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Notice of SEC Investigation

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By TMFJake
April 1, 2009

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SEC to Investigate Motley Fool CAPS

Just like any other Tuesday night after work, I was having a little sushi and a lot of sake.  And then the call came.  It was Larry Graftman, Chief Legal Counsel at The Motley Fool.  "You're not going to believe this Jake, but I just got off the phone with the SEC," he said. "You what??!!," I screamed, giving off a white spittle spray like rice thrown impulsively at a wedding.

What he told me next, I still can't hardly believe, although the cold hard reality started to set in after a few more sakes.  And, as it will require us to make some changes to CAPS, I thought it best to let all of you in on what I hope will be a temporary (as in nasty,brutish and short) investigation by the SEC.

We'll provide a link to the investigation details once they are posted on the SEC site, but, according to Graftman, we have been served with "Litigation Release No. 090401, Securities and Exchange Commission vs. Motley Fool CAPS."

Apparently a complaint was filed, which has led to an investigation into the following:

* The allegation that CAPS blogs have contributed to the loss of confidence in the credit markets.

*  Claims that CAPS Stock Ratings and Blogs have exacerbated the subprime crisis by expressly exposing fraud without making "adequate conditional exemptions" to distinguish between "criminal negligence" and "gross incompetence."

* Concerns over whether or not CAPS underperform sector calls and banking accuracy on underperforms are tantamount to spreading rumors designed to drive down the price of a stock.

***Naturally, The Motley Fool strenuously maintains that CAPS is designed for the sole purpose of giving investors more transparent, timely and useful information.***

Without admitting to the allegations contained within the complaint, we are agreeing to the SEC's proposed  Emergency Order, which will require the following changes:

�* We will temporarily ban all underperform picks on Motley Fool CAPS as of noon today.

�* We will fully cooperate and assist the SEC in their analysis of sweeping measures to combat blogs that misinform, abuse, and impoverish rather than educate, amuse and enrich.

�* At the end of an initial 24 hour "discovery phase," the SEC will determine whether the above measures provide adequate protections to the financial markets for the duration of the ongoing investigation.  If not, we will suspend the operation of CAPS until this matter is resolved.

As always, thank you for helping to make CAPS just a little smarter-please continue to do so over the next 24 hours, and I hope a lot longer.

As I am a named defendant in the complaints, this may be my last blog on CAPS.

Fool On!