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SunnComm Is Included on NASDAQ Threshold Security List of Companies Most Abused by Short Sellers.

PHOENIX -- According to This List, Fewer Than 3% of Listed Public Companies in the US Are Affected by Excessive Failed Delivery of Securities Associated with Naked Short Selling

SunnComm International, Inc. (OTC: SCMI) announced today that based on a new Securities and Exchange Commission regulation governing short selling, known as Regulation SHO, it has been listed on the Threshold Security List published Friday, January 7, 2005. The list is updated daily and includes securities with excessive certificate delivery failures most commonly associated with the illegal practice of "Naked Short Selling." The current list can be viewed at

SunnComm's management is extremely optimistic that Regulation SHO will have a positive impact on mitigating future potential abuse by short sellers who may have played a part in constraining the Company's value despite significant progress in the areas of technology development, new record label business, and shareholder equity growth. Up until now, this short position data has been impossible to verify with any degree of certainty. However, from this point forward, such information should be a matter of public record. The regulation and associated list aims at modernizing rules on short selling by addressing a primary symptom of naked short selling which involves a brokerage firm's failure to deliver stock on the settlement date (

SunnComm International's president, Peter H. Jacobs, explains, "I feel that our company's inclusion on this Threshold Security List supports our contention that there have been substantial naked short positions that may have caused failed deliveries of SunnComm shares resulting in a substantial dilutive effect on shareholder equity. It is unfortunate that a company like ours, with so many accomplishments and that has worked so hard to successfully penetrate the lucrative U.S. music business, has had its value negatively impacted by these activities. For years, SunnComm and many other small public companies have petitioned regulators to take steps to eliminate these value-draining practices. Prior to Regulation SHO taking effect, independent studies indicated that when left up to broker-dealers, only one-eighth of 1% of delivery failures was ever rectified" ( Jacobs continues, "SunnComm intends to monitor these developments as they pertain to our shareholders and we are hopeful that these new SEC regulations will reduce the eroding impact that illegal short selling has had on SunnComm's value for many years."

In practice, brokerage firms generally have to locate securities before accepting a short sale, a process known as "affirmative determination." Brokerage firms also have to borrow a security or be able to provide it for delivery on demand on the settlement date, three days after the transaction. If a firm cannot deliver the securities by settlement day, the trade is considered failed. Such failed trades are expected to be rectified promptly, but the industry has not been diligent in rectifying these failed trades or open short positions. Regulation SHO was born out of a need to enforce the settlement of failed trades by providing guidelines, updated reporting tools and potential brokerage trading penalties resulting is a more secure system of checks and balances.


Regulation SHO took effect January 3, 2005, and provides a new regulatory framework governing short selling of securities. It is designed with the objective of simplifying and modernizing short sale regulation and providing controls where they are most needed. At the conclusion of each settlement day, data is provided on securities that meet two criteria: 1) there are at least 10,000 shares in aggregate failed deliveries for the security for five consecutive settlement days and, 2) these fails constitute at least 0.5% of the issuer's total shares outstanding.


In just five years, SunnComm International Inc. (OTC: SCMI) has become the leader in digital content enhancement and security technology for audio compact disc media with its MediaMax suite of products. MediaMax is used on some of today's best selling music including Velvet Revolver, which reached the #1 spot on Billboard's Top 200 Album Chart in addition to other gold and platinum best-selling releases. MediaMax has been used by over 25 record labels on more than 75 commercial releases generating millions of copy-managed CDs worldwide. SunnComm earns royalties on every CD manufactured with its MediaMax Technology.

MediaMax is state-of-the-art technology which features SunnComm's proprietary On-the-Fly Technology(TM) - giving the consumer a legal method of making licensed duplicate copies of the CD music they purchase without the record label needing to include a 2nd set of songs on the CD in a protected format. MediaMax also includes SecureBurn(TM) - SunnComm's extraordinary new technology that inhibits copying a copy of a MediaMax CD.

MediaMax is mastered directly on the audio CD and is accessible using a personal computer. SunnComm was the first company to commercially release a content-protected audio CD utilizing an early version of the Microsoft Windows Media Data Session Toolkit, and was the first company in America to commercially release a copy-managed audio CD ( .asp). (Due to the length of this URL, it may be necessary to copy and paste this hyperlink into your Internet browser's URL address field.) Bonus features include on-board press kits, artist-related promotions, videos, song lyrics, artist bio page, photo gallery, web links and tune-sharing capability through SunnComm's MusicMail(TM) functionality. For more detailed information about the company, its vision or philosophy, personnel, partners, and customers, please visit the company's Web site at, or call the Company directly at (602) 267-7500. For additional information or investor relations please contact:

MediaMax CD3, On-the-Fly Technology, PromoPlay, TuneShare, MusicMail, Secure Burn and SunnComm are registered and/or trademarks of SunnComm International, Inc., in the United States and/or other countries. The names of actual companies and products mentioned herein may be the trademarks of their respective owners.

This news release contains predictions, projections and other statements about the future that are intended to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of l995 (collectively, "forward-looking statements"). Forward-looking statements relate to various aspects of the Company's operations and strategies, including but not limited to the effects of having experienced significant losses in the past and the risk that the Company may incur losses in the future; the Company's limited liquidity and significant indebtedness; its sales forecasts for future periods not being attained and the risk that the Company will not conclude additional revenue-generating license agreements covering its content protection and enhancement technologies; the Company's marketing, product development, acquisition investments, licensing and other strategies not being successful; possible future issuances of debt or equity securities; the possible incurrence of significant patent litigation expenses or adverse legal determinations that find our patents not to be valid; new business development and industry trends; the possible need to raise additional capital in order to meet the Company's obligations and most other statements that are not historical in nature. Important factors that could cause actual results to differ materially from those described in the forward-looking statements are described in cautionary statements included in this news release. In assessing forward-looking statements, readers are urged to consider carefully these cautionary statements. Forward-looking statements speak only as of the date of this news release, and the Company disclaims any obligations to update such statements.
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Publication:Business Wire
Date:Jan 11, 2005
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