FOR IMMEDIATE RELEASE
DATE: June 18, 2007
CONTACT: Nicole Lamboley or Scott Anderson 775-684-5709

Secretary Miller Announces Corporate Filings Reform

Carson City, NV – Secretary of State Ross Miller announced today the Governor's approval of Assembly Bill 25 which strengthens Nevada's laws regarding corporate filing practices.

"Nevada is a great place to do business and provides a favorable climate for those businesses looking to incorporate here. We need to maintain our competitive edge and insure that our filing practices are not used by rogue companies to perpetrate fraud or bilk our citizens," said Secretary Miller. In recent months, a United States Senate subcommittee has been looking at a number of states and their filing practices and is considering federal legislation aimed at reform of commercial recording disclosure requirements. Nevada was one of the states singled out by the leaders of the subcommittee, who sent a letter urging Nevada and other states to address their concerns through state legislation.

Nevada is the first state to adopt a requirement that a company's record of beneficial ownership must be maintained and available upon request by the Secretary of State during the course of a legitimate criminal investigation. The entity must further respond to any interrogatories that would assist in the investigation. Companies not complying with the provisions could have their charter suspended or revoked by the Secretary of State. "This legislation strikes at the heart of the fraudulent practices but does not pose a barrier to legitimate commerce," said Secretary Miller. "Law enforcement can now timely obtain the information they need to further investigations of money laundering and terrorist activity, but legitimate enterprises can continue on with business as usual."

Notably, the legislation also makes substantive changes to the state's corporate custodian laws. In an application to the district court to obtain custodianship of a corporation, the applicant must now include detailed disclosure information that must be filed both with the court and the Office of the Secretary of State. Secretary Miller said, "The custodianship reform requires greater disclosure in cases of corporate takeovers so that our judges and public stockholders can more effectively evaluate which situations are legitimate and which are done with nefarious intent. It is an empowering tool to hold accountable those who have fraudulently abused our laws." In testimony before a legislative committee, Secretary Miller cited fraudulent instances where Nevada based stockholders were able to obtain corporate custodianship, issues shares of stock of that corporation and later bilk investors from substantial sums of money, without alerting the officers, directors or shareholders of the troubled corporation.

The reform legislation further allows the Secretary of State to license and inspect Nevada based transfer agents who register securities not traded and regulated by the major markets. It also gives the Secretary of State authority, upon approval of the Attorney General, to examine records of anyone issuing securities that are not properly licensed. "We have seen several high profile instances of 'pump and dump' stock schemes orchestrated by Nevada based entities but controlled outside of our jurisdiction," said Secretary Miller. "The inspection of Nevada based transfer agents will allow us to take preventative steps to protect our investors and effectively enforce our criminal statutes in instances of white collar fraud."

The new laws contained in AB 25 resulted from a Task Force established by Secretary Miller at the start of his term as Secretary of State. "We assembled a group of corporate law, business and law enforcement experts to develop legislation that would address some of the concerns of the U.S. Senate subcommittee," said Secretary Miller, "and I believe this legislation could become model legislation that other states may want to consider."

Secretary Miller also serves on a Task Force of the National Association of Secretaries of State that is looking at the issues raised by the subcommittee and Nevada's proposed legislation was presented at a recent meeting.

In addition to the substantive reform in AB25, the Secretary of State supported other legislation aimed at curbing fraudulent practices in Nevada. Collectively, these statutes:

• Require any entity filed in Nevada to maintain ownership records in the United States which must be made available to the Secretary of State within three days of a legitimate criminal inquiry. The entity must also respond to any interrogatories issued by the Secretary of State which would assist in the criminal investigation. The Secretary of State is authorized to suspend or revoke the charter of any entity not complying with the requirements

• Authorizes the Secretary of State to license certain Nevada based transfer agents and inspect any necessary records

• Requires substantial disclosure requirements be filed in District Court and with the Office of the Secretary of State before a stockholder can be appointed custodian of a troubled corporation. The applicant also must provide detailed evidence showing attempts to contact the officers, directors and shareholders of the corporation for which custodianship is sought.

• Allows the Secretary of State, upon approval of the state Attorney General, to inspect the records of anyone issuing unlicensed securities.

• Prohibits the use of controversial "bearer shares," which allow the trading of company stock in bearer form by attributing stock ownership to whoever physically holds the shares.

• Allows the Secretary of State to craft regulations to address fraudulent or false filings filed with the Office of the Secretary of State.

Secretary of State Miller's office will be conducting regulation workshops and hearings later in the year detailing the processes relating to AB25 and other business related legislation.

Secretary Miller further announced the assignment of Investigator Chris Young as the office's "Commercial Filings Enforcement Officer." Investigator Young will assist law enforcement agencies in their investigation of Nevada based entities.

Nevada ranks second per capita, next to the State of Delaware in the number of corporate filings. Currently there are over 310,000 entities on file with the Secretary of State's office.