The Securities and Exchange Commission (SEC) announced that on January 8, 2016, the United States District Court for the Southern District of New York entered a judgment against defendant Steven Davis. The judgment resolves all issues of liability against Davis arising from the SEC’s filing of a civil complaint against him on March 6, 2014. A permanent injunction against Davis was entered prohibiting him from future violations of certain SEC antifraud provisions of the federal securities laws and bars Davis from serving as an officer or director of a publicly traded company. Read More
On December 30, 2015, the Securities and Exchange Commission (“SEC”) published a notice that it was soliciting comments for a proposed rule change submitted by The Depository Trust Company (“DTC”) filed a pursuant to section 19(b)(3)(A) of the Act and Rule 19b-4(f)(2) thereunder. DTC’s proposed rule was effective upon submission to the SEC.
DTC’s proposed rule change consists of a change to DTC’s Fee Schedule (“Fee Schedule”) to add a new DTC eligibility fee that would be charged to the transfer agent of any DTC-eligible issue when the transfer agent notifies DTC of a corporate action event (“Corporate Action”) that requires a new CUSIP to be made DTC-eligible. The types of actions that require a new CUSIP must be submitted to The Financial Industry Regulatory Authority (“FINRA”) pursuant to Rule 6490. Under these circumstances, DTC conducts a review of the issuer’s shares in street name. Issuers must demonstrate the “free trading” nature of their shares in street name by providing DTC with a legal opinion. Corporate Actions requiring a new CUSIP include forward and reverse stock splits, name changes, and certain recapitalizations. These types of transactions require FINRA and DTC to spend significant time and effort in their review.
The Securities and Exchange Commission (SEC) announced that on December 14, 2015, a jury in the federal court in Boston, Massachusetts, returned a guilty verdict against former Massachusetts resident Jonathan Fraiman in a criminal trial prosecuted by the Massachusetts U.S. Attorney. The jury found Fraiman guilty on one count of conspiracy and one count of mail fraud for his role in a boiler room scheme involving the sale of securities. The SEC previously charged Fraiman for the same conduct in a civil action. The scheme raised more than $4 million primarily from January 2008 through late August 2009 through the use of false promises and pressurized sales tactics with regard to the sale of securities in a group of related entities, most with the name “Envit,” that were owned and controlled by Edward Laborio, including a non-existent hedge fund. Fraiman will be sentenced on March 10, 2016.
On August 10, 2012, the SEC charged Laborio, Fraiman, Matthew Lazar, and the Envit entities in federal court for their roles in the Envit boiler room scheme. On August 7, 2014, Fraiman was criminally indicted by a federal grand jury, and was arrested on August 27, 2014. Laborio, who was also charged in the indictment, was a fugitive and was found deceased in Barcelona, Spain earlier this year. Read More
On December 17, 2015, the Securities and Exchange Commission (SEC) charged Martin Shkreli, former CEO of pharmaceutical company Retrophin, with committing fraud during a 5-year period when he also was working as a hedge fund manager. He is notoriously known for raising the cost of the antiparasitic drug Daraprim and raising its price by 5,556 percent.
The SEC alleges that Martin Shkreli misappropriated money from two hedge funds he founded and made material misrepresentations to investors among other widespread misconduct. The SEC also charged Retrophin’s former outside counsel and corporate secretary Evan Greebel with aiding and abetting certain aspects of Shkreli’s alleged fraud. Read More
On December 10, 2015, the Securities and Exchange Commission (SEC) filed a complaint that charged Oxford City Football Club, Inc. and its CEO, Thomas Anthony Guerriero, with securities fraud and other violations of the federal securities laws. The Court issued a temporary restraining order, asset freeze, and other emergency relief against Oxford City, Guerriero, and relief defendant GCE Wealth, Inc., an entity that Guerriero owned and controlled.
In the fraud complaint, the SEC claims that Guerriero used deceptive tactics and a boiler room of salespeople to raise over $6.5 million primarily obtained from inexperienced investors who were misled to believe that the company was a thriving conglomerate of sports teams, academic institutions, and real estate holdings. However, the company was actually losing millions of dollars each year and turning zero profit from its two lower-division soccer teams in the U.K. Read More
The United States Securities and Exchange Commission (SEC) announced that, on December 4, 2015, the Court for the Southern District of New York issued a final judgment, on consent of defendant Timothy Quintanilla, which permanently enjoined him from violating the antifraud provisions of the federal securities laws and ordered him to pay a $100,000 civil penalty. Quintanilla was the former outside auditor of Electronic Game Card Inc. (EGMI). This final judgment fully resolves the enforcement action before Judge Sullivan, in which final judgments were previously entered against three other defendants, former CEO Kevin Donovan, Lee Cole (Donovan’s predecessor as CEO), and Linden Boyne (EGMI’s former CFO), who the SEC charged with violations of the securities laws’ antifraud provisions and other violations. Read More
The Securities and Exchange Commission (SEC) announced that on December 15, 2015, it filed charges against Vu Le a/k/a Vinh Le and his company, TeamVinh.com LLC (“TeamVinh”), in connection with their fraudulent raising of more than $3 million from over 5,600 investors throughout the United States and in various foreign countries.
According to the SEC’s complaint filed in federal court in Minnesota:
- Vinh Le, who previously had been convicted of forgery and barred from offering or selling securities by state authorities in Minnesota and Wisconsin, and TeamVinh lured people into buying memberships in a program that Le and TeamVinh claimed to be a referral network that investors could use to earn an income from multi-level marketing companies without the investors having to do any work.
- Vinh Le and TeamVinh sold investment contracts in TeamVinh itself, promising investors a percentage of TeamVinh’s profits.
- Vinh Le and TeamVinh sought investments in a purported commodities trading platform run by Le, with Le guaranteeing investors 5% weekly returns.
A foreign private issuer going public can register an offering of securities under the Securities Act of 1933 (Securities Act) or may register a class of equity securities under the Securities Exchange Act of 1934 (Exchange Act), or both. In either case, the issuer must file a registration statement containing information required by the Security and Exchange Commission (SEC), and must become effective. Under the Securities Act, a registration statement contains a prospectus, along with other information required by the SEC’s regulations.
The SEC has adopted a series of forms available to foreign private issuers consisting of the “F” series registration statements and Forms 20-F and 6-K disclosure forms for annual and current reports. The disclosure forms available to foreign private issuers have been designed with reference to international disclosure standards, both in scope and timing requirements for filing. Most foreign private issuers opt to file under those forms instead of the forms available to domestic issuers. Read More
The Securities and Exchange Commission (SEC) charged Edward Durante, a recidivist securities law violator with operating a multi-year offering fraud that targeted investors in New England, Ohio and California. The SEC’s complaint alleges that between 2012 and 2014, Durante defrauded at least 50 relatively unsophisticated investors of at least $11 million through the sale of securities of VGTel, Inc., a shell company he controlled. Read More
Two of the most important laws applicable to companies seeking to go public in the U.S. capital markets are the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). The Securities Act requires foreign companies that want to offer and sell securities in the United States to register the transaction with the Securities and Exchange Commission (SEC) or to follow the requirements of an exemption from the registration requirements. The Exchange Act requires companies to register classes of equity securities in order to list these securities on a US national securities exchange unless certain asset and shareholder thresholds are met. The Exchange Act also requires companies to make periodic filings with the SEC to disclose information about their business operations, financial condition, and management.
In the discussion that follows, this overview outlines several things to be considered by foreign companies that want to raise profits or establish a presence for their securities in the United States, specifically with reference to foreign private issuers. Read More