FINRA Suspends and Fines Thomas Mikolasko
The Financial Industry Regulatory Authority (“FINRA”) recently suspended and fined Advisor Thomas Mikolasko, (“Mikolasko”) of HFP Capital Markets LLC (“HFP”). According to FINRA, Mikolasko made material misrepresentations and omissions of material fact in connection with $3 million in Senior Secured Zero Coupon Notes sold to 58 customers of HFP for Metals Millings and Mining LLC (“MMM”) in a private placement offering. Read More
What Are the Benefits of Foreign Issuer Status in Going Public Transactions?
A private foreign company seeking to go public may be classified as a U.S. domestic issuer or a non-U.S., private foreign issuer under SEC rules. A company’s status as a private foreign issuer has many benefits for a foreign company seeking public company status. These benefits include less stringent narrative and financial statement disclosure in public offering documents making the SEC registration statement process less burdensome.Upon completion of a going public transaction, foreign companies become subject to less stringent SEC periodic reporting requirements. Additionally, upon obtaining public company status, foreign companies are not subject to the proxy rules which impose disclosure and procedural obligations for companies who solicit shareholder votes.
The term “private foreign issuer” is not determined by solely where an issuer is incorporated or domiciled. Instead it is defined under the securities laws. Foreign issuer status offers many benefits to issuers in going public transactions. Read More
What Are Regulation Crowdfunding Disclosures?
On October 23, 2013, the Securities and Exchange Commission (“SEC”) proposed Regulation Crowdfund, setting forth the rules governing the offer and sale of securities through crowdfunded offerings, pursuant to Title III of the Jumpstart Our Business Startups Act (“JOBS Act”).
Within days, FINRA published its proposed rules for the licensing and regulation of “funding portals.” The Read More
Regulation Crowdfund For Investors
On October 23, 2013, the Securities and Exchange Commission (“SEC”) proposed Regulation Crowdfund, setting forth the rules governing the offer and sale of securities through equity crowdfunded offerings, pursuant to Title III of the Jumpstart Our Business Startups Act (“JOBS Act”). Read More
How Does the JOBS Act Benefit Foreign Issuers? Going Public Lawyers
The JOBS Act offers incentives for foreign issuers seeking to go public and enter the U.S. capital markets without filing a Form S-1 or other registration statement under the Securities Act of 1933, as amended or registering a class of securities on Form 10 under the Exchange Act. Effective September 23, 2013, as required by the JOBS Act, the SEC lifted the ban on general solicitation and advertising in private placement offerings of securities made pursuant to Rule506(c) of Regulation D. Read More
Regulation Crowdfunding for Intermediaries
Regulation Crowdfunding provides for two types of intermediaries, the registered broker-dealer and the funding portal. Broker-dealers do not need to register in order to engage in crowdfunding offerings, but their activities in this area are governed by Read More
FINRA Orders Stifel, Nicolaus and Century Securities to Pay $1 Million
On January 9, 2014, the Financial Industry Regulatory Authority (FINRA) announced that it ordered two St. Louis-based broker-dealers, Stifel, Nicolaus & Company, Incorporated and Century Securities Associates, Inc., to pay combined fines of $550,000 and a total of nearly $475,000 in restitution to 65 customers in connection with sales of leveraged and inverse exchange-traded funds (ETFs). Stifel and Century are affiliates and are both owned by Stifel Financial Corporation. Read More
SEC Announces 2014 Examination Priorities
On January 4, 2014, the Securities and Exchange Commission (“SEC”) announced its examination priorities for 2014, which cover a wide range of issues at financial institutions, including investment advisers and investment companies, broker-dealers, clearing agencies, exchanges and other self-regulatory organizations, hedge funds, private equity funds, and transfer agents.
Andrew J. Bowden, Director of the SEC’s Office of Compliance Inspections and Examinations stated, “We are publishing these priorities to highlight areas that we perceive to have heightened risk… Read More
SEC Issues New Rule 506 Guidance
On January 3, 2014, the Securities and Exchange Commission (the “SEC”) released Compliance and Disclosure Interpretations. The release provided useful information about several topics including the JOBS Act’s recently enacted Rule 506 (c) of Regulation D.
Under the federal securities laws, the purchase or sale of a security must be subject to a registrationstatement under the Securities Act of 1933 (the “Securities Act”) or exempt from registration. Section 4(a)(2) provides an exemption from securities registration for transactions by an issuer not involving a public offering. Rule 506 of Regulation D under the Securities Act provides an exemption for private placement offerings that do not to involve a public offering under Section 4(a)(2). The JOBS Act amended Rule 506(c) to allow general solicitation and advertising in offerings so long as sales are made only to accredited investors. Rule 506(c) streamlines the going public process and provides a method for issuers to raise capital both before and after their transaction is complete.
The SEC’s new Compliance and Disclosure Interpretations related to Rule 506 of Regulation D are summarized below. Read More
Senators Request Pre-Filing of Form D
A fundamental principle of the federal securities laws is that the purchase or sale of a security must be subject to a registration statement under the Securities Act of 1933 (“Securities Act”) or exempt from registration. Section 4(a)(2) provides an exemption from securities registration for transactions by an issuer not involving a public offering. Rule 506 of Regulation D under the Securities Act provides an Read More
How Regulation M Impacts Securities Offerings – Going Public Lawyers
Recently, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) issued guidance concerning Rule 105 (“Rule 105”) of Regulation M of the Securities Exchange Act of 1934, as amended. Rule 105 prohibits the purchase of securities in a secondary offering if the purchaser has a short position of the same securities established during a specified restricted period. A short sale is defined as the “sale of a security which the seller does not own or any sale which is consummated by the delivery of a security borrowed by, or for the account of, the seller.” The SEC’s guidance and recent cases indicate that the SEC will likely direct its attention to Rule 105 violations in firm examinations and SEC investigations. Read More
How Do I Resell Restricted Stock Under Rule 144? l Securities Lawyer 101
It has become routine for public companies and private companies going public to mark their stock certificates with “Restrictive Legends”. Generally, restrictive stock legends state that the securities represented by the stock certificate are not covered by a registration Read More
Celebrity Broker Bambi Holzer Barred by FINRA
Bambi Holzer, an author and former registered broker to numerous celebrities has been barred by Financial Industry Regulatory Authority (“FINRA”). Holzer frequently made television appearances. Despite her celebrity clients, by September 2013, Holzer was suspended by FINRA for her failure to comply with a $2 million arbitration award. At the time of her suspension, Holzer’s BrokerCheck report contained more than 64 customer initiated investment related legal actions alleging fraud in connection with the sale of securities. Read More
SEC Seeks Comment On DTC Proposals
On December 18, 2013, the SEC published a notice to solicit comments concerning The Depository Trust Company’s (“DTC”) proposals to specify procedures for securities deposited at DTC for book entry services when it imposes or intends to impose restrictions on the further deposit and/or book entry transfer of those securities.
DTC’s proposed rules establish procedures for: (a) notice to an issuer that a Deposit Chill Read More
SEC Charges Caroline Winsor l Securities Lawyer 101
The SEC has charged Caroline Winsor, a Canadian stock promoter, Richard Walchuk, the president and Chief Executive Officer of Viosolar Inc. and Lisa Esposito, a former registered representative, in connection with the manipulation of the common stock of two penny stock issuers, Violsolar and FACT Corporation. According to the SEC, Lance Bauerlein aided and abetted the manipulation of FACT corporation’s common shares. Read More
SEC Charges Lance Berger l Securities Lawyer 101
According to the SEC, in December 2012, Lance Berger, a stock promoter for several penny stock companies, including FUEG, along with another stock promoter who was a business associate of Berger’s, began discussions with the cooperating witness regarding possible fraudulent stock Read More
The SEC Suspends The Enlightened Gourmet Inc.
On December 10, 2013, the Securities and Exchange Commission (the “SEC”) announced the temporary suspension of trading in the securities of The Enlightened Gourmet, Inc. (“ENLG”) commencing at 9:30 a.m. EST on December 18, 2013 and terminating at 11:59 p.m. EST on January 2, 2014. The SEC also announced the suspension of Eternal Image Inc., NMT Medical, Inc. (“NMTI”) and Wits Basin Precious Minerals, Inc. (“WITM”). Read More
The SEC Releases 2013 Enforcement Results
On December 17, the Securities and Exchange Commission (“SEC”) announced that its newly-invigorated Enforcement Division had brought actions in fiscal year 2013 resulting in a record $3.4 billion in monetary sanctions. The SEC’s fiscal year ends on September 30. In the preceding 12 months, the SEC filed 686 enforcement actions. The monetary sanctions resulting from those actions is 10 percent higher than in 2012, and 22 percent higher than in 2011, the year in which the SEC filed the most actions in its history. Read More
SEC Charges Stock Randy Hamdan and Oracle Consultants
On December 10, 2013, the Securities and Exchange Commission (the “SEC”) charged Randy Hamdan and a related entity, Oracle Consultants LLC, with carrying out a pump-and-dump scheme in the securities of CompuSonics Video Corporation. The SEC claims that Hamdan generated illicit proceeds of approximately $30,000 through his corporate ego.
According to the SEC’s Complaint filed in U.S. District Court for the Eastern District of Michigan, Hamdan, who lives in the Dearborn, Michigan area, carried out the pump-and-dump scheme by engaging in manipulative trading and conducting a fraudulent marketing campaign. The SEC complaint also alleges that Hamden pretended to be a representative of CompuSonics and caused a news service to issue a false press release on behalf of CompuSonics. Read More
SEC Charges MALOM Group with Securities Fraud
The Securities and Exchange Commission filed securities fraud charges against MALOM Group AG, whose name is an acronym for “Make A Lot Of Money”.
The SEC alleges that Swiss-based Malom Group AG and other participants conducted the securities fraud schemes from Las Vegas and Zurich raising $11 million from U.S. investors by using a series of lies and forged documents to steer them into bogus foreign trading programs that were nothing more than vehicles to steal money. Advance fee frauds solicit investors to make upfront payments before purported deals can go through, and perpetrators fool investors with official-sounding terminology to add an air of legitimacy to the investment programs. Many transactions offered by Malom bore the hallmarks of prime bank frauds, which tout the supposed use of well-known overseas banks to attract investors. Read More
SEC Halts Oil And Gas Scheme l Securities Lawyer 101
On December 6, 2013, the Securities and Exchange Commission (the “SEC”) announced charges and an emergency asset freeze against the perpetrators of a Texas-based Ponzi oil and gas scheme involving purported investments drilling projects. Read More
SEC Grants Waiver Of Rule 506 Bad Actor Ban
On November 25, 2013, the Securities and Exchange Commission granted a waiver of the ban against bad actors under Rule 506 of Regulation D of the Securities Act of 1933. The waiver was granted to RBS Securities Inc. (“RBS”).
RBS requested relief from disqualifications from exemptions available under Regulation A and Rules 505 and 506 of Regulation D that arose by reason of the Final Judgment entered Read More
SEC Report Reveals Foreigners Among Dodd Frank Whistleblowers
The SEC’s 2013 Annual Report to congress on the Dodd-Frank whistleblower Program shows whistleblowers from 55 countries submitted tips to the SEC.
Under the SEC’s whistleblower program, if a whistle-blower’s information leads to an enforcement case where more than $1 million is collected, the whistleblower could receive Read More
SEC Suspends Trading of Nevada Gold Corp
On November 27, 2013, the Securities and Exchange Commission (the “SEC”) announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”), of trading in the securities of Nevada Gold Corp. (“NVGC”), of Del Mar, California at 9:30 a.m. EST on Read More
Shell Traffickers Guilty in $137 Million Corporate Hijacking Scheme
Lawrence Hartman, a Florida securities lawyer, plead guilty to a charge of conspiracy to commit mail and wire fraud for his role in a Corporate Hijacking and shell trafficking fraud scheme that swindled victims out of more than $137,000,000.
According to the charges, the defendants in the case planned to steal the identities of dormant, publicly-traded shell companies, use the corporate identities they had stolen to create fraudulent empty-shell companies which had the appearance of being publicly-traded, and sell those fraudulent empty-shell companies for use in reverse merger transactions. Those involved in corporate hijacking schemes employ various methods to illegally obtain control of public shell companies. Read More
SEC Issues Compliance and Disclosure Interpretation of Rule 506(c)
On November 13, 2013, the Securities and Exchange Commission (the “SEC”) Division of Corporation Finance issued several useful Compliance and Disclosure Interpretations related to Rule 506(c) of the JOBS Act.
The Rule 506(c) Compliance and Disclosure Interpretations are summarized below.
If, prior to the effective date of Rule 506(c), an issuer started its offering in reliance on what was formerly Rule 506 (now Rule 506(b)), and that issuer now wants to Read More
House Committee Passes Law Reducing Business-Broker Regulation
On November 14, 2013, the Financial Services Committee of the U.S. House of Representatives voted unanimously to report HR 2274, as amended, to the full House with a favorable recommendation. HR 2274 is known as the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2013, and its intention is to amend the Securities Exchange Act of 1934 (“Securities Act”) to provide for a notice-filing registration procedure for business brokers performing services in connection with the transfer of ownership of small privately held companies and to provide for regulation appropriate to the limited scope of their activities. Read More
Foreign Issuers Embrace U.S. IPO Markets
As the number of U.S. companies launching initial public offerings (“IPOs”) by filing registration statements increased throughout 2013, foreign issuers joined in. While their numbers are still relatively small compared to their U.S. counterparts, statistics show that foreign IPOs have more than doubled from 2012. Read More
SEC Announces First Deferred Prosecution Agreement
On November 12, 2013, the Securities and Exchange Commission (the “SEC”) announced a deferred prosecution agreement with Scott Herckisa, a former hedge fund administrator at Hellelwhite Fund LP, who assisted the SEC in an investigation involving Berton Hochfeld, a hedge fund manager who allegedly stole assets from investors.
Deferred prosecution agreements reward individuals and companies who provide the SEC with forthcoming information about misconduct and assist with a subsequent investigation. In return for the information provided, the SEC refrains from prosecuting cooperators for their own violations if they comply with certain undertakings. Read More
The SEC Analyzes Rule 506 l Going Public Attorneys
In its recently proposed Regulation Crowdfunding (“Reg CF”), the Securities and Exchange Commission (“SEC”) produced some interesting statistics on the types of unregistered offerings that have been popular with smaller issuers and private companies over the past few years. Since the crowdfunding proposals won’t become effective until later this year, private and public companies interested in conducting offerings in the next few months should consider the impact of recent rules. Companies should follow the guidance of an experienced going public attorney prior to undertaking an offering.. Read More
