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An Editorial I have officially stepped away from the work side of SLR for a few days. I am not going to be logging into Gmail or Second Life, really, until probably the weekend. Having read all the comments on all these stories, though, I have decided to ask our readers a couple questions. Now, take this as what it is: an editorial from a Second Life CEO that has been around the SL finance community for a while. But also take this as a bit of insight from a former official for the SL Capital Exchange... that still does work from time to time verifying IDs. I'm asking your opinion on this, so please comment. Do you think SL exchanges changed the rules mid-game for existing CEOs? Do you think there is a double standard in the implementation of real-life standards by Second Life exchanges?
Here is why I ask. The World Stock Exchange - or WSE as it is regularly called - was the first major stock exchange to hit the grid about a year ago. In the financial community, it is apparent that the WSE has always been "game-player-oriented," in that they do not REQUIRE real-life disclosure from CEOs and are not as strict on business operation or IPO policy. Everywhere on their website it is apparent that the WSE heavily considers SL a game, and the Linden Dollar to be a fictional currency. But times are now changing. We've seen CEO after CEO, bank after bank, simply disappear from the grid as companies have become insolvent or their operators have lost interest. Investors are angry, and rightfully so. Changing the subject for just a moment... Let's take a look at real life. When I log into my E*Trade investment account, a boxed disclaimer at the bottom of my portfolio page says: "Investment Products: • Not FDIC Insured • No Bank Guarantee • May Lose Value"
Where is this investor accountability in Second Life? We seem to be putting a lot of pressure on CEOs... all the while not remembering that there are dozens of investors in their companies that simply clicked "Buy" without ever looking at a prospectus, asking questions, or even knowing what the business does. Now, let's talk about buying stock in general. In SL, when I want to participate in an IPO, I simply pay an ATM, log onto the website, and buy the stock. If I am smart enough to look at the prospectus, I simply click the name of the company and a single screen of poorly-worded text is presented for my review - like this one. In real life, if I want to participate in an IPO, I first click into the IPO center of the E*Trade website. I click the name of the company and APPLY to participate by completing an extensive survey. I answer questions about my investment experience, objectives, income, and affiliations and then submit the form. Per S.E.C. policy, the brokerage will now assess (automatically through their system) whether or not I am qualified to participate in the IPO. If I am approved, I can THEN access a prospectus like this one (PDF File - 114 pages) to review before I place a Conditional Order for IPO shares. If I am not approved, then my account is blocked from participating in the initial public offering. As exchanges, we are not making sure that investors are well-educated enough to trade stocks without losing money. There are many smart investors, but there are many more that are not so smart. Our exchanges are demanding real-life accountability from CEOs but not investors. They're often not even adhering to real-life standards themselves. I am not bashing any exchange, I am simply asking if we have a double standard here. Someone commented that SL stock trading can either be a game, or it can be real, but it can't be both. I totally agree. If we want to pursue real-life action against SL CEOs that scam us, then up the exchange standards. Qualify investors, make CEOs submit a more detailed prospectus, and for goodness sakes introduce some trading options that will stabilize stock prices a bit! Are the steps the exchanges are taking, such as verifying IDs, really justified... or are they just a step in the wrong direction? Is this just a feel-good campaign for investors that have lost money in companies... to make sure these profitable stock-trading games are perpetuated... or is this really a valid attempt to increase the legitimacy of listed companies? Do exchanges have the right to hold CEOs to real-life standards when said business-owners started their public listings under different rules? When the exchanges are not adhering to real-life standards themselves? And what about the CEOs that IPO'd their businesses under the guise of the systems being a game? Strict financial reporting, regular updating, evaluation of assets are being imposed by exchanges under the threat of real-life action. Is this fair? I am all for legitimacy, transparency, and honesty in listed companies. I just have to play devil's advocate for a moment. What needs to happen to make our markets more lifelike? I do feel, while increased reporting measures and tougher listing requirements are a good thing for new IPOs, that we need to be sensitive to companies that have been around for a while... operating under different standards. I also feel like our improvements in the SL stock market should not stop with the companies, but should extend to the individual investors and even the exchanges themselves. Just a random opinion. What do you think? Xavier Mohr
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