A Tale of Two Unregistered Dealers – Toxic Convertible Note Lenders Under SEC Scrutiny

A Tale of Two Toxic Convertible Note Lenders

In 2020, the Securities and Exchange Commission (SEC) stepped up its efforts to reel in “toxic lenders”: individuals who profit enormously by buying convertible securities in penny stock companies and selling the shares they obtain upon conversion of their promissory notes, warrants or preferred stock. Since those conversions usually take place at a considerable discount to market price, as tranche after tranche is sold, the stock price plummets and shares outstanding soar. Investors flee the staggering dilution, scrambling to get out before a big reverse split becomes inevitable. The companies themselves are doomed unless management can find a way to break the vicious cycle caused by the toxic lenders.

The SEC once had difficulty dealing with toxic lenders. The lenders insisted they were engaged in lawful business. They had contractual relationships with the issuers from whom they purchased notes, and the parties involved were merely acting in accordance with the terms of those contracts, they claimed. For a while, the regulator had some success alleging that in order to sell the stock they obtained through conversion, certain lenders illegally relied on a provision of Regulation D, Rule 504 that granted an exemption from registration under the blue sky laws in force in some states. They sued Edward Bronson and his firm E-Lionheart (d/b/a Fairhills Capital) on those grounds in 2012; in the following year, Curt Kramer and his Mazuma companies agreed to settle a similar action. But Bronson, Kramer, and others like them altered their methods and were soon back in business.

The SEC needed a new approach, and in 2017, it found one. It charged Ibrahim Almagarby and his Microcap Equity Group (MEG) with acting as unregistered dealers. The Securities Exchange Act of 1934 (Exchange Act) defines a dealer as “any person engaged in the business of buying and selling securities for his own account, through a broker or otherwise.” That naturally sounds like a description of a normal retail investor, so there’s an exception for “traders,” who buy and sell for their own accounts, “but not as part of a regular business.” Anyone who fits the definition of a “dealer” must register with the SEC and FINRA. Failure to do so constitutes a violation of the securities laws. In 2008, the SEC produced a Guide to Broker-Dealer Registration that clearly explains who may need to register.

The Commission’s suit against Almagarby proved successful. In August 2020, the judge in the case granted the SEC’s motion for summary judgment, noting that:

By Defendants’ own admissions, MEG’s entire business model was predicated on the quick sale of shares and Defendant Almagarby’s stated goal was to “turn [his] money around as fast as possible”… Further, the sheer volume of the number of deals and the large sums of profit Defendants generated—no fewer than 962 sales of shares and more than $2.8 million in proceeds—gives credence to the proposition that Defendants were engaged in the “business” of buying and selling securities.

The SEC took on three toxic lenders last year: John Fierro, Justin Keener, and John Fife. Fife’s name is familiar to most who follow the OTC market. For the past ten years, he’s been among the most active of his cohort, and the deals he’s cut appear to have been among the most remunerative. The SEC alleges that between 2015 and 2020, he profited to the tune of $61 million. We wrote about him when the SEC suit was filed. By now, that litigation is well underway. Fife’s defenses, and a related action brought by him against the Financial Industry Regulatory Authority (FINRA), are interesting enough to have attracted our attention once again.

The SEC v John Fife

The SEC sued Fife, a Chicago resident, and five of his many companies—Chicago Venture Partners, L.P., Iliad Research and Trading, L.P., St. George Investments LLC, Tonaquint, Inc., and Typenex Co-Investment, LLC—on September 3, 2020. The complaint is simple, alleging that Fife purchased large numbers of convertible notes from penny stock issuers, and after the holding period specified by Rule 144 had expired, converted them to common stock and sold them into the public market. Usually, he made successive conversions and sales until the note was exhausted. The scale of the operation and the regularity with which Fife entered into new transactions make clear that he was engaged in a “regular business,” according to the SEC.

His companies played various roles. At his own website, Fife—who in his photo looks much younger than his current 60 years—explains that he’s a venture capitalist specializing in PIPE (Private Investment in Public Equity) deals. He adds that Chicago Venture Partners (CVP) is “a leading provider of capital to small capitalization companies listed on the Nasdaq and OTC Market.” From the issuer’s perspective, PIPEs are not an ideal way to raise money. The Nasdaq notes that they’re generally used when “equity valuations have fallen,” and the company needs to raise money quickly. It signs a securities purchase agreement and, in some cases, offers registration rights. In a PIPE offering, investors often buy convertible securities. How is a real PIPE offering different from what toxic funders acting as unregistered dealers do? In a PIPE, a placement agent, often an investment banker, will sell a company’s securities to a limited group of accredited investors. But that is not what toxic lenders do. They use only their own money and buy those securities for their own accounts as a regular business.

In Fife’s case, it’s a business requiring the help of a number of employees. The complaint, in fact, alleges that the CVP website advertised the defendants’ willingness to buy issuers’ stock through PIPE transactions, and that:

Defendants also directly solicited microcap issuers by cold calling or emailing issuer representatives. In these direct issuer solicitations through phone or email, Defendants typically represented to issuer representatives that Defendants sought to invest in the issuer’s stock and explained the benefits of a convertible debt transaction. Defendants also attended conferences at which they solicited penny stock issuers in person[.]

Fife and his people also used third-party finders working on commission to solicit issuers looking for “financing” and willing to sell convertible notes in exchange for it. The notes the defendants purchased could be converted into the issuers’ stock at a discount to market as high as 60 percent. The SEC points out that “[t]his mechanism, which gave Defendants a spread or markup on the stock that they sold, is a common attribute of a securities dealer.” In addition, many of Fife’s securities purchase agreements contained a “true-up” provision that required the issuer to issue yet more stock to the defendants if the price of the stock in question declined in 15 to 20 business days following a conversion. It goes without saying that such declines were often caused by the defendants’ sales of newly issued stock into the market. The discounts upon conversion and the true-up agreements guaranteed a profit for Fife.

The SEC asserts that Fife and his companies violated the securities laws by acting as unregistered dealers and requested an injunction restraining them from continuing that behavior, along with disgorgement, civil penalties, and a penny stock bar for Fife.

Justin Keener, the “Trader”

Fife and his companies did not respond to the SEC complaint until December 7, 2020, when they filed a motion to dismiss and a brief in support of it. Meanwhile, another “trader” targeted by the SEC, Justin Keener (d/b/a JMJ Financial), was sued by the SEC on March 24, 2020. On June 22, 2020, he filed a motion to dismiss in which he claimed he was an individual investor who had “for more than a decade, invested his own money under the name JMJ Financial.” He gave microcap companies money, and in return, received convertible notes. He did not advise the issuers or provide any other service to them or to the general public. He was, then, not a dealer but a trader who had violated no securities laws. His attorneys put it more colorfully: “[J]ust as a grocery store does not become a restaurant simply by selling a lot of food, a trader does not become a dealer simply by selling a lot of stock.”

On August 14, Judge Beth Bloom filed her order on Keener’s motion. She notes that although he sought to give the impression that he was a “trader” working entirely on his own, the SEC had alleged in its complaint that:

Keener operated a website that advertised his business to issuers. Keener hired employees, who worked on commission, to solicit issuers who were willing to sell convertible notes to him. Keener and his employees also attended, and sometimes sponsored, conferences at which they solicited penny stock issuers in person. On several occasions, Keener made PowerPoint presentations at these conferences that included a notarized affidavit from his accountant stating that he had $20 million “committed” to purchase convertible notes from issuers.

The judge was left to determine whether Keener was entitled to dismissal of the complaint on the basis of two issues: first, whether the Commission has alleged a plausible claim that Keener is a “dealer” as defined by the Exchange Act, and second, if so, whether the complaint is a violation of Keener’s right to due process.

Bloom notes that the SEC has previously claimed that “the primary indicia in determining that a person has ‘engaged in the business’ within the meaning of the term ‘dealer’ is that the level of participation in purchasing and selling securities involves more than a few isolated transactions.” Bloom found Keener, who bought and converted more than 100 convertible notes from more than 100 microcap issuers during a three-year period, was not engaged in a few isolated transactions. The complaint also showed that Keener advertised his business and his willingness to buy convertible notes. He also appeared at a conference attended by issuers looking for financing and claimed he had $20 million burning a hole in his pocket.

So, in the end, the judge denied Keener’s motion, concluding that she need not resolve the question of whether he is or is not a dealer at this stage. She needed only to determine whether the SEC had asserted a plausible claim that he is. She additionally found no due process violation. Keener was ordered to answer the complaint by August 27, 2020. He met the deadline with a simple answer that presented few specific affirmative defenses, though he “reassert[ed] all defenses contained in his prior motions in this action, including the Motion to Dismiss Defendant previously filed.” Evidently, he still considers himself to be a trader. 

The matter continues. For much of the current year, Keener has been attempting to persuade, and eventually compel, the SEC to produce evidence from its archives he believes would prove his point. As things currently stand, the Commission has filed a motion for summary judgment; Keener must respond by August 31.

Fife Responds

Fife had the good fortune to be the last alleged dealer the SEC sued in 2020, had no doubt been following developments in the Almagarby and Keener cases as he prepared his own defense. Both would have been important to him in different ways. The Almagarby case had been decided, and Keener was an old friend and colleague. 

Fife chose, like Keener, to begin by filing a motion to dismiss. If it succeeded, the case would end in his favor. The motion itself explains simply that the complaint should be dismissed because the Commission’s definition of “dealer” flies in the face of the Exchange Act as it’s been understood since 1934 and because the Commission violates the due process clause because it seeks “to retroactively enforce a novel, newly-minted interpretation of ‘dealer’ that jettisons decades of agency and judicial application.” There’s more, and it’s all explained at length in the brief in support.

The brief is bold—it begins with an assertion that the SEC’s action is “premised on a government bait-and-switch”—and complex but ultimately unsatisfying. The argument constructed by Fife’s attorneys is built on the notion that for “decades,” the Commission, “through published guidance and no-action letters, has reassured lenders (and other market participants) that they would not need to register as a ‘dealer,’ so long as they refrained from engaging in traditional dealer activities, such as effecting customer transactions or offering investment advice.”

In support of that contention, the motion cites hedge fund giant Steve Cohen, whose firm S.A.C. Capital Advisors LLC was accused by the SEC of insider trading and pled guilty in a fraud prosecution brought by the Department of Justice. Several of the fund’s traders went to prison, and Cohen himself was barred from a supervisory role at S.A.C. or any firm. In response, he turned S.A.C. into the Point72 Asset Management family office in 2014. In 2018, after a two-year ban, Point72 reopened to outside investments. 

Why you may ask, is any of that relevant? Because CVP is Fife’s family office. It uses no money contributed by outside investors; all the cash lent out is Fife’s. The brief invokes the names of Cohen and Point72, saying the latter “bought and sold billions of dollars of securities each year… Yet the Commission never claimed that firm was a “dealer.” Indeed, it was the SEC itself that ordered Cohen to “transfer” his trading activity to a “family office” not registered with the Commission.”

Was it? In reality, in 2014, the SEC reached a settlement with S.A.C. and its co-defendants. They agreed to “distribute certain ‘side pocket investments, proceeds therefrom or ownership interests in an entity holding all or a portion of such investments’ to a ‘family office’ managed by Steven A. Cohen…” The SEC did not, it seems, “order” Cohen to do that; it was the settlement arrived at. And, as even Fife acknowledges, no one ever suggested Cohen or S.A.C. was an unregistered dealer. It is impossible to see how this attempt to compare Fife’s home office to Cohen’s (which is now once again a hedge fund taking outside investments) will help Fife’s case. It doesn’t matter if Fife’s CVP is a home office; it matters if Fife is acting as an unregistered dealer. 

Fife views the SEC’s reduction of the holding periods required by Rule 144 in 1997 and 2007 and its removal of “volume of sale limitations” as an attempt on the Commission’s part to “promote capital formation, particularly for smaller companies.” And, the brief asserts, “CVP answered the Commission’s call.” As far as we can see, however, the Commission did not call on Fife to act as an unregistered dealer.

More reasonably, Fife points out that over the years, he financed a large number of issuers that reported to the SEC and that his stock purchase agreements were memorialized in countless Forms 10-K, 10-Q, and 8-K. The SEC made no objection, though now it says CVP has been a dealer all along. He argues that for nearly 100 years, there’d been a “traditional conception of a dealer—a public securities business serving its customers.”

He then introduces a novel theory. CVP is not regularly buying and selling securities because to do so “is to buy and sell the same type of security, in the same condition, around the same time.” In support, he cites a case involving a shrimp canner, saying that “[e]ven though [he]… bought (raw) shrimp and sold (canned) shrimp, [he] was not ‘buying and selling shrimp’ in the statutory sense, because the shrimp were not in the same ‘form and condition,’ and so was not a dealer in shrimp. Fife, therefore, is not a “dealer” in securities because he buys promissory notes, converts them to common stock, and sells the stock: “CVP does not buy and sell the same security in the same condition.”

He also addresses exceptions to the definitions offered in the Exchange Act. Citing a series of cases from the 1930s, he notes that according to one, an investment trust was not a dealer, even though its “activities… consisted in the buying and selling of securities”; according to another, an “investment business,” which “buys and sells shares of stock” for its own profit,” is not a dealer in securities.” A decision from another case from the same period held that the company in question was “clearly… not a merchant or dealer in securities” because “it did not advertise or otherwise hold it out to the public as a dealer in securities.”

The SEC has, however, alleged that CVP directly solicited issuers it believed might be interested in selling convertible notes in exchange for cash. 

Unlike Keener, Fife doesn’t claim he was just a “trader,” within the exception cited by the Commission. He does claim that CVP, a family office, is not the kind of firm an “ordinary person” would associate with dealing. It’s hard to see how such a contention would be provable or relevant. In a bit of one-upmanship, he observes that defendants in the other recent cases didn’t get their defenses right and that Keener, in fact, conceded that the Exchange Act “appears to broadly cover anyone in the business of buying and selling securities.” His own argument is that for a family office and a few other types of businesses, that is permissible and is not a violation of the provisions of the Act.

He also raises the question of another case involving whether a firm was or was not a dealer: SEC v. Big Apple Consulting USA, Inc., 783 F.3d 786 (11th Cir. 2015). The Eleventh Circuit rejected the defendants’ appeal, but Fife and his legal team believe that’s irrelevant, because “Big Apple concerned the Securities Act, not the Exchange Act,” and “the Securities Act adopts a materially broader definition of ‘dealer’ than does the Exchange Act.”

Keener had tried a similar argument in his own motion to dismiss, and it was rejected, along with the entire motion, by Judge Bloom. Her argument is worth examining:

… See “SEC v. Big Apple Consulting USA, Inc., 783 F.3d 786, 809-10 (11th Cir. 2015) (explaining that the “centerpiece” of the definition of a “dealer” is the word “business,” and noting that defendants were dealers where their “entire business model was predicated on the purchase and sale of securities” and where they bought “stocks at deep discounts” by contractual agreement and “then resold those stocks for profit”) (emphasis in original). See also Eastside Church of Christ v. Nat’l Plan, Inc., 391 F.2d 357, 361 (5th Cir. 1968) (determining that defendant was a dealer under the explicit terms of the Exchange Act because defendant purchased church bonds “for its own account as part of its regular business and sold some of them”); SEC v. Offill, No. 3:07-CV-1643-D, 2012 WL 246061, at *8-9 (N.D. Tex. Jan. 26, 2012) (granting summary judgment in favor of the SEC, explaining that while “there is not an abundance of binding case law defining broker and dealer,” Eastside Church, 391 F.2d at 361, is “illustrative,” and determining that defendant was a dealer under the Exchange Act because he “bought and sold securities as part of his regular business”).”

Bloom clarifies in a note that:

Although Defendant stresses that Big Apple does not apply because that court interpreted the Securities Act of 1933 rather than the Exchange Act, … the Court is not persuaded. The Eleventh Circuit panel noted that the definition of a “dealer” under both statutes is “very similar” and it found the district court’s analysis to be “sound” where the district court “analyzed the definition of dealer as it related to the SEC’s [Exchange Act] claims and generally applied that analysis to the [Securities Act of 1933] exception.”

The central point, then, is whether an individual or entity alleged to be acting as a dealer is buying and selling securities as part of his regular business. While Bloom is not yet ready to make a determination about whether Keener is a dealer or not, she has set out the conditions that must be met to make it.

Fife, like Keener, alleges a due process violation, insisting that CVP was engaged in the activities for which it’s been sued long before the SEC offered its “novel,” “made-for-litigation” interpretation of what a dealer is. Judge Bloom did not think much of Keener’s similar arguments. She pointed out that he was not a novice investor who “occasionally dabbles in securities trading.” In his motion to dismiss, he had argued that if he’s found liable, he’ll be penalized for conduct he “had no way of knowing could be unlawful.” Bloom points out that the language of the Exchange Act is clear and that the SEC Guide to Broker-Dealer Registration, published in 2008, offers scenarios in which a person or company may be deemed a dealer. She adds that a judge in a related case dismissed the claim of a due process violation and does the same for Keener.

It seems unlikely that Fife will have better luck than Keener, but he continues to see the SEC’s case as a “retroactive enforcement action.”

Fife Sues FINRA

A few weeks after Fife filed his motion to dismiss in the SEC action, he sued FINRA in connection with a disciplinary action the regulator brought against him a decade ago. His explanation of the reasons for his suit are not, however, entirely clear. 

He begins by saying that the SEC has sued him “for providing fully-disclosed loans of which the SEC had been aware for over a decade. He goes on to explain: “Invoking the FINRA Bar, the SEC’s Complaint characterizes Mr. Fife as a “recidivist violator of the federal securities laws,” adding that “[t]he SEC is leveraging the FINRA Bar to argue both the merits of their case and for a more draconian outcome.”

That is not true. The SEC did not call Fife a recidivist violator in connection with the FINRA disciplinary action. It was instead referring to the litigation the Commission brought against him and his company Clarion Management, LLC, in 2007. The complaint alleged that in 2002 and 2003, the defendants “engaged in a fraudulent scheme to purchase variable annuity contracts issued by the Lincoln National Life Insurance Company… in order to engage in ‘market timing’ in mutual funds for the benefit of Clarion Capital, LP.” Clarion Capital was a hedge fund formed by Fife for the purpose of executing his market timing scheme. While it has some amusing elements—“[d]efendants used fictitious family names for the trusts, one for each letter of the alphabet. These names included Austin, Brady, Cooper, Davis, Ellis, Good, Hunt, Ivy, Jasper, Kane, Lewis, Mead, Neil Oak, Post, Queen and Ross”—it only illustrates Fife’s willingness to violate the securities laws early in his career. Clarion Capital acted as the general partner and unregistered investment adviser to Clarion Capital. Clarion Management was wholly owned by Clarion, Inc., which was wholly owned by Fife. Fife settled the case quickly, agreeing to pay disgorgement and a civil penalty and consenting to an order barring him from association with any investment adviser, with the right to reapply after 18 months.

His involvement with Gordon & Co., Justin Keener, and ultimately, FINRA’s Enforcement Division is much more interesting. In 2011, FINRA was investigating a member brokerage firm called Gordon & Co.. Gordon was run by a woman called Allison D. Salke. In the course of its investigation of Gordon, FINRA realized Keener and Fife owned stakes in the company and sent Rule 8210 requests to both. The rule allows staff to “require a member, person associated with a member, or any other person subject to FINRA’s jurisdiction” to provide information in person or in writing and to provide any relevant books and records he or she may possess.

Salke eventually realized that the matter would not be resolved in her favor and decided to spill the beans. She signed a Letter of Acceptance, Waiver, and Consent on December 5, 2012. By that time, Gordon had been “terminated,” and Salke had given up her registrations. In the meanwhile, Keener and Fife had refused to respond to the Rule 8210 requests. In October 2011, Keener was informed that he’d be suspended from association with any FINRA member firm if he didn’t comply, and so on November 16, he filed a request for a hearing. Fife declined to have anything to do with the proceedings. In July 2012, Keener was suspended; Fife and his wife Pauline had been suspended a few months earlier, on April 6.

Between Salke’s account and the one presented in the report of Keener’s hearing, a fairly complete story emerges. Salke’s explanation was that in April 2011, she’d agreed to Gordon’s entry into a limited partnership agreement with Keener and the Cobblestone Trust, which was controlled by Fife’s wife, Pauline. Each party paid $150,000 for 12.5 percent ownership of Gordon. They also agreed to pay a minimum of $30,000 monthly to Gordon for commissions for a five-month period and to keep accounts at Fidelity, containing $1,150,000 to cover positions created by their trading.

Within a month or two, FINRA became aware that the firm had begun selling large amounts of microcap securities. In September, FINRA staff paid an unannounced visit and were told that Keener and Cobblestone were going to buy Gordon. The examiners also saw account statements documenting the sale of millions of shares of sub-penny stock. In September, FINRA told Gordon it had to file documentation of the ownership and control interests of Keener and Cobblestone, register Keener and Fife as principals, and file an application for Fife to be associated with the firm despite being statutorily disqualified thanks to his 2007 settlement with the SEC. Gordon did file forms U4 for Fife and Keener, which is why their suspension notices show they had CRD numbers.

According to FINRA, Salke ignored red flags suggesting Fife and Keener were selling large amounts of unregistered securities and therefore failed to supervise the business of the firm adequately. By October, she had had enough and told FINRA that Gordon would no longer be trading for Fife and Keener. She then closed their accounts and redeemed their partnership interests. But she was still in trouble.

At that time, FINRA was examining the possibility not that the two men were unregistered dealers but that their activities might qualify them as statutory underwriters. The examiners noted that the convertible notes they acquired from issuers would be converted into stock at a substantial discount to market price. In addition:

Communications from JK and JF to the Firm indicated that they wanted to recoup the amount of their loans and make a profit fast. Their trading instructions evidenced a disregard for the market price of the stocks; they sold as the price of the stock declined into sub-pennies, but made profits because of the substantial discount they received when they purchased the stock from the issuers. Their sales were generally a large percentage of the daily trading volume of the relatively illiquid stocks they sold. The number of shares sold represented a large percentage of the outstanding shares of the issuers.

FINRA concluded that “they had engaged in distributions of microcap and sub-penny stock into the market as underwriters and that no valid exemption from registration applied,” and that they’d also violated Section 5 of the Securities Act. 

Interestingly, Fife and Keener dealt in the same penny stocks at the same time, as if they were partners. Between the spring and fall of 2011, among their favorites were CBA Florida, Inc. (CBAI), Silver Dragon Resources (SDRG), mPhase Technologies, Inc. (XDSL), and BizAuction, Inc. (BZCN; now Cannagrow Holdings, CGRW). FINRA called them “examples”; no doubt its investigators could have furnished many more. 

Back in 2011, FINRA was extremely interested in what Keener and Fife were up to, but it seems there were limits to what actions it could take against them. In the end, they were suspended from association with any FINRA member. But that didn’t stop them from continuing to purchase convertible notes and sell the stock resulting from their conversion into the public market. Perhaps FINRA would have liked the SEC to step up to the plate and litigate them as statutory underwriters.

That didn’t happen. But now, the SEC is trying a different tactic: to pursue Fife and Keener as unregistered dealers. It is difficult to understand why Fife would want to draw attention to his history with FINRA by bringing an action against the regulator, especially given that all he wants is “declaratory judgment that the FINRA Bar is null and void because FINRA’s actions against him exceeded its statutory authority.”

In his complaint, Fife brings us up to date on his family office, which he says manages $150 million of his money, and further describes his interest in businesses that do not issue penny stocks. He explains that he’s a philanthropist and entrepreneur. He notes that “the sophisticated nature of Mr. Fife’s investments required white-glove service from his broker-dealers … and required a broker-dealer that would tailor its services to Mr. Fife’ [sic] specialized needs.” He proposes that Gordon suited those needs perfectly. 

Oddly, he introduces the SEC suit, and the topic of the proper definition of “dealer,” and the question of due process, themes that have no real relevance to his action against FINRA. In closing, he asks that the FINRA bar be nullified. 

Some months later, on March 29, 2021, FINRA filed a motion to dismiss and a memorandum of law in support of it. The motion contends simply that the complaint must be dismissed because the Federal District Court for the Southern District of New York lacks subject matter jurisdiction. It contends that the Exchange Act “provides the exclusive remedy for disputes arising from FINRA’s exercise of its regulatory functions and disciplinary actions and requires Plaintiff to exhaust his administrative remedies.” Additionally, it holds that “[t]here is no private right of action against FINRA for the relief Plaintiff seeks. FINRA also has absolute immunity from claims, such as Plaintiff’s, arising from FINRA’s regulatory and oversight functions.” It seems likely to us that FINRA will prevail. Again, what is Fife’s action against the regulator supposed to achieve, other than to attract attention to his earlier partnership with Keener, another of the SEC’s targets?

The two cases in which Fife has an interest—the SEC’s against him and his against FINRA—currently await new developments. SEC v Keener is also pending. Penny stock funders using what the SEC calls “market-adjustable securities” of penny stock issuers may soon be facing trouble from another direction. Late last year, the regulator proposed amendments to Rule 144 that would require a restart of the prescribed holding period every time a lender like Fife converts. The practical effect of that would be to make it impossible for toxic funders to convert and then sell immediately. 

Success with the actions against unregistered dealers combined with a new Rule 144 would perhaps kill the lenders’ golden goose for once and all.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email [email protected] or visit www.securitieslawyer101.com.  This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
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