The broker-dealer community has an obligation to the marketplace to possess some fundamental basis for publishing a quote at a given price. The key is to determine what kind of information the broker-dealer can reasonably access for distribution. The release lists a number is items to be obtained and reviewed. While the information would certainly provide the broker-dealers with greater awareness of the issuer, the Commission has to be particularly sensitive to legitimate suggestions that a particular category of information is burdensome to collect. Conversely, if the information is necessary for an investor to make an informed investment decision, the information should be gathered.
Many firm rely on the piggyback exception to the rule.
While we acknowledge that this could have a chilling effect upon the publication of quotes and that liquidity may be detrimentally affected for small business issuers, drastic times call for drastic measures. Microcap fraud is rampant and ultimately detrimental to that same market and many of its investors. Hopefully, this rule will have the effect of encouraging issuers that want to maintain liquidity in their stock to disseminate accurate information to the marketplace. With widespread use of the Internet, this could easily be accomplished. Another reason the elimination of this loophole is important is that investors assume that their brokers have information about stocks that they are quoting.