NEW YORK (TheStreet) -- Critics have been saying for a long time that the Securities and Exchange Commission misses all the big investor issues of the day, and is at least 30 years behind the times. That is tragically unfair. Why, look at the Investor Bulletin that the SEC just generated, warning of the dangers of a spanking new investor concern called the "reverse merger."The SEC isn't 30 years behind the times. It's 25 years behind the times, and not a second more. As I mentioned in this space last August, reverse mergers have been used by stock scamsters since the 1980s as well as by legitimate companies, and at best are red flags. The SEC is probing a network of Chinese small-cap stocks that are a product of reverse mergers, including China Sky One Medical ( CSKI), Fuqi International ( FUQI) and Rino International ( RINO). I'm glad the SEC's investor-education apparatus has moved so forthrightly into the concerns of the 1980s. All they need to do now is to move into the 1990s and maybe -- who knows? -- in 20 years or so they'll catch up with the 2000s. In furtherance of that goal, as a public service, I am taking the liberty of suggesting other topics of future SEC Investor Bulletins: Reverse Stock Splits. As long as the SEC is focusing on the word "reverse," perhaps it might focus on another "reverse"-related investor concern: the reverse stock split. The SEC has a long list of Investor Alerts, ranging from affinity fraud to government impersonators, and yet it doesn't include this really odious investor rip-off. Reverse splits artificially boost share prices, which is never a good thing. It should be outlawed, or at least warned against. The most recent subject of a reverse split was Citigroup ( C), which carried out a 1-for-10 split in May, and the stock tumbled thereafter -- as reverse-splitted stocks have been known to do. But don't hold your breath on the SEC issuing an Investor Bulletin on Reverse Stock Splits. You can bet that the SEC's fine staff isn't going to tee off a politically powerful potential employer like Citi. Naked-Shorting 'Victims.' Naked-shorting has been a favorite whine theme of inept CEOs and outright scammers since the 1980s and earlier. It's currently a favorite of Overstock.com ( OSTK) CEO Patrick Byrne, who is crying about naked-shorting when he isn't restating his financial statements, fending off a consumer-fraud lawsuit by California law enforcement, and posting comments to magazines that mention him in passing.
A while back, to its credit, the SEC issued an Investor Alert on one of the more egregious naked-shorting scammers, CMKM Diamonds. But the feds haven't done a thing about the stream of baloney flowing from Overstock.com, or tackled another prominent naked-shorting "victim," Novastar International, a subprime lender whose squalid story was detailed in Gretchen Morgenson's excellent new book Reckless Endangerment. An Investor Bulletin on Naked Shorting Crybabies like Novastar, Overstock and Sirius XM ( SIRI) would bring the SEC well into the 1990s. (So would the SEC actually doing something about Byrne, but I'm not expecting miracles.) Which reminds me: How about an Investor Bulletin on Restatements? As the trade magazine BusinessFinance pointed out in 2005, restatements of previous SEC filings by public companies indicate "poor documentation of transactions, the wrong accounting treatment, lack of transparency, weak internal controls, and -- in rare instances - fraud." In other words, it's a whopping red flag. Yet there's been no Investor Bulletin on the subject, and little action by the SEC. The SEC's enforcement division -- as part of its policy of ignoring Sarbanes-Oxley -- only rarely imposes sanctions on companies that put out faux financial statements. In the case of Overstock, which has repeatedly had to restate its financials and once fired auditors who disagreed, the company has accompanied its restatements with attacks on Sam Antar, the former Crazy Eddie CFO who has described the flaws in the company's accounting on his blog. The SEC occasionally pursues companies that restate their finances such as Beazer Homes ( BZH), which recently dismissed its CEO, but more often it relies on the companies to self-police. Fat chance. Anything having to do with Apple. Of all the cult stocks out there, the one that has the most gape-jawed fans are the shareholders of Apple ( AAPL). Now, don't get me wrong: Some of my best friends are Apple users, and will never use any other kind of computer. But an Investor Bulletin on Anything to Do With Apple would warn investors of the hypnotic effect that the mere mention of the name has on investors. It doesn't even have to involve the company. A case in point: On Tuesday, the financial world went into a swoon over word that, as the Wall Street Journal Online put it, "J.C. Penney is tapping Ron Johnson, head of Apple's iconic retail stores, as its new president and eventual chief executive." "Iconic retail stores"? Sure, they're nice stores, but since they belong to Apple, they are "iconic." I'm sure that Johnson is a fine executive, but the 12% stock spike that accompanied the move was a bit too much.
So get cracking, SEC.