Is the SEC Sending a Big Hint With Its Latest Penny Stock Suspension?

At the open of the trading session on February 11th, The Securities and Exchange Commission suspended trading in SpectraScience Inc (SCIE). It could be a precursor for a significant change in focus for the SEC to try to clean up a marketplace that has gone off the rails lately with an unprecedented amount of manipulative trading activity through the influence of Social Media.

The SEC charges Giuliani Associates Lev Parnas and David Correia

On February 4, 2021, the U.S. Securities and Exchange Commission announced charges against two associates of Rudy Giuliani, the former New York City mayor and lawyer for Donald Trump, alleging they raised $2 million from investors by making false and misleading representations.

Two Recidivists That Met Behind Bars Busted for Securities Fraud

On January 8, 2021, the Securities and Exchange Commission announced settled charges against a Utah corporation, its principals, Mark W Wiseman and Clark J Madsen, and two securities fraud recidivists, Thomas J Robbins and Daniel J Merriman, for orchestrating two inter-related frauds resulting in approximately $11 million in investor losses to around 80 investors.

Executive Order 13959 Sees Its First Casualties

On November 12, 2020, President Donald Trump signed Executive Order 13959. The executive order prohibits all U.S. Investors (institutional and retail alike) from purchasing or investing in securities of companies identified by the U.S. government as “Communist Chinese military companies.” The prohibition went into effect on January 11, 2021, and immediately resulted in its first casualties, with 3 listed stocks being delisted and several OTC stocks having their symbols deleted.

SEC Votes to Amend Rule 144 for Buyers of Convertible Notes and Preferred Stock

On December 22, 2020, the Securities and Exchange Commission (“SEC”)  voted to propose amendments to Rule 144 to eliminate tacking for shares acquired upon exercise or conversion of market-adjustable securities. Market adjustable securities are most often promissory notes, warrants, or preferred stock convertible into common or other shares at a dramatic discount to the issuer’s trading price. These types of market adjustable securities are known as “toxic financings” or “death spirals” for a reason. These financings are typically provided by persons acting as unregistered dealers, and they have crippling effects on small businesses and investors.

Nine Individuals Indicted in Global Resource Energy Inc (GBEN) “Pump and Dump” Scheme

On December 17, 2020, the US Department of Justice unsealed an Indictment against nine individuals charged in a “pump and dump” stock manipulation scheme involving Global Resource Energy Inc (GBEN) filed in the Northern District of Ohio, Eastern Division.

SEC Approves NYSE Plan for Direct Listings

On Tuesday, the US Securities and Exchange Commission (SEC) approved a proposed plan by the New York Stock Exchange (NYSE) to let companies raise capital through direction listing.

SEC Charges The Cheesecake Factory For Misleading COVID-19 Disclosures

On Friday, the Securities and Exchange Commission (the “SEC”) announced that it had settled charges against The Cheesecake Factory Incorporated (CAKE) for making misleading disclosures about the impact of the COVID-19 pandemic on its business operations and financial condition.

House Passes Marijuana Decriminalization Bill

On Friday, the U.S. House of Representatives passed a historic bill that would end the federal prohibition of marijuana. The Marijuana Opportunity, Reinvestment and Expungement (MORE) Act passed by a 228 to 164 margin.

Nasdaq Announces New Proposed Listing Requirements to Advance Diversity

On December 1, 2020, the Nasdaq Stock Market LLC filed a proposal with the U.S. Securities and Exchange Commission (“SEC”) to adopt new listing rules related to board diversity and disclosure.

Congress passes a Bill that forces Chinese stocks to meet US accounting standards

The U.S. House of Representatives unanimously passed legislation on Wednesday that would kick Chinese companies off U.S. stock exchanges if they do not fully comply with the U.S. auditing rules. 

Licensed Attorney And Disbarred Attorney Charged For Roles In Fraudulent Opinion Letter Scheme

On December 2, 2020, the Securities and Exchange Commission (the “SEC”) charged disbarred attorney Richard J. Rubin and licensed attorney Thomas J. Craft with fraud for their roles in a legal opinion letter scheme to fraudulently facilitate the sale of millions of shares of microcap securities to retail investors.

OTCQX Listing and Eligibility

OTC Markets Group Inc. operates the OTCQX® Best Market, the OTCQB® Venture Market, and the Pink® Open Market for 11,606 U.S. and global securities. Securities are placed into one of these three tiers based on the level of disclosure provided and the listing fees paid by the issuer.

Unregistered Dealers – The Scam Goes On

2020 has been a historic year for Securities and Exchange Commission (“SEC”) enforcement action against toxic lenders as unregistered dealers.

What is a SPAC?

SPACs, which stand for special purpose acquisition companies, are similar to blank check companies. The SPAC does an Initial Public Offering (an “IPO”) as a shell company with no commercial operations to raise money from the public for the purpose of acquiring an existing private company with real operations.

Possible replacements for Jay Clayton as SEC Chair

With Jay Clayton stepping down as the Chairman of the Securities and Exchange Commission at the end of the year, president-elect Joe Biden will have an opportunity to pick his replacement. Who are some of the top candidates as a full-time replacement for SEC chief?

Jay Clayton won’t be sitting on his hands during his last month as the SEC Chair

On November 16, 2020, Jay Clayton, Chairman of the Securities and Exchange Commission, announced that he would be stepping down at the end of the year after 3 years and 238 days on the job.

Jeffrey D. Martin Charged with Manipulating Publicly Traded Stocks in Multiyear “Pump and Dump” Securities Fraud Scheme Worth Over $19 Million

On November 19, 2020, the United States Attorney William M. McSwain filed a superseded Indictment against Jeffrey D Martin, 61, of Orlando, FL. Martin was charged with conspiracy and multiple counts of securities fraud and wire fraud, related to his manipulation of several publicly-traded securities in a “pump and dump” scheme in which Martin and his co-schemers allegedly defrauded investors out of over $19 million.

SEC Charges Benja and Andrew J. Chapin With Defrauding Investors

Today, the Securities and Exchange Commission (the “SEC”) charged a San Francisco-based e-commerce startup and its chief executive officer with misleading investors about purported contracts with well-known consumer brands.

SEC Warns Broker-Dealers of Risks Associated with Offshore Omnibus Accounts Transacting in “Penny Stocks”

Last week, the SEC Division of Trading and Markets published a staff bulletin highlighting various risks for broker-dealers arising from certain transactions in “penny stocks” and other low-priced securities. The Commission emphasized that these risks are heightened when the identities of a foreign financial institution’s underlying customer and/or the ultimate beneficial owner of the funds and securities are unknown to a broker-dealer because of the omnibus account structure.

SEC Enforcement Actions Decline in 2020

According to the annual report published by the Division of Enforcement of the U.S. Securities and Exchange Commission (the “SEC”), there were 715 overall enforcement actions in fiscal 2020, down 17% from the previous year.

Despite the slow down, financial remedies ordered “set a new high,” according to Stephanie Avakian, the agency’s enforcement chief. The Commission obtained judgments and orders totaling approximately $4.68 billion in disgorgement and penalties – the highest amount on record.

Caveat Emptor Securities Hit with a Big Setback

Last week, E*TRADE, a subsidiary of Morgan Stanley, which offers an electronic trading platform to trade financial assets including common stocks, announced that effective November 21, 2020, customers will no longer be able to open positions in Caveat Emptor securities due to the risks associated with trading shares in these companies.

SEC Awards Two Unique Whistleblower Awards

On November 13, 2020, the Securities and Exchange Commission (the “SEC”) announced an award of over $1.1 million to a whistleblower whose independent analysis led the staff to look at new conduct during an ongoing investigation. 

SEC Amends Regulation A, Crowdfunding and Rule 504 Securities Exemptions

The SEC adopted amendments to: (1) establish a new integration framework for issuers to move from one securities offering exemption to another; (2) increase the current offering and investment limits for Regulation A  Offerings, Regulation Crowdfunding – Regulation CF and Rule 504 offerings; and (3) amend “Test-the-Waters” and “Demo Day” offering communications rules.

SEC Charges John McAfee, Jimmy Watson, Jr with Fraudulently Touting ICOs

On October 6, 2020, the Securities and Exchange Commission (the “SEC”) charged businessman and computer programmer, John McAfee, for promoting investments in initial coin offerings (ICOs) to his Twitter followers without disclosing that he was paid to do so. McAfee’s bodyguard, Jimmy Watson, Jr., was also charged for his role in the alleged scheme.

Edward T. Kelly, Aceto Corporation Controller, Charged with Insider Trading

Edward T. Kelly, Aceto Corporation, Insider Trading, Lakewood Ranch Florida

SEC Obtains Final Judgment Against Nicholas Tornello, Hill International, Inc

On October 1, 2020, the U.S. District Court for the Eastern District of Pennsylvania entered a final consent judgment against Nicholas Tornello, a former senior accountant at Hill International, Inc.

SEC Proposes Exemptive Relief for Finders

At its October 7, 2020 open meeting, the Securities and Exchange Commission (the “SEC”) voted to propose exemptive relief for certain finders engaged in raising capital  from accredited investors. If the proposal is adopted, it would allow them to receive commissions and other transaction-based compensation without registration as a broker-dealer under Section 15 of the Securities Exchange Act of 1934 (the “Exchange Act”).

SEC Amends Rule 15c2-11, Form 211 Amendments

On September 16, 2020, SEC amended Exchange Act Rule 15c2-11 and Form 211. Changes to Rule 15c2-11 were proposed last year. The OTC Markets will be impacted by the changes as will penny stock issuers on the OTCQB and OTC Pink tiers.

Can I Use an Online Portal For My Rule 506(c) Offering?

Online Platforms for Rule 506(c) Offerings The most common exemption from SEC Registration is Rule 506(c) of Regulation D which provides for two unique exemptions from SEC registration that allow the issuer to raise unlimited amounts of capital… Read More