SMALLXCHANGE.COM, TRICALPA.COM

The Commission has issued three orders suspending or prohibiting the performance of unauthorized activities on the Internet:

• the indefinite suspension of the organized trading effected on the web site www.smallxchange.com (Resolution 12411);
• the suspension for 90 days of the unauthorized solicitation of investors and unauthorized public offers to exchange financial instruments on the same site(Resolution 12412);
• the prohibition to market units of non-harmonized collective investment undertakings on the web site www.tricalpa.com (Resolution 12410)

With the first measure the Commission, pursuant to Article 78.2b) of the Consolidated Law on Financial Intermediation, ordered SmallXChange.Com Ltd. (with registered office at Tortola in the British Virgin Islands), as the organizer and operator, to suspend indefinitely the trading organized on the web site www.smallxchange.com.

Consob found, in fact, that this site contained a financial circuit - referred to on the site as a private stock exchange market - involving companies listed on the exchange and investors able to buy and sell shares or capital parts of such companies. Both companies listed on the bourse and investors have to be shareholders of SmallXChange.Com Ltd.

The Commission considered that an organized trading system for financial instruments was being operated on the site outside regulated markets and that such trading, since it was carried out in connection with the unauthorized performance of activities reserved by law to persons possessing the prescribed authorizations and with the solicitation of investors in violation of the information requirements to which offerors are subject under the Consolidated Law on Financial Intermediation, was highly prejudicial to the protection of investors.

In accordance with Articles 99.1a) and 102.3a) of the Consolidated Law on Financial Intermediation the Commission also ordered SmallXChange.Com Ltd. to suspend its unauthorized solicitation of investors and unauthorized public offers to exchange financial instruments on the web site www.smallxchange.com.

Analysis of the site revealed that there were 13 listed companies, including SmallXChange.Com Ltd. itself. Except for the organizer of the system, information on the companies listed on the exchange is not available directly on the site but in some cases by means of ypertext links, not all of which were operational.

Taking into account that companies wishing to be listed on the exchange have to become shareholders of SmallXChange.Com Ltd. (by exchanging some of their shares for shares of the latter), that investors wishing to trade via the system must also become shareholders of SmallXChange.Com Ltd., that shares or capital parts of the companies listed on the exchange are offered to the public on the site, and that all these activities are performed in violation of the rules in force concerning public offers to exchange financial instruments and the solicitation of investors, the Commission suspended their performance for 90 days.

Lastly, in accordance with Article 54 of the Consolidated Law on Financial Intermediation, the Commission ordered Tricalpa Finance Inc., with registered office in the British Virgin Islands, to desist from marketing units of non-harmonized collective investment undertakings. Analysis of the web site www.smallxchange.com revealed that a hypertext link made it possible to reach Tricalpa Finance Inc., which offers a range of services, including that of collective portfolio management by means of a non-harmonized common fund called Millennium Bug International Fund.

Since the Millennium Bug International Fund, established in the British Virgin Islands with registered office in the Citco Building, is not authorized to engage in the solicitation of public savings in Italy and no procedure for the authorization of marketing activity has ever been initiated, the Commission found that it was violating Articles 1 and 2 of Legislative Decree 86/1992, which subject the marketing in Italy of the units of a collective investment undertaking that is not harmonized pursuant to Directive 85/611/EEC to the successful completion of an authorization procedure and the filing of the prospectus of the collective investment undertaking with Consob.

The order issued by the Commission prohibits further marketing of the units of the common fund, which is carried out by Tricalpa Finance Inc. on the web site www.tricalpa.com, where information and contract forms are made available to Italian customers. (in Consob Informa n. 10/2000 - 2 March 2000).