The 2007 PIPE’s conference, held last week in New York, was attended by major players in the rapidly evolving reverse merger marketplace. Over the past year the reverse merger segment of the financial services industry has emerged as the defacto IPO marketplace for emerging growth companies and has gained credibility with the SEC. The acceptance of the reverse merger sector was demonstrated by the SEC introducing six new rule proposals to assist small companies with the going public process.

The fifth annual conference was staged by DealFlow Media ( www.dealflowmedia.com ), which publishes The PIPE’s Report. Here are some excerpts from a recent article written by DealFlow Media.

Two current and three former Securities and Exchange Commission attorneys detailed the travails of a regulatory body that strives for efficacy despite being understaffed, divided and potentially burdened by outside influence from Wall Street elite.

PIPE attorneys explained significant advantages to small companies of the SEC’s expected adoption of proposed rule changes to S-3 eligibility and Rule 144 offerings. In some ways, the proposals reflect the SEC’s traditionally negative view of PIPE’s; they give smaller companies more recourse to access public capital with less of a discount and less necessity to issue restricted stock.

A panel of five DLA Piper attorneys and SEC enforcement attorney Julie Riewe reported that the SEC has been sending inquiries to hedge funds that invest in PIPE’s requesting records of all client accounts and records in all PIPE transactions. This is part of the ongoing effort looking into insider trading in connection to PIPE’s.

Statisticians, major placement agents and investment groups reported expansion in the types of PIPE issuers as well as investors. There is a watchful eye on China and increasing PIPE investment there, especially in companies that have merged into U.S. shells. Brad Ackerman, director of PIPE fund-of-funds manager Hull Capital, is interested in China as a PIPE investment opportunity, but cautions against looking at the region as just a short-term hot play. International PIPE’s outside China are also becoming more common. Tony Ghee of Yorkville Advisors detailed pitfalls and benefits of PIPE investment in public companies on foreign exchanges including those in India and Italy.

Keynote speaker Gary Aguirre, a former SEC investigator who was fired from the SEC in relation to his investigation into Pequot Capital and Morgan Stanley’s CEO John Mack, offered constructive criticism on the current regulatory environment. Addressing hedge fund managers on the issue of hedge fund fraud, Aguirre feared he’d be driven offstage by a hostile audience. He survived unscathed.

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