Securities & Going Public Blog

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

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

Receiver Appointed in North Dakota Developments Ponzi Scheme

North Dakota Developments Is a Ponzi Scheme

We’ve so far written twice about North Dakota Developments (“NDD”), a real estate Ponzi scheme operated by Daniel J. Hogan and Robert L. Gavin.  In the course of the scam, Gavin and Hogan, who are United Kingdom citizens, relieved investors of more than $62 million.  The pair persuaded their victims, many of them elderly and vulnerable, to purchase interests in “units” at what are called “man camps”–workers’ housing—in properties to be built in the Bakken oil fields of North Dakota and Montana.

The interests purchased were not actual real estate, but securities.  The Securities and Exchange Commission (“SEC”) therefore had jurisdiction of them and of NDD and its managers Gavin and Hogan.  On May 5, 2015, it acted, obtaining a temporary restraining order against the company and the perpetrators.  Judge Daniel Hovland also ordered an asset freeze of the defendants’ bank accounts and those of other companies they controlled.  Read More

Do I Have To Amend My Form D? Going Public Attorneys

Amended Form D

When a company decides to raise money in a Regulation D offering as part of its going public transaction, it must file a Form D – Notice of Sales with the Securities and Exchange Commission Rule 504, 505 or 506 of Regulation D of the Securities Act of 1933, as amended (the “Securities Act”). A Form D must also be filed for an exempt offering made pursuant to the accredited investor exemption of Section 4(5) of the Securities Act.

The Form D notice must be filed using the SEC’s Electronic Gathering, Analysis and Retrieval System known as EDGAR. Many companies are unaware that Form D must be amended under certain circumstances.

An issuer with a previously filed notice on Form D should file an amended Form D to: Read More

Douglas Parigian Pleads Guilty in Amateur Golfers Scheme

Douglas Parigian Pleads Guilty in Amature Golf Scheme

On May 13, 2015, the Securities and Exchange Commission (SEC”) announced that Douglas Parigian pled guilty to criminal charges of conspiracy and securities fraud for his role in an insider trading ring involving trading in the stock of American Superconductor Corporation. The criminal charges against Parigian arose out of the same fraudulent conduct alleged in an SEC action for securities fraud filed against Parigian and others in July 2014.

On July 9, 2014, the U.S. Attorney’s Office for the District of Massachusetts indicted Parigian and another defendant, Eric McPhail, for conspiracy and securities fraud and, for Parigian only, lying to FBI agents. The U.S. Attorney charged that McPhail had a history, pattern and practice of sharing confidences with a senior executive at American Superconductor. Between 2009 and 2011, the senior executive provided McPhail with material, nonpublic information concerning the company’s quarterly earnings and other business activities (the “Inside Information”) with the understanding that it would be kept confidential. Read More

EDGAR Prepares For Regulation A+ – Going Public Attorneys

Regulation A+ - Going Public Attorneys

The SEC’s EDGAR system is being updated to prepare for Regulation A+. On April 23, 2015, the SEC adopted changes to Volume I and Volume II of the EDGAR Filer Manual. Revisions include:

  • The revisions to the SEC’s EDGAR filer manual reflect recent amendments to Regulation A to accept Regulation A forms including DOS, DOSLTR, 1-A, 1-A/A, 1-A POS, 1-A-W, 1-A-W/A, 253G1, 253G2, 253G3, 253G4, 1-K, 1-K/A, 1-SA, 1-U, 1-U/A, 1-Z, 1-Z/A, 1-Z-W and 1-Z-W/A.
  • Additionally, an issuer filing on EDGAR for the first time in a going public transaction can select a “Regulation A” offering option on their Form ID to reflect it is submitting the Form ID application for EDGAR access to file Regulation A draft offering statements. Forms submitted pursuant to Regulation A can be accessed at a “File Regulation A Forms” tab.
  • Issuers filing draft offering statements under Regulation A+  must prepare and submit their draft offering statements using EDGAR form types DOS and DOS/A, and must use the submission type Draft Offering Statement Letter (DOSLTR) to submit correspondence related to their draft offering statements.
  • Issuers which file confidential draft Regulation A offering statements can publicly file previously submitted drafts by selecting the “Disseminate Draft Offering Statement”  tab on the “File Regulation A Forms” page of the EDGAR website.

Read More

SEC Says North Dakota Developments Is A Ponzi Scheme

North Dakota Developmets Ponzi Scheme

On May 5, 2015, the Securities and Exchange Commission (“SEC”) obtained a temporary restraining order against North Dakota Developments, LLC (“NDD”), Robert L. Gavin and Daniel J. Hogan in connection with an elaborate real estate development Ponzi scheme that defrauded vulnerable investors of millions of dollars.  In addition, Judge Daniel Hovland ordered a freeze order of the assets held by the defendants and a number of other companies controlled by them.

Read More

What Is DTC Eligibility? Going Public Attorneys

DTC Eligibility - Securities Attorney

DTC’s eligibility creates liquidity for companies after a going public transaction. DTC’s Issue Eligibility program allows newly issued securities as well as secondary offerings that meet DTC’s eligibility criteria to become eligible for the depository and book-entry services of The Depository Trust Company (DTC). DTC eligibility means that a security is freely tradable and fungible and is otherwise qualified to be held at DTC and traded and serviced through DTC’s electronic book-entry system. DTC’s eligibility criteria are more fully described in DTC’s Operational Arrangements.

DTC’s Depository services over the lifecycle of the security may include deposits, withdrawals, and a wide range of corporate action events such as dividend and interest payments, tender and rights offers, and corporate reorganizations. Read More

Morgan Stanley Fined $2 Million for Short Sale & Short Interest Reporting

Morgan Stanely Finded by FINRA

On May 3, 2015, The Financial Industry Regulatory Authority (FINRA) announced it has fined Morgan Stanley & Co. $2 million for short sale and short interest reporting and rule violations that spanned a period of more than six years, and for failing to implement a supervisory system reasonably designed to detect and prevent such violations.

Thomas Gira, Executive Vice President, FINRA Market Regulation, said, “Short interest reporting continues to provide investors with important transparency into the level of short selling in a particular issue. Accordingly, it is imperative that this information be timely and accurately reported. Similarly, a fundamental requirement for compliance with the short sale rule is that firms properly track their short positions.” Read More

SEC Halts Advance Fee Scam Targeting Home Building Industry

Advance Fee Scam

On May 15, 2015, the Securities and Exchange Commission (SEC) announced charges and an emergency asset freeze in an alleged advance fee scam involving bogus prime bank instruments. The SEC complaint was filed on  May 11, 2015, in the U.S. District Court for the District of Maryland.  Advance fee scams 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.

According to the SEC’s complaint, which the Court unsealed yesterday at the SEC’s request, Thomas G. Ellis and Yasuo Oda, through their company, North Star Finance LLC, and Michael K. Martin and Sharon L. Salinas, through their companies, Capital Source Lending LLC and Capital Source Funding LLC, have collected approximately $5 million from defrauded investors since at least January 2013. Read More

Steven Palladino Pleads Guilty to Criminal Contempt for Violating SEC Orders

SEC Charges Steven Palladino
On May 14, 2015, the Securities and Exchange Commission (SEC) announced that, Steven Palladino pled guilty to 25 counts of criminal contempt charged by the United States Attorney’s Office for the District of Massachusetts based on his repeated violations of court orders obtained by the Commission in its civil action filed in 2013 against Palladino and his Massachusetts-based company, Viking Financial Group, Inc. (collectively, “Defendants”). The SEC action charged that Defendants were operating a fraudulent Ponzi scheme. The court in the SEC action entered orders with certain preliminary relief beginning in April 2013, including an asset freeze against Defendants. The U.S. Attorney alleged in April 2014 that Palladino knowingly and willfully disobeyed court orders in the Commission’s action that froze all of Defendants’ assets and required that Defendants deposit all funds in their possession into a court-ordered escrow account. Based on his guilty plea to these contempt charges, Palladino, who is currently serving a prison sentence based on convictions in state court for the same conduct alleged in the SEC charges in its case, could face additional incarceration. Read More

Three SEC Stop Orders, One Mystery? Going Public Attorneys

SEC Stop Orders - Going Public Attorneys

On May 11, 2015, the Securities and Exchange Commission (“SEC”) instituted administrative proceedings against two penny stock companies, Visual Acumen, Inc., and First Xeris Corp. (FXER).  The purpose of the actions was to establish grounds for imposing stop orders that would suspend registration of the companies’ stock.

First Xeris had filed a Form S-1 registration statement on April 22, 2013 to register an offering of 3 million common shares for a total of $39,000.  The registration statement was amended several times, and finally deemed effective on January 8, 2014.  Visual Acumen filed its own Form S-1 registration statement on February 5, 2014 to register an offering of 3 million common shares for a total of $33,000.  The registration statement was amended once, and became effective on May 9, 2014.  Read More

What is a Sponsoring Market Maker? Going Public Attorneys

Sponsoring Market Maker - Securities Lawyer


The last step in a going public transaction is for the company to receive a stock trading or ticker symbol from the Financial Industry Regulatory Authority (“FINRA”).  For a company to obtain its ticker symbol, a sponsoring market maker (“Sponsoring Market Maker”) must sponsor the company’s application and submit a Form 211 to FINRA on the issuer’s behalf.  Sponsoring Markets Makers have become one of the most important participants in the going public process when direct public offerings are used because they are the only ones who can apply for a ticker symbol. Read More

FINRA Halts Trading in Riviera Tool Company

Riviera Tool Trading Halted

Moving with unusual speed, the Financial Industry Regulatory Authority (FINRA) halted trading in Riviera Tool Company (RIVT) after the closing bell on May 7, 2015.  The action was a U3 Extraordinary Event halt.  In a U3, “trading is halted because FINRA has determined that an extraordinary event has occurred or is ongoing that has had a material effect on the market for the OTC Equity Security or the security underlying an OTC ADR or has caused or has the potential to cause major disruption to the marketplace or significant uncertainty in the settlement and clearance process.”  The halt may remain in place for up to 10 days, and can be extended beyond that should FINRA find reason to do so.
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Securities Lawyers Gone Wild – John Briner Criminally Charged

John Briner Charged - Going Public Attorney

The walls are closing in on former securities attorney John Briner.  In the past two months, he’s been criminally charged in the Provincial Court of British Columbia, sued by the U.S. Commodity Futures Trading Commission (“CFTC”), and disciplined by the Law Society of British Columbia.  Briner’s new problems follow on a series of enforcement actions brought against him by the Securities and Exchange Commission (“SEC”) in the United States.

John Briner’s troubles began in March 2006, when OTC Markets Group (then the Pink Sheets) added him to its Prohibited Attorney List.  The ban appears to have had to do with Briner’s role in a penny stock scam involving a company called Golden Apple Oil and Gas, Inc.  In September 2009, the SEC charged Golden Apple; Briner; Jay Budd, the company’s president; and Ethos Investments, Inc., a company controlled by Budd, with a number of securities violations.  Much earlier, in April 2006, the agency had issued a trading suspension of Golden Apple’s stock. Read More

SEC Rules Affecting Shell Companies

Shell Company Laws

The Securities and Exchange Commission (“SEC”) has published releases relating to Shell Companies that affect the use of Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”), by shareholders of Shell Companies. In addition, the rules limit registration of securities on Form S-8 of the Securities Act and affect disclosures required in Form 8-K under the Securities Exchange Act of 1934, (the “Exchange Act”).

What is a Shell Company?

Securities Act Rule 405 and Exchange Act Rule 12b-2 define a Shell Company as a company, other than an asset-backed issuer, with no or nominal operations; and either:

  • no or nominal assets;
  • assets consisting of cash and cash equivalents; or
  • assets consisting of any amount of cash and cash equivalents and nominal other assets.

Read More

Short Sales Q & A – Securities Lawyer 101

Short Sales - Going Public Lawyer

Posted By Brenda Hamilton, Securities Lawyer

Short Sales Q & A

A short sale transaction can be part of a legitimate trading strategy. It is often endorsed for its beneficial effects on the securities markets, which include increasing liquidity.  Short selling is also criticized.  Short sellers profit by identifying companies that are weak or overvalued, and companies whose shares have been manipulated to rise to artificially high share prices.  The most widely misunderstood aspect of short selling is under what circumstances it becomes illegal.  We created this Securities Lawyer 101 Series to address the most common questions we receive about Short Sales. Read More

Rule 144 Q & A – Going Public Lawyers

Rule 144 - Securities Lawyer

The Securities Act of 1933, as amended (the “Securities Act”) requires the sale of a security to be registered under the Securities Act, unless the security or transaction qualifies for an exemption from registration. Rule 144 of the Securities Act provides a safe harbor that permits holders of “restricted securities” to resell their securities in the public market if specific conditions are met.

This Securities Lawyer 101 Series discusses the most common questions we receive about Rule 144’s Safe Harbor.

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Private Placement Memorandums Q & A – Going Public Lawyers

Private Placement Memorandum - Going Public Attorney

A Private Placement Memorandum (“PPM”) is also referred to as a confidential offering circular or memorandum.  PPM’s are used by private companies in going public transactions and by existing public companies to raise capital by selling either debt or equity in an exempt offering.  Most exempt offerings are private placements.

Q. What Disclosures Are Required in Private Placement Memorandums?

A. PPM disclosures vary depending on a couple of factors, including whether the investor is accredited or non-accredited and whether the Company is subject to the Securities and Exchange Commission’s (“SEC”) reporting requirements, and a few other factors. Read More

SEC Reporting After Regulation A – Going Public Lawyer

Reporting After Regulation A

On March 25, 2015, the SEC adopted Regulation A+ which amends former Regulation A. Regulation A+ adopts new ongoing reporting requirements that are based upon two Regulation A+ offering tiers. Tier 1 provides an exemption from SEC registration for offerings of up to $20 million. Tier 2 exempts offerings up to $50 million. One of the most notable differences between the two Regulation A+ tiers is that issuers that conduct a Tier 2 offering will become subject to ongoing SEC reporting obligations, though such obligations are significantly less burdensome than those to that apply to SEC reporting issuers.

Presently, issuers that conduct a Regulation A offering must file a Form 2-A with the SEC every six months to report sales in the offering, and submit a final filing to the SEC within 30 days after the offering is complete.  Regulation A+ eliminates Form 2-A and creates Form 1-Z. Read More