The Securities and Exchange Commission (the “SEC”) announced the temporary trading suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”), of trading in the securities of Winsonic Digital Media Group, Ltd. (“WDMB”), commencing at 9:30 a.m. EDT on March 24, 2015 and terminating at 11:59 p.m. EDT on April 7, 2015.
The SEC temporarily suspended trading in WDMG due to a lack of current and accurate information concerning WDMB’s securities because it has not filed any periodic reports since the period ending September 30, 2008, or any reports since June 2011.
The SEC cautions brokers, dealers, shareholders, and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by the company. Read More
Recently, the FINRA Investor Education Foundation issued a new research report about the impact of financial fraud on its victims. FINRA’s report reveals that nearly two thirds of self-reported financial fraud victims experienced at least one non-financial cost of fraud to a serious degree—including severe stress, anxiety, difficulty sleeping and depression. FINRA Foundation’s research examines the broader psychological and emotional impact of securities and other forms of financial fraud.
“Financial Fraud’s effects linger and cause distress well after the scam is over. For the first time, we have data on the deep toll that fraud exerts on its victims, and the results are sobering. This new research underscores the importance of the FINRA Foundation’s work with an array of national, state and local partners to help Americans avoid fraud, and assist consumers who have been defrauded,” said FINRA Foundation President Gerri Walsh. Read More
More often than not, bankruptcy is the kiss of death for a public company.
In most cases, when a company emerges from bankruptcy, the bankruptcy reorganization plan will involve reverse stock splits or other acts which dilute or cancel the existing common shares and the old shares will be worthless. Read More
When a person or group of persons acquires beneficial ownership of more than 5% of a voting class of a company’s equity securities registered under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”), they are required to file a Schedule 13D with the SEC.
Once a company completes its going public transaction and the staff of the Securities and Exchange Commission (“SEC”) declares its Form registration statement effective under the Securities Act of 1933, as amended (the “Securities Act”), the company will become subject to the SEC’s periodic reporting requirements. Companies can also become subject to the SEC’s reporting requirements by filing a registration statement under the Securities Exchange Act of 1934, as amended such as a Form 10 for Form 8-A.
These requirements stipulate that the company must file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K on an ongoing basis. Holders of 5% or more of a company that registers a class of securities under the Exchange Act become obligated to file certain beneficial ownership reports including Schedule 13D. Read More
Form S-8 (“Form S-8″) is a short-form registration statement under the Securities Act of 1933, as amended (the “Securities Act”) used to register employee and consultant benefit and compensation plans. Form S-8 cannot be used until the issuer has completed its going public transaction and become an SEC reporting company.
This Securities Lawyer 101 Q & A discusses the most common questions we receive from our clients about Form S-8 Registration Statements.
Q. What is a Form S-8 Registration Statement? Read More
On March 13, 2015, the Securities and Exchange Commission (the “SEC”) provided guidance addressing waivers of disqualification for bad actors under Regulation A and Rules 505 and 506 of Regulation D of the Securities Act of 1933, as amended. A waiver of disqualification under these provisions may be granted by the SEC’s Division of Corporation Finance if it determines after a review of all the facts and circumstances that the applicant has met its burden of showing good cause that it is not necessary under the circumstances that the exemptions from the bad actor provisions be denied. Read More
A few weeks ago, on March 2, 2015, the Securities and Exchange Commission (the “SEC”) announced trading suspensions of 128 OTC shell companies to prevent corporate hijackings of the issuers and or their CUSIP numbers. Corporate hijackings have plagued the microcap markets for decades. The SEC stated such action was taken to “keep them out of the hands of microcap fraudsters” in connection with “Operation Shell-Expel,” its highly publicized microcap fraud-fighting initiative. Even a minimal review of a few of the suspended companies is disappointing because it reveals that the SEC trading suspensions were years too late. Many of the shell companies were hijacked years ago and/or remained in the hands of shell peddlers who had already profited from selling them for use in reverse merger transactions. Some can even be traced to notorious felonious lawyer and shell purveyor, Peter Berney. Many believe that Berney, a lawyer was given a license to swindle after becoming a convicted felon in exchange for setting up buyers of his hijacked custodianship shells including his own clients.
Operation Shell Expel was announced by the SEC in 2012. Shell companies have faced selective scrutiny for years, particularly when used in connection with “reverse-mergers.” Read More
Last week, the Utah legislature passed a law that will create a white-collar offender registry. Similar to a sex offender registry, it will offer a website where anyone interested can view photos of convicted white collar criminals, along with their vital statistics. It will include anyone who’s been convicted of a finance or fraud-related crime—securities fraud, mortgage fraud, money laundering, Ponzi schemes—since 2005. An initial conviction will place the offender on the site for ten years; his third will land him there permanently. The only way out is for him to make full restitution to his victims. Read More
Form S-1 requires companies to provide a Plan of Distribution as required by Item 508 of Regulation S-K. Item 508 requires a company to describe how it will offer its securities to the public. When a company indicates that its officers or directors, or any person(s) other than an underwriter, will sell its securities, in what is called a Selling Stockholder or Resale Registration Statement, the SEC asks you to name those persons and describe the process through which these selling stockholders will offer and sell the company’s securities when going public.
One aspect of the disclosure in this section is that the SEC makes the issuer set a price on the stock that your selling stockholders will be selling. For example, “The selling stockholders will offer their shares at $___ (insert specific fixed price) per share until our shares are quoted on the OTC Markets, and thereafter at prevailing market prices or privately negotiated prices. We will not receive proceeds from the sale of shares from the selling stockholders.” Read More
A going public lawyer helps the company comply with the expansive disclosures required in registration statements filed with the Securities and Exchange Commission (the “SEC”). Proper disclosure is critical during the going public process. SEC disclosures are most often prepared by the company’s going public attorney. Regardless of the venue for listing or trading, the securities laws require accurate and complete disclosure. A going public lawyer assists the issuer in determining whether it should conduct an initial public offering or a direct public offering as well as whether it qualifies for a national stock exchange and/or the most appropriate tier of the OTC Markets.
An issuer must generally disclose information about its business, operations, financial condition, risks, management, litigation and shareholders, in addition to how many shares it will offer and the share price. Issuers must also disclose the use of offering proceeds if they are registering shares for a capital raising transaction. As such, a going public lawyer reviews a mound of documents in going public transactions. Read More
On March 13, 2015, the Securities and Exchange Commission (the “SEC”) charged eight officers, directors, or major shareholders of public companies in connection with going private transactions. According to the SEC, the defendants failed to update their stock ownership disclosures to reflect material changes, including steps to take the companies private. Each of the respondents, without admitting or denying the SEC’s allegations, agreed to settle the proceedings by paying a financial penalty.
The charges involve outdated disclosures in reports filed by “beneficial owners” who hold more than 5 percent of a company’s stock. Federal securities laws require beneficial owners to promptly file an amendment when there is a material change in the facts previously reported by them on Schedule 13D, commonly referred to as a “beneficial ownership report.” The disclosure requirements include plans or proposals that would result in certain transactions, such as a going private transaction. Read More
Companies may use an exemption under Regulation D to offer and sell securities without having to register the offering with the Securities and Exchange Commission (“SEC”). When relying on such an exemption, companies must file what’s known as a “Form D” after they first sell their securities. Form D is a brief notice that includes basic information about the company and the offering, such as the names and addresses of the company’s executive officers, the size of the offering and the date of first sale. Read More
Proper disclosure is critical during the going public process. SEC disclosures are most often prepared by the company’s going public attorney. The securities laws require companies provide expansive disclosures in registration statements filed with the Securities and Exchange Commission (the “SEC”). Regardless of the venue for listing or trading, the securities laws require accurate and complete disclosure. A going public attorney assists the issuer in determining whether it should conduct an initial public offering or a direct public offering as well as whether it qualifies for a national stock exchange and/or the most appropriate tier of the OTC Markets.
An issuer must generally disclose information about its business, operations, financial condition, risks, management, litigation and shareholders, in addition to how many shares it will offer and the share price. In addition, if Form S-1 is used, the company’s going public attorney must render a legal opinion as to certain corporate matters. Providing the required disclosures will help assure there are no future problems with DTC eligibility. Read More
On March 4, 2015, the Securities and Exchange Commission (the “SEC”) announced it had charged H.D. Vest Investment Securities with violating key customer protection rules after failing to adequately supervise registered representatives who misappropriated customer funds.
On March 6, 2014, the Securities and Exchange Commission (the “SEC”) announced it had added Billy Joe Adcox, Jr. of Ruston, Louisiana to a civil injunctive action in the United States District Court for the Western District of Louisiana alleging that Adcox, Scott Zeringue and Jesse Roberts, III engaged in insider trading in the securities of The Shaw Group, Inc. (“Shaw”) ahead of a public announcement that Shaw was going to be acquired by Chicago Bridge & Iron Company N.V. (“CBI”).
The SEC alleges that Adcox was tipped by his long-time friend, Jesse Roberts, III, also of Ruston, Louisiana. According to the SEC, Adcox knew Roberts obtained the confidential information about the impending merger from Roberts’ brother-in-law, Zeringue, a Shaw insider. Adcox and his relative allegedly bought Shaw stock based on the tip and, about two weeks later, sold the stock for a profit of over $111,000. Adcox’s relative also tipped a third unnamed individual, who made about $43,000. Read More
The Financial Industry Regulatory Authority (“FINRA”) and the Securities and Exchange Commission require that broker-dealers perform adequate due diligence before letting a registered representative recommend private placements made pursuant to Regulation D of the Securities Act of 1933, as amended (the “Securities Act”). FINRA listed due diligence of private placements as a concern in its 2015 Regulatory and Examination Priorities). FINRA’s recent case against LaSalle St. Securities LLC (“LaSalle”) demonstrates that this due diligence obligation is mandatory even for private placement offerings made to accredited investors.
FINRA found certain deficiencies that occurred at various times during a four-year period in connection with the offerings of four issuers. The findings stated that with respect to private placement offerings, LaSalle Securities failed to exercise adequate due diligence before allowing a registered representative to recommend the offering to four accredited investors and distributed a private-placement memorandum to potential investors that did not include certain material facts and relied on a flawed methodology for projecting return on investment. Read More
Form 10 is a type of registration statement used to register a class of securities under Section 12(g) of the Securities Exchange Act of 1934 (“Exchange Act”). Both public and private companies can register a class of securities on Form 10. This blog post addresses the most common questions we receive about Form 10 registration during the going public process.
Companies become subject to the SEC’s periodic reporting requirements a number of ways including by filing a registration under the Securities Act of 1933, as amended or pursuant to the Securities Exchange Act of 1934. The SEC periodic reporting rules require that publicly traded companies disclose a wealth of information to the public. Periodic reporting also requires that these reports be written in plain English. Understanding these reports helps investors make informed decisions regarding whether to buy, sell or hold a company’s securities.
Periodic reports provide issuers with the opportunity to provide shareholders with transparency by telling their story. Companies that provide materially false or misleading statements, or omit material information that is necessary to render a report not misleading in their periodic reports are subject to liabilities arising under federal and state securities laws. Investors can obtain a company’s Form 10-K, Form 10-Q and Form 8-K filings on the SEC’s EDGAR database. Read More
Posted By Brenda Hamilton, Securities Lawyer
It is not unusual for a private or public company to be approached by person (“Finder”) who offers to locate investors in exchange for a success fee. Most finders are not registered as broker-dealers with the Securities and Exchange Commission (“SEC”) or Financial Industry Regulatory Authority (“FINRA”). The possibility of receiving capital, even through the efforts of a finder creates a tempting opportunity for issuers going public in need of capital. Matching companies with investors can be a lucrative proposition for the Finder. While it may seem harmless, the SEC does not think so and in fact, the SEC frequently brings cases against unregistered Finders and those who aid and abet them. This Q & A addresses common questions we receive from our clients about Finders. Read More
Institutional investment managers that exercise investment discretion of $100 million or more in Section 13(f) securities holdings, which include holdings in exchange-traded securities, shares of closed–end investment companies and certain convertible debt securities, must publicly disclose their holdings on Form 13F each quarter.
An “institutional investment manager” is an entity that either invests in, or buys and sells, securities for its own account. As such, banks, insurance companies, and broker/dealers, corporations and pension funds that manage their own investment portfolios are subject to the rule if they invest in, or buy and sell securities for their own account. Read More