Why Regulators Must Act Now

Net stocks ramp so much on mere press releases that fraudsters could easily rig a run-up for their own devices.
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Regulators beware. The propensity for the stock of any old company to

double

upon the issue of a Net-release will soon inspire a dramatic increase in fraud.

Think about it. Soon any company that already has a symbol, even a bankrupt company, can issue a release and get its stock going. That makes it even more imperative that the

Nasdaq

tighten listing requirements for teetering companies.

Let's say

National Gift

falls on hard times and is struggling to keep its head above water. It files for exemption after exemption from Nasdaq listing requirements and keeps its listing. What is to keep National Gift from announcing a Web site to sell giftwrap while simultaneously offering hundreds of thousands of shares for sale?

This is money in the bank for the execs at National Gift. In fact, in a world in which releases are worth a million times their weight in gold, how could bad guys not be tempted to do this?

That's why to avoid a scandal

now

regulators should cull the ranks of near-deceased companies that trade to be sure that they are delisted. Don't wait for this obvious fraud to happen.

James J. Cramer is manager of a hedge fund and co-chairman of TheStreet.com. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions.