Securities & Going Public Blog

Regulation A+ Forms Published- Securities Lawyer 101

Regulation A+ Disclosure Attorneys


On June 19, 2015, Regulation A+ became effective.  The new rule imposes certain filing requirements with the Securities and Exchange Commission (SEC). Regulation A+ requires certain offering information be reported on Form 1-Z and it imposes ongoing reporting requirements for issuers that conduct Tier 2 offerings.  Form 1-Z requires information about the amount of securities qualified and sold, as well as the price, fees, and net proceeds.

Issuers conducting Regulation A, Tier 2 offerings may report offering information on Form 1-Z or, depending on when the offering is terminated, in their annual report on Form 1-K. Issuers conducting Tier 2 offerings must file annual reports on Form 1-K, semi-annual reports on Form 1-SA and current information reports on Form 1-U. Read More

A Tale of Corporate Hijackings, and Two Stings: Amogear and CitySide

Corporate Hijacking Attorneys

In July of last year, the Securities and Exchange Commission, the U.S. Attorney for the District of Massachusetts, and the Federal Bureau of Investigation brought charges against five individuals whose attempt to manipulate shares of Amogear Inc. was caught in an undercover operation. The defendants, promoters Andrew J. Affa, Michael A. Affa, Mitchell H. Brown, Christopher R. Putnam, and Christopher G. Nix, were charged with conspiracy to commit securities fraud.

The arrests and criminal charges were only the tip of the iceberg.  The case began and was developed as a sting that started at least several years earlier.

To facilitate the sting, the FBI took control of a custodianship shell.  The shell housed a company called Kitcher Resources, Inc, a purported mining company.  While the government was quick to point out no investor lost funds as a result of the pump and dump of Amogear’s shares, the original shareholders of Kitcher were harmed dramatically because their ownership interests were eliminated. Once eliminated, corporate hijackers sold the shell and pocketed the proceeds. According to the Amogear indictment, the FBI took control of Amogear at some point after the Nevada custodianship proceeding ended. Even after taking control of the public shell, no actions were taken to restore the ownership interests of the stockholders or provide them with the proceeds from the sale of public shell in exchange for their interests. Intrigued, we decided to review the pleadings filed in Nevada. Read More

Amateur Golfer Convicted of Securities Fraud – Going Public Attorney


Securities Fraud - Golfer Convicted

On June 17, 20-15, a federal jury convicted amateur golfer, Eric McPhail and Douglas Parigian. McPhail was convicted of conspiracy and securities fraud for his role in an insider trading ring that traded on inside information about American Superconductor Corporation. The criminal charges against McPhail arose out of the same fraudulent conduct for which the Securities & Exchange Commission instituted a securities fraud action against him and others during July 2014.  The U.S. Attorney’s Office indicted McPhail and another defendant, Douglas Parigian, in July 2014. The indictment alleged that McPhail had a history, pattern and practice of sharing confidences with an individual who had material, nonpublic information concerning American Superconductor’s quarterly earnings and other business activities (the “Inside Information”). Read More

Going Public – Regulation A+ – IPO Alternative

Regulation A+ Attorneys - Go Public

Regulation A+ is designed to facilitate smaller companies’ access to capital by providing an alternative to direct public offerings/DPO’s and initial public offerings/IPO’s.  Regulation A+’s new rules provide investors with more investment choices and issuers with more capital raising options during their going public transactions.  Regulation A+ provides a workable alternative to an initial public offering/IPO by allowing companies to raise capital without an underwriter and without filing a full blow S-1 registration statement with the SEC.

Regulation A+ expands existing Regulation A. Existing Regulation A provides an existing exemption from registration for smaller issuers of securities.  Regulation A+ offerings can be used in combination with direct public offerings and initial public offerings as part of a Going Public Transaction.  The exemption simplifies the process of obtaining the seed stockholders required by the Financial Industry Regulatory Authority while allowing the issuer to raise initial capital. Read More

Exchange Act Registration & Going Public For Foreign Issuers

Foreign Issuers - Going Public Attorneys

Foreign companies going public in the United States must file a registration statement covering a class of securities pursuant to the Securities Exchange Act of 1934, as amended (“Exchange Act”) if the class of securities will be listed on a United States national securities exchange such as NASDAQ. A foreign private issuer must register a class of equity securities under the Exchange Act unless the exemption provided by Exchange Act Rule 12g3-2(b) is available. If the foreign private issuer has assets in excess of $10 million and the class of securities is held of record by either (i) 2,000 persons or (ii) 500 persons who are not AIs (in both cases, of whom at least 300 are residents in the United States). Read More

Regulation A+ Primer – Going Public Attorneys

Regulation A+ - Securities LawyerOn March 25, 2015, the Securities and Exchange Commission adopted final rules amending Regulation A. The new rules are often referred to as Regulation A+. These rules are designed to facilitate smaller companies’ access to capital.  Regulation A+’s new rules provide investors with more investment choices and issuers with more capital raising options during their going public transactions. The rules adopting Regulation A+ are mandated by Title IV of the Jumpstart Our Business Startups (JOBS) Act.

Regulation A+ expands existing Regulation A. Existing Regulation A provides an existing exemption from registration for smaller issuers of securities.  Regulation A+ offerings can be used in combination with direct public offerings and initial public offerings as part of a Going Public Transaction.  The exemption simplifies the process of obtaining the seed stockholders required by the Financial Industry Regulatory Authority while allowing the issuer to raise initial capital. Read More

The Laws That Apply To Going Public & Being Public

Going Public Attorneys review a series of rules and regulations.

The first laws that apply to going public transactions are contained in the Securities Act of 1933 (the “Securities Act”). The Securities Act was followed by the Securities Exchange Act of 1934 (the “Exchange Act”). Going Public attorneys must be familiar with both the Securities Act and the Securities Exchange Act. Both are the foundation of securities regulations, and have been amended to adopt to our changing markets.  in going public transactions where shares are registered with the SEC, the issuer must comply with the disclosures required by the Securities Act.

The Securities Act of 1933 l Form S-1 Regulation

The Securities Act is often called the “truth in securities” law. It has two basic objectives: to require that investors receive financial and other important information about securities being offered for sale, and to prohibit deceit, misrepresentation, and other fraud in the sale of securities. The Securities Act obligates issuers to file a registration statement for any shares they’re selling, or to avail themselves of an appropriate exemption from registration. When a company files a Securities Act registration statement such as a Form S-1, it must provide copious information about itself, its business plan, its risk factors, financial reports and more. Issuers filing a Securities Act registration statement are registering an offering, not a class of stock. Read More

When Can Public Companies Use Social Media? Going Public Lawyers

Social Media is OK – Securities Lawyer 101

Securities Lawyer 101 Blog

The use of social media is a growing concern with new exemptions that allow issuers to engage in general solicitation and advertising of their unregistered offerings. The Securities and Exchange Commission has made its position on the use of social media sites like Facebook and Twitter by public companies clear. The SEC has stated that social media may be used to report key information in compliance with Regulation Fair Disclosure (Regulation FD), as long as investors are alerted to the specific social media that will be used to disseminate such information. Regulation FD requires that SEC reporting companies disseminate material information in a manner reasonably designed to get the information out to the general public broadly and non-exclusively.  Read More

Going Public: Pros and Cons- Going Public Lawyers

Going Public Lawyer

A Going Public Lawyer is an important part of the overall going public process.   A Going Public Lawyer in the beginning of the process assists the issuer in structuring its transaction the most time and cost effective way to obtain public company status.  Changes resulting from the JOBS Act, made going public transactions an appealing option for private companies seeking to raise capital. Rule 506(c) allows companies to conduct private placements prior to going public to offset their going public costs. In going public transactions, these privately placed shares are registered on Form S-1 and become the public float.  A Going Public Lawyer in a Rule 506 offering assists the issuer with verification of investors and filing its Form D.  Read More

Nicholas Lattanzio Charged in Hedge Fund Fraud

Hedge Fund Fraud - Going Public Attorney

On June 10, 2015, the Securities and Exchange Commission announced that it had charged Nicholas Lattanzio, the manager of Black Diamond Capital Appreciation Fund for falsely promising small businesses that he would arrange project financing for them and generate substantial returns on money they invested in his fund.  According to the SEC’s complaint, Lattanzio told small business owners that they could withdraw their money if the promised project financing didn’t materialize. Lattanzio also allegedly claimed his hedge fund had as much as $800 million under management and a proven track record of producing double-digit returns.

Read More

OTC Markets Prepares For Regulation A+ – Going Public

Regulation A+ Attorneys

On March 25, 2015, the Securities and Exchange Commission (“SEC”) adopted amendments to Regulation A. The new rules, known as “Regulation A+,” update and expand the existing Regulation A, and are mandated by Title IV of the Jumpstart Our Business Startups (JOBS) Act passed in 2012. Regulation A+ is effective on June 19, 2015. The rule is expected to have a significant impact on the capital raising process for small companies by allowing issuers to raise up to $50 million without all of the requirements of a public offering but potentially providing many of the benefits. OTC Markets Group recently published proposed amendments to the OTCQB Standards to conform to the SEC’s recent amendments. The OTC Markets proposed rules are scheduled to become effective July 10, 2015.

Eligibility – Regulation A Offerings

The use of Regulation A+ is limited to companies organized in and with their principal place of business in the United States or Canada.  Regulation A is not be available to companies that: Read More

The SEC’s Pay Versus Performance Proposals

SEC's Pay v. Performance- Going Public Lawyer

The proposals require SEC reporting companies to disclose the relationship between compensation “actually paid” to their named executive officers and the company’s financial performance, measured as total shareholder return (TSR). The proposed disclosure would consist of a table reflecting compensation and TSR amounts including a discussion of the relationship between performance and the amounts paid to executive officers. Pay versus Performance Proposals.

Disclosure Table – Executive Compensation Amounts

The disclosure table would include:

  • the applicable year for which the information is presented,
  • the total compensation paid to the company’s principal executive officers as presented in the summary compensation table,
  • the compensation actually paid to the principal executive officers,
  • the average total compensation to the company’s other named executive officers as set forth in the summary compensation table,
  • the average total compensation actually paid to the other named executive officers,
  • the company’s TSR, and
  • for other than smaller reporting companies, the issuer must provide peer group TSR.

Read More

Can Regulation A+ Be Used For a Shelf Offering?

Shelf Offerings

Amended Regulation A or Regulation A+ allows issuers to conduct continuous or delayed offerings under pursuant to Rule 251(d)(3). Continuous or delayed offerings are also known as shelf offerings. Shelf offerings are often used in going public transactions to register shares held by selling stockholders.  This helps the issuer to satisfy FINRA’s shareholder requirements for a ticker symbol assignment.

Rule 251(d)(3) allows Regulation A shelf securities offerings for: Read More

Will My Regulation A Offering Be Integrated?

Regulation A Offering

The Regulation A offering integration rules prevent companies from improperly avoiding registration by dividing a single securities offering into multiple securities offerings to take advantage of Securities Act exemptions that would not be available for the combined offering.

Recently amended Regulation A also known as Regulation A+ contains integration safe harbor provisions. Under Rule 251(c), a Regulation A+ offerings will not be integrated with prior offers or sales of securities. Subsequent offers or sale will not be integrated with securities offerings that are: Read More

Who Can Conduct A Regulation A+ Offering? Going Public

Regulation A+ Offerings - Securities Lawyer

On March 25, 2015, the Securities and Exchange Commission (“SEC”) adopted amendments to Regulation A known as Regulation A+. Regulation A+ was adopted to facilitate capital-raising by smaller companies. Regulation A+ offerings cannot be undertaken by all companies or used to offer and sell all types of securities. This blog post addresses eligibility requirements of Regulation A+ offerings.

Securities Eligible For Regulation A+ Offerings

Only equity securities, including warrants, options, debt securities and debt securities convertible into or exchangeable for equity interests, can be offered and sold in Regulation A+ offerings. Read More

Raising Capital: Equity Offerings v. Debt Offerings


Raising Capital - Debt v Equity

Both private and public companies seeking to raise capital by selling securities, do so by offering either debt or equity securities to investors. Companies can also offer a combination of debt and equity through the sale of units comprised of common stock and a convertible note.

What is an Equity Offering?

A company selling equity is most often accomplished through the sale of common stock or membership interest for a limited liability company. In return for the investment, the investor receives a form of equity ownership of the Company typically represented by shares of stock. Read More

States Challenge Regulation A+ – Securities Offerings

Regulation A+

The recent amendments to Regulation A (often called Regulation A+) provide a manageable exemption for raising capital. The exemption can be used by both private and non-reporting trading companies such as OTC Pink listed issuers. Regulation A provides two tiers of securities offerings, with the filing obligations determined by the size of the offering.  For offerings up to $20 million, “Tier 1” allows companies to raise capital without audited financials. Tier 2 offerings allow an issuer to raise up to $50 million and audited financial statements must be provided. Read More

Why Stay Private? The Assault On Small Business

Small Business - SEC Enforcement

For many, the American Dream is about having the opportunity to create and own a business. Small businesses, often described as the backbone of our economy, employ one out of two workers in the United States. Once established, small companies seeking to develop and expand their business often do so by going public. Unfortunately, there are few safeguards in place to protect mom-and-pop companies seeking access to the public markets. More often than not, small business owners are not familiar with the capital markets and the regulations that apply to capital raising activity and the going public process, making them easy prey for reverse merger purveyors given “licenses to swindle” at their expense. Read More

SEC Freezes Profits From Avon Stock Manipulation Scheme

Avon Trading Scheme

On June 4, 2015, the Securities and Exchange Commission (SEC) announced an emergency asset freeze of two U.S. brokerage accounts connected to schemes to manipulate the securities of Avon and other stocks, thwarting any ability for fraudsters to cash in on ill-gotten proceeds. According to the SEC complaint, it tracked a filing made on its EDGAR system about a false Avon tender offer to a foreign entity using an IP address located in Sofia, Bulgaria.

According to the SEC charges, a Bulgarian trader named Nedko Nedev controlled at least one of the two now-frozen brokerage accounts, and his account held a substantial position in Avon contracts-for-difference (CFDs) that had lost value in recent months.  The SEC charges allege that Nedko Nedev generated approximately $5,000 in excess profits by selling almost half of the account’s Avon CFDs at inflated prices after the EDGAR filing led to a 20-percent increase in the value of Avon stock on May 14. Read More

What is a Reverse Stock Split? Securities Lawyer 101

Reverse Stock Split

Securities Lawyer 101 Blog

Reverse stock splits are often used by public companies to reduce the amount of securities outstanding.  Reverse splits are also be used by private companies in corporate restructurings.  Typically in a reverse split, a company reduces the number of its outstanding shares in proportion to the ratio of the reverse stock split so that each stockholder the same percentage of the company’s outstanding shares immediately prior to and after the reverse split.  If approved and effected, the reverse stock split will be realized simultaneously and in the same ratio for all of the company’s common stock.  The reverse stock split will affect all holders of the company’s common stock uniformly and will not affect any stockholder’s percentage ownership interest in the company. Read More