tests and the addition of a
substantial compliance provision modeled upon Rule 508.

     A multi-jurisdictional regional offering exemption is a
desirable expansion of the exemptive scheme from registration
best achieved with the least effort by adopting a new Rule 504A
with a dollar amount ceiling of $5 million, if the offering is
authorized for sale in the states where the offers are intended
to be made, with a required delivery of a disclosure document.

     The Commission should adopt a new exemptive rule under
Section 3(b) of the Securities Act permitting offers and sales of
securities within regional areas.  A regional area may be defined
by an established market area, metropolitan area or a
geographically limited area.

     The relationship between a monetary measure for
"accreditation" of investors and actual sophistication as it
relates to the investor's ability to fend for his or herself in
financial matters (i.e., Does a monetary measure oversimplify and
exclude those who are truly accredited, and able to fend for
themselves?) should be reconsidered.

     All accredited and sophisticated investors should be
permitted to see and invest in all private placements on a system
after the moment of accreditation regardless of when the private
placement is posted, and encourage states to adopt the same
standard.

     Sales only should be subject to regulation, rather than
offers to sell securities.

     Provide a safe harbor for forward looking statements
included in offering documents of private placements and IPOs.

     There should be a bottom up review of the Securities Act and
the Securities Exchange Act as they relate to the access to
capital for small businesses.  A task force should be created

composed of staff of the SEC, NASAA, private industry and
"gatekeepers" such as private attorneys and accountants to
thoroughly reevaluate these Acts as they relate to small
business.

     In light of the new concept of "Company Registration"
examine the possibility of small business 12(g) reporting
category that facilitates reporting by small businesses and that
would remove the trading restrictions of Rule 144, create a lower
level of required disclosure for companies between $10 and $25
million, and move from quarterly to semiannual reports.

     The Commission should adopt company-based registration but
the ability of small issuers to utilize transaction-based
registration should be retained as a parallel system for the
purpose of protecting small issuers' access to the public capital
markets.

Securities Exchange Act of 1934

     The regulators should provide a broker/dealer exemption for
Finders. A Finder would be defined as a person who arranges for
investors to acquire securities of a business.

     The Commission and the states should create/provide an
exemption for Finders who are not registered broker/dealers. A
Finder would be defined as a person who occasionally arranges for
investors to acquire securities of a business. Non-broker/dealer
Finders would not be subject to any qualifications criteria
including, but not limited to, testing, bonding or reporting.
The activities of a non-broker/dealer Finder may be circumscribed
by the amount of compensation received or involvement with a
specified number of transactions.

     A limited class of broker dealer should be created that is
enabled to raise capital for small business offerings, especially
as it relates to using the Internet. This class would include a
sub-set of broker dealers subject to a less rigorous series exam,
be prohibited from handling money, and only permitted to do
primary offerings.

     A new class of "Finder-Broker Dealers" should be created to
develop a new professional class dedicated to locating "Angels"
to provide capital to entrepreneurs.  These individuals would be
licensed to arrange "private placements" only.

     A licensing requirement should be created for "financial
public relations" people.

     Registered broker-dealers should be allowed to share fees
with non-registered broker-dealers provided that full disclosure
of the fee-splitting arrangement is given to the customer.

Investment Company Act of 1940

     The Commission should provide a method similar to that
currently in place with "no action" and interpretative letter
guidance whereby investment companies could rely upon the facts
and circumstances utilized by others in securing Commission
relief under section 6(c) of the '40 Act.

     The "affiliated transactions" provision in section 57 of the
'40 Act should be updated to provide flexibility.

     The possibility of facilitating investment by the average
American investor in mutual funds designed for investments
normally classified as "Venture Capital" should be examined in
light of the constraints imposed by the Investment Company Act of
1940.

     A safe harbor should be established in the '40 Act for the
"mark to market" evaluation of investment companies' portfolio of
illiquid investments in small businesses to protect directors of
such companies from possible liability by using the SBA's
valuation policy as a guideline.

     An exemption should be established from the '40 Act for a
publicly-held venture fund where the fund is:

     a non-leveraged SBIC regulated by the SBA with a minimum
capitalization of $5 million;

     an intra-state fund of $10 million (increase from the
current $5 million);

     comprised of qualified purchasers, defined as individuals
with assets of $5 million or more, institutions with $25 million
of more, and others as the SEC may define by regulation;

     a state chartered economic development fund with 80% of the
financing raised from accredited investors resident in the state;
30 percent funded by 3 large institutional investors as defined
by SBA regulation.

     The 200 percent asset coverage limitation imposed on BDCs by
section 61(a)(1) of the '40 Act is too restrictive and should be
raised or removed.

     The BDC provisions of S-1815 regarding the issuance of stand
alone options and rights should be adopted and implemented
immediately. This will:

               (a) broaden the investor base for BDCs by allowing
          institutional investors to stage-in their capital
          commitments, and

               (b) enhance aftermarket trading and stockholder
          liquidity by balancing investment appeal between retail
          (individual) investors and institutions.

     Present securities regulation should be modified to permit

BDCs to make scheduled (binding) rights offerings to all existing
stockholders during the 5 years after the IPO.  This will:

               (a) allow individual investors the option to
          "stage-in" their capital to BDCs similar to
          institutional investors, and

               (b) enhance the individual investor's rate of
          return without the obligation to provide more capital.

     A current yield to investors in BDCs should be provided by
enacting a tax credit or tax deduction of 10% annually for the
first 5 (five) years after the IPO of the BDC and recapture the
tax impact by having the BDC pay a surtax of 10% of all capital
gains when realized (until recapture).  This will:

               (a) improve the marketability of BDCs by enhancing
          the aftermarket trading of the BDC's stock and
          mitigating the NAV discount of newly formed BDCs, and

               (b) establish permanent pools of risk capital that
          provide capital for job creation long after the tax
          revenue neutral impact is complete.

     Exempt private fund managers (with more than $100 million of
private equity under management) from the affiliate rules
involving joint transactions with common portfolio companies
among funds while retaining oversight by the BDC's independent
directors.  This will:

               (a) encourage some of the most experienced
          professional venture fund managers to make their
          expertise and deal flow available to a broader range of
          retail and small institutional investors, and

               (b) remove a major regulatory impediment to
          attracting the fund management talent necessary to
          bring major bracket underwriters and institutions to
          BDCs.

     Remove the "liquidity penalty" of fund managers by enacting
capital gains taxation treatment of incentive compensation
regardless of the structure of the BDC (Corporate or
partnership).  This will:

               (a) eliminate the tax penalty on fund managers who
          provide their investors with the BDC's benefits of
          liquidity, and

               (b) align the long term return on investment
          interests of the BDC's managers with their investors.

     Subchapter M of the Tax Code imposes diversity tests on
investment companies registered under the '40 Act that are too
limiting, and should be revised, along with the provision of a
committed capital structure.

     The tax code should be amended to provide for the
deductibility by the company of dividend distributions to avoid
double taxation of dividend income and to remove the disparate
treatment between debt and equity financing.

     A tax code amendment should be created for pass-through
treatment of dividend income, investment income and realized
capital gains without the 90% distribution requirement so that
the gains and income are only taxed at the personal level when
distributions are made.


State Regulation

     The states should provide exemptions from state securities
laws, except for anti-fraud purposes, for all offers and sales to
accredited investors.

     There should be federal preemption of all state securities
regulation except (1) enforcement matters (i.e., state anti-fraud
rules) and (2) broker-dealer regulation.

     State securities laws should be preempted, or the SEC should
train people at the state level to achieve greater regulatory
uniformity.

     The Commission and states should permit posting of an
offering memorandum or prospectus on a web page that contains a
prominently displayed statement either affirmatively identifying
the states in which the offer is being made or identifying the
states in which an offering is not being made. Such a posting
shall not constitute an offer or a solicitation of an offer,
provided the offering has been authorized for sale in every
jurisdiction in which offers are intended to be made.


MISCELLANEOUS

     The Forum's recommendations should be distributed at the
Small Business Town Meetings.

     We recommend that the SEC be held accountable for all
activities and initiatives relative to the recommendations that
come out of the Forum.   We recommend a timely and concise
reporting to maintain a level of communication in order to
enforce/encourage enactment of recommendations and utilization of
resources of its participants.

     Invite to all future Forums all state and federal agencies
that impact the capital formation process for small businesses,
making specific attempts to have other SEC divisions, Capitol
Hill staff members, and the IRS participate.

     Encourage the participation in future Forums by more women
and minority groups.





II.  INTRODUCTION

     The U. S. Securities and Exchange Commission hosts an annual
forum which focuses on the capital formation concerns of small
business as provided in the Small Business Investment Incentive
Act of 1980.  Thus, in each of the past fifteen years, the SEC
Government-Business Forum on Small Business Capital Formation has
been convened.  A major purpose of the Forum is to provide a
platform for small business to highlight perceived unnecessary
impediments to the capital-raising process.  Numerous
recommendations have been developed at these Forums seeking
legislative and regulatory change in the areas of taxation,
securities regulation, financial services and state and federal
assistance.  Participants at the Forum typically are small
business owners, venture capitalists, government officials, trade
association representatives, academicians and advocates of small
business.  While a number of different formats have been tried
over the years, a very effective one for purposes of the
development of recommendations for governmental action has
included the use of small interactive participant groups; and in
recent years, the Forum has typically included this feature.  The
Fifteenth Annual Forum was held in Washington, D. C. on September
26 and 27, 1996.

     The Forum is governed by an Executive Committee comprised of
senior government officials and representatives of small business
who have a strong interest and expertise with the issues and
capital-raising problems of small business.  The Executive
Committee organizes, plans and implements the Forum.

     The topic areas of taxation, credit and securities again
were selected as the focus of the Forum.  The Executive Committee
had determined that the format of the sessions would present in
the mornings a variety of round-table discussions, each devoted
to one of the three targeted disciplines.  Each round table would
highlight current issues in its targeted topic area, and be
moderated by a member of the Forum's Executive Committee, with a
core staff of presenters and commentators comprised of several
experts in the particular discipline.  Because all of the round
tables would be offered concurrently, Forum participants had to
select the round-table discussion in which they wished to
participate.  As in prior years, time would be devoted to
discussion in small interactive break-out groups in order to
permit Forum participants sufficient opportunity to develop
thoughtful recommendations.  These groups were to be comprised
only of participants who had attended a particular topic round
table.

     Welcoming remarks were offered by Brian J. Lane, Director of
the Corporation Finance Division of the U. S. Securities and
Exchange Commission.  Jere W. Glover, the Chief Counsel for
Advocacy, U. S. Small Business Administration then presented a
report regarding the status of implementation of the
recommendations from the 1995 White House Conference on Small
Business.   This report was followed by the scheduled round-table
discussions.  The luncheon address was presented by Richard Y.
Roberts, Chief Executive Officer of the Princeton Venture
Research Group, who was introduced by SEC Commissioner Steven M.
H. Wallman.  Break-out sessions among the Forum participants were
conducted throughout the afternoon.

     The second day's session followed the same basic format.
The luncheon address was offered by the Honorable Philip Lader,

Administrator, U. S. Small Business Administration.

     The Forum participant break-out sessions produced 67
recommendations, all of which were finally endorsed and are
highlighted in the following section of this report.

     While the U.S. Securities and Exchange Commission hosts this
annual convocation of small business friends and advocates, and
is pleased to serve as such, it in no way seeks to sponsor or
influence any of the Forum's recommendations.  While a number of
these matters are of substantial interest to the Commission as an
institution, it takes no position on any of the recommendations.
The views in this report are those of the Forum participants.




III. RECOMMENDATIONS FROM THE WHITE HOUSE CONFERENCE

     That the Forum reaffirm endorsement of Recommendation 14 of
the 1995 White House Conference on Small Business
Recommendations, as follows,

     To increase the availability of growth capital to invest in
small businesses, Congress should:

     a) Further privatize the Small Business Investment Company
(SBIC) program, now administered by the SBA, by creating a new,
government sponsored, but privately managed, corporation named
Venture Capital Marketing Association or "Vickie Mae" which would
function similar to the Federal National Mortgage Association
(Fannie Mae);

     b) Extend the capital gains tax deferment currently afforded
investments rolled into Specialized Small Business Investment
Companies (SSBICs) to include investments in SBICs to encourage
more investment in new SBICs;

     c) Remove barriers to pension funds, foundations and
endowments wishing to invest in SBICs and SSBICs; eliminate the
"unrelated business taxable income" (UBTI) tax on all such
activities; and

     d) Reduce the minimum capital size requirements for
establishing SBICs owned by regulated financial institutions,
thereby encouraging them to provide equity to small businesses
provided that no leverage is utilized by such SBICs until current
minimum capitalization for leverage is achieved.

     This recommendation, if implemented, would increase the
availability of growth capital to small business which is a very
desirable goal.  It specifies a number of areas where
governmental regulations could be developed or revised in order
to increase not only access to, but also the availability of,
capital for the use of small business.

     As was adopted in the March 1996 Final Report of the SEC
Government-Business Forum on Small Business Capital Formation,
this year's forum reaffirms and believes that proposition 286
warrants further consideration:

286. The U. S. Small Business Administration is vital to the
growth of small business in America.  Efforts to make the SBA's
programs more cost effective and efficient should be continued
and encouraged.  The SBA's "independent" agency role as the
primary supporter of small business within the Federal Government
should be enhanced by:

     a) Elevation of the U. S. Small Business Administration to a
congressionally approved cabinet level position.

     b) Budget allocations to maintain, increase, and enhance the
7(a) Loan Guaranty Program.

     c) Budget allocations to maintain, increase, and enhance the
504 Loan Program.

     d) Budget allocations to make permanent the Small Business
Development Center Program which provides business assistance to
small businesses nationwide.

     e) Permanent maintenance of the "independent role" of the
U. S. Small Business Office of Advocacy.

     f) All other SBA programs should be reviewed with
substantial input from the private sector.  Any programs deemed
to be ineffective should be eliminated.

     The continuing operation of the Small Business

Administration and its programs is important to the small
business community.  The significance of the U. S. Small Business
Administration and the programs it operates to small businesses
in this country can not be underestimated.  Serious efforts
should be undertaken to preserve this governmental function and
enhance its utility.

IV.  TAXATION

     A.  Statement of the Issues

     Tax policy can impose a heavy burden upon smaller
businesses.  Uncertainty as well as frequent changes in the rules
further complicate the area for most small businesses that are
already overburdened with demands upon time and resources.  Tax
policy also can be used in ways that encourage certain activities
which could foster the successful operations of the smaller
entrepreneur.

     B.  Recommendations

Preamble

     Small business recognizes the rationale for taxes and
understands the need to pay tax to support government.  However,
we are opposed to taxes that have the result of diminishing the
capital that provides growth needs of small business to generate
GDP and jobs.  Simplified, fair, understandable taxes are
necessary.  Any administrative action that burdens small business
is counterproductive to profitability of business needed for
continuance.  We feel these recommendations target the source of
these objectives and will resolve many, but not all, of the
current problems.

Primary Recommendations

Fundamental Tax Reform

     It is the consensus of the Forum that current tax law and
regulations promulgated thereunder unduly hinder the ability of
small business to attract and maintain the capital necessary for
formation and growth.  It is for this reason that the Forum
submits the following recommendations to promote fundamental tax
reform and totally abolish the complicated present system.
Congress should enact legislation that replaces the present
system with a single comprehensive simple tax for individuals and
businesses that eliminates double taxation.  We recommend a
system that encourages savings and is not difficult or costly to
comply with.

     Simplifying the federal tax structure will cause many
benefits to all parties involved.  Small businesses would reap
its share of the benefits, if such a system could be implemented.
Social Security Fundamental Reform

     We urge the Congress enact legislation to reaffirm the
stability of the existing Social Security System and to guarantee
the commitments for all current participants.  In the interests
of increasing capital formation in the U.S. and assuring a more
productive national retirement system, we recommend that an
optional system be designed to eliminate intergenerational
funding.  This system would eventually replace the existing
Social Security system.

     Any uncertainty relating to the soundness of the nation's
Social Security System has a negative impact upon economic
matters, which hurts small businesses' ability to raise capital.
The current system, which bases its effectiveness on the
contributions of currently working persons, is inherently
unstable and needs to be replaced.

Overall Capital Gains Reform

     Congress should reinstate a 50% capital gains exclusion on
sales of capital assets held more than one year.

     Tax policy should be used to encourage investments in small
businesses.  The tax differential for capital gains encourages
the investment of risk capital, especially in small and
development-stage companies.  The suggested change would
modernize our tax policy with respect to this important issue and
make it more consistent with the policies of other industrialized
countries.  Importantly, if implemented, more monies would become
available to finance the efforts of small business as a result of
such changes.

Estate Tax Reform

     Estate Taxes negatively impact small business in capital
formation, job creation and business continuity; therefore, our
Forum calls on Congress to repeal the Federal Estate and Gift
Tax.

     Federal estate taxes are graduated and run up to a maximum
rate of 55 percent.  The current estate tax exemption of $600,000
may be insufficient to cover the value of many family businesses.
The overhang of this taxing system, and the gift tax system as
well has a particularly harmful and negative effect upon the
valuation of small businesses.  Excluding the value of such
businesses for purposes of calculating estate and gift tax could
have an overall beneficial impact on the general economy.

Secondary Recommendations

Targeted Capital Gains Reform

     Congress should enact a targeted capital gains law that
promotes the long-term investment in qualified small businesses.
     This law should include the following provisions:

A)   A capital gains exclusion of at least 50% of the regular
     capital gains tax rate for an investment in a qualified
     small business which should include all forms of business
     entities, including pass-throughs.

B)   The exclusion should increase as the holding period
     increases to promote the concept of "Patient Capital".

C)   A tax of not more than 10% (preferably zero tax) should be
     imposed on the sale of a majority interest in a qualified
     small business held for more than 15 years.

D)   A deferral of the gain on the sale of an interest in a
     qualified small business if the proceeds are reinvested in
     another qualified small business within two years.

E)   A qualified small business should be an active operating
     business.

     Capital gains treatment under the federal tax laws needs to
be reworked for the benefit of small business.  The listed
recommendations will go a long way to assist the capital raising
abilities of small companies, making their investment much more
attractive to the nation's investors.

Independent Contractor Reform

     The definition of an independent contractor must be
clarified.  Congress should recognize the legitimacy of an
independent contractor.

     a) The 20-factor test is too subjective.  The number of
relevant factors should be narrowed with more definitive
guidelines for implementation.  Realistic and consistent
guidelines should require one of four criteria plus a written
agreement.  The criteria are (1) realization of profit or loss;
(2) separate principal place of business; (3) making services
available to the general public; or (4) paid on a commission
basis.

     (b) Safe-harbor provisions should be established that would
protect the hiring business from the burdensome penalties
currently being assessed by the IRS.  De minimis rules based on
dollars paid, hours worked, years in business, and/or specified
closed-end projects should be established.

     (c) The IRS should eliminate back taxes for
misclassification when Form 1099's are filed and there is no
evidence of fraud.

     (d) Congress should specifically allow employers and
independent contractors to provide joint technical training and
to jointly utilize major specialized tools without jeopardy of
reclassification of the independent contractor to employee
status.

     (e) Changes and implementation processes should be
formulated by a joint committee of legislators and small business
people.

     The uncertainty that surrounds the classsification of
"employee" versus "independent contractor" needs to be
eliminated.  From the perspective of small business operators,
this determination impacts the decision whether tax withholding
is necessary and if improperly decided by the employer can lead
to significant tax penalties to the business.

IRS Reform

     To prevent excessive taxpayer expense and erosion of capital
to small business, we recommend that a reform be instituted to
hold the IRS accountable for its actions as a unified body at all
levels.  We recommend that a training program and a communication
network be put into place which would ensure that all levels of
the agency operate in compliance with all laws and regulations
that are in place such as the 1996 Small Business Regulatory
Reform Fairness Act.  The standard for this should be set that
institutes a training and development relationship with
taxpayers.  "Punitive" penalties should not be unreasonable to
the "offenses" they address.  Congress should review the
collection penalty rates named in Section 6656 of the Omnibus
Budget Reconciliation Act of 1989 (Public Law 101-239).

     We suggest that an independent agency be available at the
election of the taxpayer as a mediator in instances where the
taxpayer feels "unregulated" authority has been exercised.  The
agency would be empowered to resolve disputes.  This would not be
applicable in cases of prior offense taxpayers.

     This recommendation would also include special provisions
for an innocent party or to a sincere hardship case.

     This recommendation relates to a general overhaul of the
manner of collecting as well as the collector of the federal
income tax.  It is a thoughtful constructive criticism of the
current system and if implemented would work greater efficiency
which in turn would be beneficial to all taxpayers, including
small businesses.

Qualified Pension Fund Reform

     The Congress should modify current law to allow an
individual to invest under current limits, his or her own self
directed qualified pension or profit sharing plans in his or her
own small business.  These funds could be used as a direct
investment or as collateral to obtain debt financing.

     This recommendation would allow for additional funding
opportunities for the small business, while reducing the
individual's tax liability.  Owner/operators should be allowed to
invest through their retirement plans to take advantage of the
future success of their business.

ERISA Reform

     In order to create and preserve capital for small business
and its employees, Congress shall reform ERISA so as to allow
employers to design qualified employee plans to suit employers
and employees goals and needs, including but not limited to
liberalization of vesting schedules, repeal of top heavy
restrictions and adoption of reasonably prudent investment
policies.

     Revision of ERISA standards and policies could help smaller
businesses in their general operations as well as in the
recruitment and retention of qualified personnel.  Utilizing
innovative compensatory systems is a particularly desirable
method for a company that needs to retain cash for its business
to remain healthy and competitive.

Investment Reform

     In order to enhance the attractiveness to investors of small
business investment, Congress should authorize a new investment
instrument known as the Small Business Participating Debenture
which could provide two components of "interest", a guaranteed
portion at a stated rate, and a participation contingent upon an
agreed share in issuer profits.  The participating component of
"interest" would be taxed to the investor as long term capital
gain, but deductible by the issuer as interest.  Investor losses
would be deductible against ordinary income similar to Section
1244 stock.

     The creation and recognition of this new security would
eliminate double taxation of profits which would be a very
desirable development for small businesses.






 V.  CREDIT

     A.  Statement of the Issues

     Access to capital is a critical concern for small business.
Regardless of its location in the development cycle, a small
business is in need of funds for its continuing operation.
Typically, debt financing plays a central role in this recurring
struggle to stay competitive.

     B.  Recommendations

     Congress should establish and implement a cost-benefit
analysis method of evaluation to review the loan programs and
Business Assistance Programs of the SBA.  This analysis should
identify program costs and the ultimate benefits generated by
these programs in terms of job creation and retention, tax
revenues generated, and the economic impact on the local and
national business environment.

     The recommendation would provide helpful information
regarding the effectiveness of SBA programs which in turn could
be used to revamp unsuccessful programs, replacing them with ones
that would serve the small business community more efficiently,
saving the taxpayers money at the same time.

     Congress should evaluate action to facilitate:
               - the investment by mutual funds and public and
          private investment funds into investment grade
          securities of securitized small business loans; and
               - examining credit enhancement mechanisms to
          further facilitate small business loan securitization
          by public and private resources.

     All potential methods of freeing up additional moneys for
lending and investment in small businesses need to be explored.
The suggestions if implemented would be helpful in this regard.

     A program should be developed by the SBA, the lending
industry, the SEC and/or Congress that will further leverage the
SBA secondary market by providing a mechanism for the pooled
securitization of the unguaranteed portion of SBA loans.

     The active secondary market in the guaranteed portion of SBA
loans could be effectively complemented by such a market in the
remaining part of such loans.  While the risks are somewhat
greater since the government guarantee does not attach, there
should be greater confidence that the entire amount of such loans
will ultimately be fully repaid.  Enhancements could be offered
as well.  Development of such a market would make more capital
available for the use of small businesses.

     The SBA should continue to evaluate the nature and character
of long term technical assistance provided by the Women's
Business Development Programs, as well as the pre-qualification
programs, in order to further preserve and enhance such programs.

     Small businesses headed by women are a rapidly expanding

group and important part of the nation's entrepreneurial system.
These businesses face special problems in addition to the typical
ones encountered by new companies.  For this reason, the SBA

established a special counselling and assistance program for

businesses operated by women.  This program is of great value and
should be continued.

     The SBA should continue to evaluate and expand upon the
reach of and incentives for the SBA micro-loan program.
     A micro-loan under the SBA Program seeks to make directly
funded loans through intermediaries to very small businesses in
economically-depressed areas of the country.  The loans are
short-term with fixed interest rates.  The maximum loan is for
$25,000.  The program presents opportunities for low-income
individuals who are otherwise unable to obtain private financing
to fund their small businesses.  Increasing the maximum loan
levels, especially through credit unions would benefit local
communities.  The numbers of qualified intermediary lending
institutions should be increased.

     The banking regulators should permit financial institutions
to utilize credit scoring as a tool but not as the major
consideration in loan lending.  Credit scoring should not be used
in a manner that results in racial discrimination.  In this
regard, area and zip codes, as well as any other information that
may result in racial discrimination, should not be used as a
determinant in credit scoring models.

     Simplifying the manner in which loans will be made is a
desirable objective from the perspective of small business.  The
use of credit scoring is not inherently discriminatory and could
be a beneficial development in this regard and making more money
available for lending and in a quicker timeframe.

     Environmental lender liability concerns of lending
institutions should not exist where such institutions have only
taken a financial position in real estate related loans (i.e.
either directly or as collateral) and not in a
managerial/administrative capacity.

     Action should be taken to insulate lenders from future
liability in connection with environmental laws where their only
connection with the problem is that they have lent money secured
by the property in question.  Uncertainty and concern about
potential exposure is causing lenders to shy away from making
many necessary loans to small businesses.

     The SBA should examine the costs and benefits of using
alternative rate structures (e.g. alternative to the prime rate
stipulated in the law) as the index rate for alternative-rate
loan arrangements.  Alternative rates could include Treasury bill
rates or other money market rates.  Long negative cash flow
amortization structures should also be examined, accordingly.  In
this regard, it should be noted that over the past several years,
the prime rate has become more rigid in adjusting downward when
market rates decline.  Small business borrowers with adjustment-
rate loans have not benefited from declines in the market rates.
More flexible index rates may help.

     Greater flexibility in debt payment obligations would be
helpful to small business.  While the many SBA loan programs
provide borrowing opportunities, adjustment of interest rates as
economic situations change should be accommodated for the benefit
of small business borrowers.

     The SBA's Business Information Center programs ("BIC's")
should be maintained and enhanced.  A data base of business
assistance programs made available by the SBA and other federal
agencies should be maintained at each BIC.  Entrepreneurial
training programs should be fostered through these BIC's,
providing business plan development and loan packaging training
on an international and domestic level to potential business
clients and lenders.  Use of technology to maintain and
disseminate information via the internet in conjunction with the
SBA's web site should be encouraged at each of these centers.

     All SBA educational programs and facilities should be
continued and encouraged with the necessary funding.  Small
business needs every informational opportunity to learn of
available sources of financing as well as how to maintain and
grow their businesses.

     In our ever changing global economy, international sales
provide a significant growth opportunity to small businesses.
New market penetration and profit potential benefit the
entrepreneur while the government is encouraged by resulting
employment growth, reinvested domestic earnings and improved
balance of trade deficits.  Unfortunately, banks, especially
those lending with an asset based orientation, effectively
exclude financing such international sales and/or resulting
receivables.  Efforts should be made to encourage or even mandate
to some degree that banks avail themselves of the several
guarantee/insurance programs already in place by the Department
of Commerce, SBA, Export-Import Bank and many of the states.
Such programs generally provide financing for these export
contracts/sales while leaving the banks' collateral and security
intact.

     Traditional lending sources should be informed about
government programs that encourage their risk-taking in lending
situations.  This educational initiative may lead to the
availability of more money for small business to succeed in their
endeavors, particularly in the area of financing export sales.






VI.  SECURITIES REGULATION

     A.  Statement of the Issues

     Compliance with securities regulations may impose
substantial costs upon issuers of securities.  There is a
geometric progression in the impact of such costs relative to the
smallness of the issuer.  Coordination of federal and state
regulation continues to be needed and substantial relief from
costs would flow from a more unified system of regulation.

     B.  Recommendations

Securities Act of 1933

     The Commission should increase the transaction amount
ceiling of Rule 504 to $5 million from $1 million.

     The Commission's registration exemption, which requires
essentially only compliance with the anti-fraud provisions of
the federal securities laws, should be increased in amount from
$1 million in a 12-month period to $5 million.  Such an increase
would reduce compliance burdens for small business.

     The Commission and the states should implement a national
"test the waters" provision for small business offerings.

     "Test the waters" materials should be permitted for all Reg.
D offerings.

     Permitting issuers to gauge the potential investor interest
in a possible securities offering before the preparation of
costly compliance documents makes sense for the issuer and
investor alike.  Issuer costs can be substantially reduced with
this process and investor protections are not compromised.  This
change would be useful for small business in both registered and
exempt offerings.

     The Commission should eliminate the general solicitation
restriction for all Regulation D offerings.

     The Commission should modernize its approach to exempted
transactions by focusing on the purchase or sale portion of a
transaction and remove the offer from regulatory requirements.
This change would increase the utility of the exemptions for
small business.

     General solicitation and advertising for accredited
investors should be permitted without restriction.

     The prohibition on general solicitation for Rule 505 and 506
offerings should be relaxed in order to allow small businesses to
find accredited investors.  One possibility would be to create a
safe harbor for communications with anyone that the offeror
reasonably believes to be accredited.

     This approach would constitute an intermediate step
in revamping the "offer" analysis under the Commission's
exemptive regulatory system.  It would open up offerings to
those highly sophisticated investors that the Commission has
characterized as "accredited."

     The intrastate exemption should be expanded to states
contiguous to the principal place of business of the company.

     To the extent possible, changing the focus of the so-called
intrastate offering exemption from the state of incorporation to
the state where the company transacts its principal business
would make the provision far more useful than presently is the
case.  Expanding the scope further to include contiguous states
to the state of principal operations would be even better from
the vantage of the issuer.  Since investors would be close
enough to the location of the business, complete information
about the operations could be easily obtained and verified.

     The Commission should reexamine Rule 147 with a view towards
modernizing the safe harbor, including the elimination or
relaxation of the triple percentage tests and the addition of a
substantial compliance provision modeled upon Rule 508.

     Rule 147 provides definitional guidance to the intrastate
offering exemption provided by section 3(a)(11) of the Securities
Act.  This exemption frequently fails because of the need to
maintain the local character of the offering through both offers
and sales and business.  More comprehensive Commission guidance
in Rule 147 would be helpful.  The addition of the good faith and
substantial compliance defense would be an effective guard
against third party suits for inconsequential deviations from
exemption terms.

     A multi-jurisdictional regional offering exemption is a
desirable expansion of the exemptive scheme from registration
best achieved with the least effort by adopting a new Rule 504A
with a dollar amount ceiling of $5 million, if the offering is
authorized for sale in the states where the offers are intended
to be made, with a required delivery of a disclosure document.

     A new exemption should be considered by the Commission which
would join the benefits of state regulation and review with an
exemption requiring minimal federal oversight as is the case with
Rule 504.  By requiring development and distribution of an
offering document which has been reviewed by securities
regulators, the federal exemptive ceiling can be safely increased
as proposed.

     The Commission should adopt a new exemptive rule under
Section 3(b) of the Securities Act permitting offers and sales of
securities within regional areas.  A regional area may be defined
by an established market area, metropolitan area or a
geographically limited area.

     Issuers that are geographically located in proximity to
state lines should be permitted to use the concepts underlying
the intrastate exemption, even though investors may live on both
sides of a state boundary line, due to the local natures of
their businesses, and the familiarity local citizens have with
their businesses.  By using its exemptive authority, the
Commission could craft a rule which would cause this very
desirable result.

     The relationship between a monetary measure for
"accreditation" of investors and actual sophistication as it
relates to the investor's ability to fend for his or herself in
financial matters (i.e., Does a monetary measure oversimplify and
exclude those who are truly accredited, and able to fend for
themselves?) should be reconsidered.

     Under Commission tests of "accreditation," an investor
meeting certain net worth or income levels is considered to be
financially sophisticated.  Natural persons with lower income or
net worth levels may be equally, and in some cases, more
sophisticated than these persons that currently qualify.  The
Commission should consider revisions to their definition in order
to broaden its scope to capture all financially sophisticated
investors.

     All accredited and sophisticated investors should be
permitted to see and invest in all private placements on a system
after the moment of accreditation regardless of when the private
placement is posted, and encourage states to adopt the same
standard.

     Under Commission staff interpretations, sophisticated and
accredited investors have to have a preexisting business
relationship with an issuer's agent before a private placement
begins in order for that person to participate in the
transaction; after commencement of the private placement a
qualifying investor can review the offering but can not purchase.
The purpose of this position is to discourage general
solicitations in offerings that are required to be made in a non-
public way.  Because of development in electronic technologies,
the emphasis should be placed upon the sophisticated nature of
the purchaser rather than the time the investment was brought to
their attention.

     Sales only should be subject to regulation, rather than
offers to sell securities.

     Modern technology necessitates a fresh analysis of the way
"offers" are regulated under the Commission's exemptive scheme,
if they are to be subject to continuing regulation at all.  One
intermediate approach to the issue would be to permit free use of
the electronic media to offer securities for sale and then to
have strict requirements about the numbers and types of investors
permitted to purchase in the offering.

     Provide a safe harbor for forward looking statements
included in offering documents of private placements and IPOs.

     Financial forecasting is an important feature in investment
analysis that is typically required by professional investors and
lenders.  The safe harbor recently enacted in the Private
Securities Litigation Reform Act is not available for initial
public offerings or for offerings (including private ones) by
non-reporting companies.  Because of this exclusion from the safe
harbor, many issuers will not provide the information even though
investors want it and will not buy the Company's securities
without having it.  This situation can have hurt an issuer's
chances to raise capital.

     There should be a bottom up review of the Securities Act and
the Securities Exchange Act as they relate to the access to
capital for small businesses.  A task force should be created
composed of staff of the SEC, NASAA, private industry and
"gatekeepers" such as private attorneys and accountants to
thoroughly reevaluate these Acts as they relate to small
business.

     The federal securities statutes need to be revisited to make
more general accommodations for the capital-raising needs and
problems of small business.  The recommended task force would be
a first step in acknowledging the problem and providing a map
toward appropriate revisions that are consistent with investor
protection.

     In light of the new concept of "Company Registration"
examine the possibility of small business 12(g) reporting
category that facilitates reporting by small businesses and that
would remove the trading restrictions of Rule 144, create a lower
level of required disclosure for companies between $10 and $25
million, and move from quarterly to semiannual reports.

     The idea of "company" registration for all reporting
companies should be implemented by the Commission.  This system
will take advantage of the substantial amounts of company
information already available to the market and investors and
save issuers time and money by utilizing the Commission's
information systems to keep the investor informed.

     The Commission should adopt company-based registration but
the ability of small issuers to utilize transaction-based
registration should be retained as a parallel system for the
purpose of protecting small issuers' access to the public capital
markets.

     Even with the implementation of "company" registration the
maintainance of the present transactional system for small
companies will aid in their marketing of their securities.
Securities Exchange Act of 1934

     The regulators should provide a broker/dealer exemption for
Finders.  A Finder would be defined as a person who arranges for
investors to acquire securities of a business.

     Subjecting every intermediary who puts investors together
with investment opportunity to the full scale regulation of the
broker/dealer rules and regulations may deprive small businesses
of important capital raising possibilities.  A more thoughtful
application of the requirements could result in a benefit to
small business.

     The Commission and the states should create/provide an
exemption for Finders who are not registered broker/dealers. A
Finder would be defined as a person who occasionally arranges for
investors to acquire securities of a business. Non-broker/dealer
Finders would not be subject to any qualifications criteria
including, but not limited to, testing, bonding or reporting.
The activities of a non-broker/dealer Finder may be circumscribed
by the amount of compensation received or involvement with a
specified number of transactions.

     The exempted finder class could be based upon some de
minimis level of activity, amount of compensation to be received
or other objective criteria.

     A limited class of broker dealer should be created that is
enabled to raise capital for small business offerings, especially
as it relates to using the Internet. This class would include a
sub-set of broker dealers subject to a less rigorous series exam,
be prohibited from handling money, and only permitted to do
primary offerings.

     The establishment of a category of broker/dealer
specializing in the securities of small business issuers could
benefit small businesses.  Inducements to enter
into the field such as lower net capital requirements and
reporting provisions could be developed.

     A new class of "Finder-Broker Dealers" should be created to
develop a new professional class dedicated to locating "Angels"
to provide capital to entrepreneurs.  These individuals would be
licensed to arrange "private placements" only.

     Encouragement through regulatory accommodation or
otherwise to increase the numbers of brokers interested and able
to assist small business in their capital-raising ability should
be explored.

     A licensing requirement should be created for "financial
public relations" people.

     It is possible that provisions of the existing federal
securities laws or regulations are being avoided by persons that
need to be subjected to such regulations in the public interest
and the  protection of the nation's investors.  The present
situation may penalize the careful businessman interested in
fully complying with the federal securities laws.

     Registered broker-dealers should be allowed to share fees
with non-registered broker-dealers provided that full disclosure
of the fee-splitting arrangement is given to the customer.

     Relaxation of restrictions on fee-splitting by
broker/dealers should be considered.

Investment Company Act of 1940

     The Commission should provide a method similar to that
currently in place with "no action" and interpretative letter
guidance whereby investment companies could rely upon the facts
and circumstances utilized by others in securing Commission
relief under section 6(c) of the '40 Act.

     The necessity of complying with detailed requirements to
secure a Commission order for relief from Investment Company Act
registration in appropriate cases should be revisited.  To the
extent some simplified system could be implemented, the
Commission should take the steps to eliminate a needlessly time
consuming and expensive process.

     The "affiliated transactions" provision in section 57 of the
'40 Act should be updated to provide flexibility.

     This provision of the Investment Company Act makes it
particularly difficult for business development companies to
engage in the kind of venture capital financing that small
businesses typically need.  A broader relaxation should be
considered where the transactions in question are designed to
assist small businesses.

     The possibility of facilitating investment by the average
American investor in mutual funds designed for investments
normally classified as "Venture Capital" should be examined in
light of the constraints imposed by the Investment Company Act of
1940.

     Changes should be made to the 1940 Act in order to more
readily permit the investment by the average prudent investor in
mutual funds dedicated to venture capital financing.  The current
regimen imposes too many barriers to the viable operation of such
a targeted mutual fund.

     A safe harbor should be established in the '40 Act for the
"mark to market" evaluation of investment companies' portfolio of
illiquid investments in small businesses to protect directors of
such companies from possible liability by using the SBA's
valuation policy as a guideline.

     The Investment Company Act requirement of that fund boards
determine the "fair value" of portfolio securities for which
market quotations are not readily available discriminates against
the illiquid securities typically issued by smaller companies.
Using an established valuation guideline such as the one
developed by the SBA should provide sufficient information to
investors and consequently some protection for the investment
company's directors from liability under the federal securities
laws.

     An exemption should be established from the '40 Act for a
publicly-held venture fund where the fund is:
     a non-leveraged SBIC regulated by the SBA with a minimum
capitalization of $5 million;
     an intra-state fund of $10 million (increase from the
current $5 million);
     comprised of qualified purchasers, defined as individuals
with assets of $5 million or more, institutions with $25 million
of more, and others as the SEC may define by regulation;
     a state chartered economic development fund with 80% of the
financing raised from accredited investors resident in the state;
30 percent funded by 3 large institutional investors as defined
by SBA regulation.

     The recommended exemption from the provisions of the
Investment Company Act provides adequate safeguards for investors
and at the same time will significantly increase the financing
options for small businesses through available sources of venture
capital.

     A number of these proposals were implemented by the
enactment of the National Securities Markets Improvements Act of
1996 ("NSMIA") in October of 1996 after the development of the
Forum recommendation.

     The 200 percent asset coverage limitation imposed on BDCs by
section 61(a)(1) of the '40 Act is too restrictive and should be
raised or removed.

     The BDC provisions of S-1815 regarding the issuance of stand
alone options and rights should be adopted and implemented
immediately. This will:
               (a) broaden the investor base for BDCs by allowing
          institutional investors to stage-in their capital
          commitments, and
               (b) enhance aftermarket trading and stockholder
          liquidity by balancing investment appeal between retail
          (individual) investors and institutions.

     Present securities regulation should be modified to permit
BDCs to make scheduled (binding) rights offerings to all existing
stockholders during the 5 years after the IPO.  This will:
               (a) allow individual investors the option to
          "stage-in" their capital to BDCs similar to
          institutional investors, and
               (b) enhance the individual investor's rate of
          return without the obligation to provide more capital.

     A current yield to investors in BDCs should be provided by
enacting a tax credit or tax deduction of 10% annually for the
first 5 (five) years after the IPO of the BDC and recapture the
tax impact by having the BDC pay a surtax of 10% of all capital
gains when realized (until recapture).  This will:
               (a) improve the marketability of BDCs by enhancing
          the aftermarket trading of the BDC's stock and
          mitigating the NAV discount of newly formed BDCs, and
               (b) establish permanent pools of risk capital that
          provide capital for job creation long after the tax
          revenue neutral impact is complete.

     Exempt private fund managers (with more than $100 million of
private equity under management) from the affiliate rules
involving joint transactions with common portfolio companies
among funds while retaining oversight by the BDC's independent
directors.  This will:
               (a) encourage some of the most experienced
          professional venture fund managers to make their
          expertise and deal flow available to a broader range of
          retail and small institutional investors, and
               (b) remove a major regulatory impediment to
          attracting the fund management talent necessary to
          bring major bracket underwriters and institutions to
          BDCs.

     Remove the "liquidity penalty" of fund managers by enacting
capital gains taxation treatment of incentive compensation
regardless of the structure of the BDC (Corporate or
partnership).  This will:
               (a) eliminate the tax penalty on fund managers who
          provide their investors with the BDC's benefits of
          liquidity, and
               (b) align the long term return on investment
          interests of the BDC's managers with their investors.

     The simplified compliance requirements of the Investment
Company Act for business development companies needs to be
publicized by the Commission.  The use of the abbreviated
regulatory system has never reached its full potential in part
because of the lack of knowledge about the program.  The lack of
vitality to the current BDC program could be remedied by a number
of changes to the regulatory requirements for these companies
subject to less restrictions under the 1940 Act than the "garden
variety" investment company.

     The subsequent adoption of NSMIA implemented a number of
these recommendations to revise the applicable law for BDCs.

     Subchapter M of the Tax Code imposes diversity tests on
investment companies registered under the '40 Act that are too
limiting, and should be revised, along with the provision of a
committed capital structure.

     The tax code should be amended to provide for the
deductibility by the company of dividend distributions to avoid
double taxation of dividend income and to remove the disparate
treatment between debt and equity financing.

     A tax code amendment should be created for pass-through
treatment of dividend income, investment income and realized
capital gains without the 90% distribution requirement so that
the gains and income are only taxed at the personal level when
distributions are made.

     The effectiveness of present small business accommodations
and any future developments in the 40 Act area are seriously
impacted by the current federal tax laws.  The recommended
changes are necessary and will make such accommodations workable
and fully effective.

State Regulation

     The states should provide exemptions from state securities
laws, except for anti-fraud purposes, for all offers and sales to
accredited investors.

     The development of a uniform "accredited investor" exemption
from state securities regulation would be very helpful to small
business capital formation and would have little impact upon the
protection of investors.  In the area of electronic matching
services which are becoming popular, the current concern about
violating state laws simply thorough publication of an offering
even though limited to specific states where the offering has
been qualified, could be eliminated by such a uniform
exemption.

     There should be federal preemption of all state securities
regulation except (1) enforcement matters (i.e., state anti-fraud
rules) and (2) broker-dealer regulation.

     The federal system of registering and exempting securities
and transactions from registration is sufficient in the public
interest and to protect investors; the state presence in this
activity is duplicative and unnecessary.  Significant savings,
cost and otherwise, would result if the states did not register
securities and transactions involving securities sales.

     State securities laws should be preempted, or the SEC should
train people at the state level to achieve greater regulatory
uniformity.

     If preemption is not undertaken, then the Commission should
be training the state regulators in order to enhance the
uniformity of regulation.

     The Commission and states should permit posting of an
offering memorandum or prospectus on a web page that contains a
prominently displayed statement either affirmatively identifying
the states in which the offer is being made or identifying the
states in which an offering is not being made. Such a posting
shall not constitute an offer or a solicitation of an offer,
provided the offering has been authorized for sale in every
jurisdiction in which offers are intended to be made.

     A uniform system should be established which permits the use
of the internet in securities offerings in states where
authorized without running afoul of state laws where the offering
has not been authorized, through a simple statement that the
offering is being limited to certain specifically identified
states.




VII. MISCELLANEOUS

     The Forum's recommendations should be distributed at the
Small Business Town Meetings.

     We recommend that the SEC be held accountable for all
activities and initiatives relative to the recommendations that
come out of the Forum.   We recommend a timely and concise
reporting to maintain a level of communication in order to
enforce/encourage enactment of recommendations and utilization of
resources of its participants.

     Invite to all future Forums all state and federal agencies
that impact the capital formation process for small businesses,
making specific attempts to have other SEC divisions, Capitol
Hill staff members, and the IRS participate.

     Encourage the participation in future Forums by more women
and minority groups.

     These recommendations relate to the manner of conducting the
annual Forum.  The suggestions if implemented will make the Forum
offer a broader-based participant group and should encourage the
development of even more thoughtful recommendations.


VIII. FORUM PARTICIPANTS


Martin H. Abo                      
Abo Uris Altenburger &             Julius J. Brecht
Caglioti                           Wohlforth Arg Johnson & Brecht
3003B Lincoln Drive West           900 W. 5th Avenue
Marlton, NJ.  08053                Anchorage, AK.  99501
                                   
Jeffrey M. Aresty                  Irving H. Bowen
Aresty International Law           J. Michael Reisert Inc.
Offices                            2455 E. Sunrise Blvd., #700
Bay 107 Union Wharf                Ft. Lauderdale, FL.  33304
Boston, MA.  02109                 
                                   Charles H.B. Braisted
Alexander Bardy                    Davis Polk & Wardwell
Powerhouse International           450 Lexington Avenue
24385 Halsted Rd.                  New York, NY.  10017
Farmington Hill, MI.  48335        
                                   Joseph B. Buonanno
Tommy J. Bargsley                  Thacher Proffitt & Wood
Bargsley & Associates, CPAs        Two World Trade Center
11940 Jollyville Rd.               New York, NY.  10048
Suite 210-S                        
Austin, TX.  78759                 David Carroll, CPA
                                   3601 Empire Avenue
Barry H. Barnett                   Burbank, CA.  91505
Barnett, Allison & Robert          
P.O. Box 6584                      Robb Champlin
Albuquerque, NM.  87197-6584       C.H.I. Fabrication Services
                                   HC-89 Box 1004
Peter A. Basilevsky                Corbett Road
Satterlee Stephens Burke &         Downsville, NY.  13755
Burke LLP                          
230 Park Avenue                    Cynthia M. Copsey
New York, NY.  10169               The Direct Stock Market, Inc.
                                   1453 3rd Street Promenade
Jeffrey Bass                       Suite 300
Margolin Winer & Evers LLP         Santa Monica, CA.  90401
400 Garden City Plaza              
Garden City, NY.  11530            William H. Culver
                                   Optelecom, Inc.
Andrew J. Beck                     9300 Gaither Road
Haythe & Curley                    Gaithersburg, MD.  20877
237 Park Avenue                    
New York, NY.  10017               Suzynne D. Cummings
                                   S.D. Cummings & Co., PC.
Margaret C. Bell                   163 High Street, Ste. One
Executive Vice President           Exeter, NH.  03833
The Herman Group, Inc.             
2121 San Jacinto Street            Cambodochine Dao
Dallas, TX.  75201                 Ecology Communications
                                   30 Oak Shade Road
Seth I. Ben-Ezra                   Gaithersburg, MD.  20878
Steven J. Goldstein, P.C.
500 N. Broadway, Suite 105
Jericho, NY.  11753
                                   Timothy Draper
Leonard S. DeFranco                Draper Fisher Associates
Leonard S. DeFranco &              400 Seaport Court #250
Associates,                        Redwood City, CA.  94063
  Ltd.                             
Two Oak Brook Place                Patrick H. Dykes
2311 West 22nd St., Ste. 217       Patrick's Antique Cars &
Oak Brook, IL.  60521              Trucks
                                   P.O. Box 10648
Mark S. Deion, President           Casa Grande, AZ.  85230
Deion Associates & Strategies,     
Inc.                               Christopher Ebert
106 Tyler Street                   American Cinema Stores
Warwick, RI.  02888-2704           1543 7th St., #400
                                   Santa Monica, CA.  90401
Ralph V. De Martino, Esq.          
De Martino Finkelstein Rosen &     Robert W. Edler
Virga                              Thiedmann & Edler
1818 N. Street, NW., Ste. 400      30 So. Wacker Drive, #2810
Washington, DC.  20036             Chicago, IL.  60606
                                   
William A. Despo                   William D. Evers, Esq.
William A. Despo, P.C.             Miller, Mailliard & Culver,
1 Gateway Center                   LLP
Newark, NJ.  07102                 155 Montgomery St., Ste. 1212
                                   San Francisco, CA.  94104
Kathleen K. Diamond                
Language Learning Enterprises      L. J. Fay
1100 17th Street, NW., Ste.        Alpha Management Group
900                                2814 Camino Dos Rios #405
Washington, DC.  20036             Thousand Oaks, CA.  91320
                                   
James C. Diana                     Leo Feldman
Silverstein and Mullens, PLLC      IPOnet
1776 K Street, NW                  9001 Jones Road #1408
Washington, DC.  20006             Houston, TX.  77065
                                   
Gerard DiFiore, Esq.               Edward H. Fleischman
Herten Burstein                    Linklaters & Paines
25 Main Street                     885 Third Avenue
Hackensack, NJ.  07601             Suite 2600
                                   NY, NY 10022-4834
Marc B. Dorfman                    
Freedman, Levy, Kroll &            Twila L. Foster
Simonds                            Jackson Tufts Cole & Black,
1050 Connecticut Avenue, N.W.      LLP
Ste. 825                           650 California St.
Washington, DC.  20036             San Francisco, CA.  94108
                                   
Elyn S. Dortch                     Richard C. Fox, Esq.
Nationsbanc SBIC Corporation       P.O. Box 1097
901 West Trade St., Ste. 1020      Pecos, NM.  87552
Charlotte, NC.  28202-1100         
                                   Russell M. Frandsen
Radcliff, Frandsen, Tricker &      SBTDC
Dongell                            UNC Wilmington
777 S. Figueroa St., 40th Flr.     601 South College Rd.
Los Angeles, CA.  90017-5800       Wilmington, NC.  28403
                                   
Gregory M. Giammittorio            Earl Hall
Steptoe & Johnson                  Parkway Enterprises, Inc.
1330 Connecticut Avenue, NW.       831 Parkway Avenue, B-9A
Washington, DC.  20036             Trenton, NJ.  08618
                                   
Jeffrey S. Gilbert                 Kevin Hedley
Hollander, Gilbert & Co.           Kevin M. Hedley, MS, CPA, CVA
15260 Venture Blvd.                433 River Street
Ste. 940                           Troy, NY.  12180
Sherman Oaks, CA.  91403           
                                   Mark L. Heller
Steve Glover                       Cooper, Erving, Savage, Nolan
Fried, Frank, Harris, Shriver        & Heller, LLP
  & Jacobson                       39 North Pearl Street
1001 Pennsylvania Avenue           Albany, NY.  12207
Washington, DC.  20004             
                                   Richard S. Heller
Joe Golemme                        Shustak Jalil & Heller
Joseph M. Golemme, CPA             545 Madison Avenue
145 Cross Street                   New York, NY.  10022
Hanoven, MA.  02339                
                                   Sherri M. Herman
Tom Stewart-Gordon                 The Herman Group, Inc.
SCOR Report                        2121 San Jacinto Street
4131 Fawn Hollow Drive             Dallas, TX.  75206
Dallas, TX.  75244                 
                                   Richard C. Herring
Don Gouldin                        Gloucester Co., Inc.
Virginia Securities Division       P.O. Box 428 (235 Cottage
PO Box 1197                        Street)
Richmond, VA.  23218               Franklin, MA.  02038
                                   
Thomas A. Grant                    Victor Hollander
Mezzullo & McCandlish              Hollander, Gilbert & Co.
1111 E. Main Street                15260 Ventura Blvd.
Ste.  1500                         Ste. 940
Richmond, VA.  23219               Sherman Oaks, CA.  91403
                                   
John Graves                        Laurel Hooks
Graves & Co.                       AFAB
PO Box 56405                       619 Ridgedale
Houston, TX.  77256                Richardson, TX.  75080
                                   
Stephanie Guiste                   Esther A. Hubbard
UTFC                               Interim Staffing Services
177 East 100 South                 11281 Richmond Avenue
Salt Lake, UT.  84111              Suite #J-105
                                   Houston, TX.  77082
Warren W. Gulko                    
Benjamin Hulsey                    Societe BankHouse
Peper, Martin, Jensen, Maichel     One International Place
  & Hetlage                        Boston, MA.  02110
720 Olive Street, 24th Flr.        
St. Louis, Mo.  63101              Lee Lanktree
                                   Majors Medical
Harlan T. Jacobs                   2600 Million Trail #390
Genesis Business Centers, Ltd.     Boca Raton, FL.  33431
3989 Central Avenue NE             
Ste. 620                           Diahann W. Lassus
Columbia Heights, MN.  55421       Lassus Wherley & Associate, PC
                                   1 Academy Street
Eric Jenkusky                      New Providence, NJ.  07974
C.H.I. Fabrication Services        
HC-89 Box 100A                     
Corbett Road                       Frank E. Lawatsch, Jr.
Downsville, NY.  13755             Crummy Del Deo Dolan
                                   Griffinger
Mary Johnston                        & Vecchione
Financial Executives Institute     One Riverfront Plaza
10 Madison Avenue                  Newark, NJ.  07102
Morristown, NJ.  07960             
                                   Mark Little
Leroy A. Johnson                   Waterhouse Fin. Management
Rutgers Small Business             12042 Blanco Road, #330
Development                        San Antonio, TX.  78216
  Center                           
180 University Avenue - 3rd        Anil Lodhia
Flr.                               Technigen Corporation
Newark, NJ.  07102                 3812 William Street
                                   Burnaby, B.C.
James M. Kanski                    Canada, V5C 3H9
Attorney at Law                    
355 West End Avenue                Mark Lumer
Suite 2                            Mark Lumer & Company
New York, NY.  10024               200 California Street
                                   Fourth Floor
Stephen A. Klein                   San Francisco, CA.  94111
Stephen A. Klein, Esq.             
10409 Englishman Drive             Joe Lunin
Rockville, MD.  20852              Pitney, Hardin, Kipp & Szuch
                                   P.O. Box 1945
Stanley T. Koenig                  Morristown, NJ.  07962
Ulmer & Berne, PLL                 
1300 E. 9th Street                 E. Jeffrey Lyons
Suite 900                          The Marquette Consulting
Cleveland, OH.  44114              Group, Inc.
                                   Northwestern University
Jonathan L. Kravetz                Evanston Research Park
Mintz Levin                        1840 Oak Avenue
One Financial Center               Evanston, IL.  60201
Boston, MA.  02111                 
                                   Jean M. Macheledt
Barbara K. Kravitz                 Macheledt, Bales & Johnson LLP
501 Skysail Lane, Suite B100       1610 Wynkoop Street
Fort Collins, CO.  80525-3133      Suite 200
                                   Denver, CO.  80202
Paul R. Madden                     
Chapman and Cutler                 
2 No. Central - Suite 1100         Martin Mushkin
Phoenix, AZ.  85004                470 Park Avenue South
                                   New York, NY  10016-6820
Drew Marsh                         
Marsh & Marsh                      H. William "Bill" Nordyke
120 E. Parrish Street              TCI, Inc.
Suite 310                          1650 University NE
PO Box 12                          Albuquerque, NM.  87102
Durham, NC.  27701                 
                                   Ralph W. Norton
Jeffrey D. Marshall                Graubard Mollen & Miller
Marshall Associates                600 Third Avenue
18 Mitchell Road                   New York, NY.  10016
Ipswich, MA.  01938                
                                   Jim Oakley
Stephen G. Martin                  The Oakley Companies
National Internet Securities       341 North "D" Street
Assocn.                            Porterville, CA.  93257
  & Internet Securities            
Trading Corp.                      Jack O'Connor
374 Maguire Village #4             Jack O'Connor's Quality Beefn
Gainesville, FL.  32603              Seafood
                                   1288 Rt 22 East
Robert C. May                      Bridgewater, NV.  08807
Shumaker Williams, P.C.            
P.O. Box 88                        David W. Ormes
Harrisburg, PA.  17108             Ormes Capital Markets, Inc.
                                   55 Broadway - 10th Floor
Robert C. McGee                    New York, NY.  10006
Business Loan Center               
1301 N. Hamilton Street            Marc P. Palker
Suite 200                          Firetector Inc.
Richmond, VA.  23230               262 Duffy Avenue
                                   Hicksville, NY.  11801
Gretchen McMasters                 
WBS&A, Ltd. Strategic              Piyasena Perera
Consulting                         Coudert Brothers
  Services                         1114 Avenue of the Americas
3 Glenway Drive                    New York, NY.  10036
Austin, TX.  78738                 
                                   John Perkins
Michael L. Mead                    Direct Public Offering Council
Telescan, Inc.                     1426 Ingersoll
5959 Corporate Drive               Jefferson City, MO.  65109
Suite 2000                         
Houston, TX.  77036                Mark Perlmutter
                                   Direct IPO
Annita M. Menogan                  4676 Admiralty Way
Attorney                           Suite 520
Marina del Rey, CA.  90292         Washington, DC.  20006
                                   
Jeffrey M. Pollock                 Richard H. Rowe
New Hampshire Business             Proskauer Rose Goetz &
Development                        Mendelsohn
  Corporation                        LLP
1001 Elm Street                    1233 20th Street, NW
Manchester, NH.  03101             Suite 800
                                   Washington, DC.  20036
Irwin Pomerantz                    
Irwin Pomerantz and Associates     Robert K. Sanborn
7700 Sunset Blvd., Suite 205       Crossroads Business Center
Los Angeles, CA.  90046            25 Commercial Drive
                                   Wrentham, MA.  02093
H. Boone Porter, III               
Lewis, Rice & Fingersh, LC         John R. Sarkisian
1010 Walnut, Suite 500             RAM Investment Co.
Kansas City, MO.  64106            P.O. Box 60373
                                   Pasadena, CA.  91116-0373
William J. Ransom                  
Ransom & Assoc.                    W. Parker Seeley, Jr.
106 E Pacemont Road                Seeley & Berglass
Columbus, OH.  43202-1225          3695 Post Road
                                   Southport, CT.  06490
John F. Reilly                     
Obermayer Rebmann Maxwell          Karl M. Sjogren
 & Hippel LLP                      Fairshare Inc.
One Penn Center - 19th Flr.        1072 Sundance Drive
1617 JFK Boulevard                 Fremont, CA. 94539
Philadelphia, PA.  19103-1895      
                                   Mary M. Sjoquist
Michael P. Ridley                  Muldoon, Murphy & Faucette
Arter & Hadden                     5101 Wisconsin Avenue, NW
5 Park Plaza, Suite 1000           Washington, DC.  20016
Irvine, A.  92714                  
                                   Brad Smith
Robin F. Risser                    WRS&A, Ltd. Strategic
Picometrix, Inc.                   Consulting
P.O. Box 130243                      Services
Ann Harbor, MI.  48113-0243        3 Glenway Drive
                                   Austin, TX.  78738
Steven Rosen                       
Franchise Network                  James W. Somers
650 Sentry Parkway, Suite 1        Information Management Group
Blue Bell, PA.  19422                International, Inc.
                                   9893 Georgetown Pike
Irwin M. Rosenthal                 Suite 710
Rubin Baum Levin                   Great Falls, VA.  22066
30 Rockefeller Center              
New York City, NY.  10112          David A. Spotts
                                   NASD
Suzanne E. Rothwell                1735 K Street, NW
NASD Regulation, Inc.              Washington, DC. 20006
1735 K Street, NW                  
Ernest M. Stern                    Pittsburgh, PA.  15222
Venable, Baetjer, Howard &         
Civiletti                          Patrick Valenzuela
1201 New York Avenue, NW           California Trade & Commerce
Suite 1000                           Agency
Washington, DC.  20005             801 K Street, Suite 1700
                                   Sacramento, CA.  95814
Tom Stitzel                        
Boise State University             Garrett Vogel
Department of Marketing &          Code Rite Inc.
Finance                            5601 Bridge Street
1910 University Drive              Ft. Worth, TX.  76112
Boise, ID. 83725                   
                                   Samuel L. Waltz, Jr.
Patrick R. Sughroue                Sam Waltz & Associates
Brookstone Resources, Inc.         Business
3777 Sparks Drive SE                 & Communications Counsel
Suite 130                          P.O. Box 3798
Grand Rapids, MI.  49546           3920 Kennett Pike, Greenville
                                   Station
Arthur Sweet                       Wilmington, DE.  19807-0798
Goremotive Industries Inc.         
18321 Ventura Boulevard            Charles A. Watts, Jr.
Suite 340                          Ferguson, Stein, Wellas,
Tarzana, CA.  91356                Adkins,
                                     Graham & Sumter, PA.
Brice E. Tarzwell                  741 Kenilworth Avenue, Suite
McAfee & Taft                      300
Two Leadership Square - 10th       Charlotte, NC.  28204
Floor                              
Oklahoma City, OK.  73102          Douglas Weisberg
                                   Computer Mart
John J. Tollefsen                  318 South River Road
Internet World Broadcasting        Bedford, NH.  03110
  Corporation                      
16212 Bothell Way SE               Craig E. Weissberg
Mill Creek, WA.  98012             Internet Securities Trading
                                   Corp. & Nat'l Internet
Douglas K. Traynor                 Securities Assn.
First United Equities              7937 SW 105 Place
Corporation                        Miami, FL.  33173
200 Garden City Plaza              
Garden City, NY.  11040            Don Welty
                                   UTFC
James W. Turner                    177 East 100 South
James W. Turner & Co., Inc.        Salt Lake, UT.  84111
800 Downtowner Boulevard           
Suite 103                          Daniel Weston
Mobile, AL.  36609                 League of American Investors
                                   254 Camino Toluca
Eustace O. Uku                     Camarillo, CA.  93010-2662
Exico, Inc.                        
1001 Liberty Avenue                Franklin L. Widmann
Suite 603                          New Jersey Bureau of
Securities
PO Box 47029
Newark, NJ.  07101

Robin M. Wilder
Shumaker Williams, PC
PO Box 88
Harrisburg, PA.  17108

Grafton H. Willey, IV.
Rooney Plotkin & Willey
10 Dorrance Street
Providence, RI.  02903

John G. Wilson
Fairshare, Inc.
6718 Callaghan, #208
San Antonio, TX.  78229

Kenton E. Wood
DH Blair & Co., Inc.
44 Wall Street
New York,  NY.  10005

Mike Young
University of Houston Small
Business
  Development Center
1100 Louisiana, #500
Houston, TX.  77002

Patricia S. Zimmerman
Priority Care
999 Oronoque Lane
Stratford, CT.  06497