Sweet to Sour

Early one evening last week, President Edward T. McCormick of the American Stock Exchange got a phone call from SEChairman Sinclair Armstrong in Washington : "Ted, I'm sending you a telegram to the effect that we are suspending trading in Great Sweet Grass Oils pursuant to section 19 (a) (4), and we are also suspending over-the-counter trading under section 15, rule X-15C2-2." Translated, this meant that in "the public interest," and to forestall "fraudulent, deceptive or manipulative acts or practices," Sweet Grass was suspended from trading for ten days. (Toronto continued to trade the stock.) SEC scheduled a hearing to see if it should delist the stock or suspend it from trading for up to a year.

It was about time. For months SEC and the American Stock Exchange had been casting a suspicious eye on the trading in Sweet Grass, a favorite of the little speculator. Fortnight ago, Hearst Financial Columnist Leslie Gould listed it in his "Don't Be a Sucker" series as one of the hot items peddled over the counter by boiler shops using batteries of phones and sweet-talking salesmen. There were several reports that holders of big blocks of the stock were pushing it on over-the-counter brokers at 15% under the market price. On the American Exchange the stock became one of the most heavily traded, ranged from a high of sf to last week's low of if. During one three-day September period trading jumped spectacularly to 177,900 shares v. 18,800 shares in the previous three-day period.

"Glaringly Misleading." SEC showed its first interest last January. Then, the Canadian company, which had interests in oil and gas wells and leases, filed an annual report with SEC. The company said that in return for 2,250,000 of its shares it had acquired the assets of two small oil companies, Pitt Petroleums Ltd. and Depositors Mutual Oil Development Co. SEC took a look at the oil and asset claims and told the company they were not justified. After receiving an amended version, SEC sent a second objection. The company promised to correct its report, did not do so until after the hearing was scheduled.

Last May, a market letter issued by Oil Statistics Co. of Babson Park, Mass. fired a public warning: "The literature disseminated on Great Sweet Grass oils is glaringly misleading. The situation strongly suggests that the 'professionals' have been using grand slam publicity techniques to distribute their own holdings of the stock and they are now pulling out." Oil Statistics also mentioned Kroy Oils as another company Sweet Grass reportedly controlled. Its report sent Sweet Grass stock, which had been ranging between 4 and 5 3/4, down to 3.

Fast Trading.. Not till a fortnight ago did SEC publicly move, order the hearing. This, however, did not stop trading in the stock. As the shares tumbled, the American Exchange's nervous board of governors twice held up trading; it also advised member brokers to explain Sweet Grass's position to all prospective buyers. But trading grew more frenzied, helped by such tips as Du Val's Special Report advising investors to "take advantage of the depressed price and buy." After 114,600 shares changed hands in one day SEC stopped trading. The action did not affect Kroy Oils; at week's end it was one of the most active stocks traded on the American Exchange, closed at 1 3/16up 1/16.

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