OTC Markets 101 l Going Public Attorneys

Christopher Lollar Settles Charges of Insider Trading Ahead of Oil Discovery Announcement

On April 4, 2018, Christopher Lollar has agreed to settle SEC charges that he conducted insider trading ahead of a market-moving announcement about the company’s discovery of a significant new oil source.

The SEC alleges in its complaint, filed on November 1, 2017, that Christopher Lollar traded on nonpublic information while working in the company’s San Antonio office that was performing the geologic and geophysical work to explore and develop the newly-discovered resource play called Alpine High. Christopher Lollar allegedly conducted trades in Apache shares and call options in the days and weeks leading up to the company’s Alpine High announcement on Sept. 7, 2016. The value of Christopher Lollar ‘s brokerage account skyrocketed approximately 2,700 percent after the announcement, and his alleged profits from insider trading totaled $214,295.07. Read More

Beware of Custodianship Shells and Reverse Mergers

The Securities and Exchange Commission (“SEC”) says it doesn’t like over-the-counter shell companies especially when reverse mergers are involved, and would like to see them gone from the marketplace. To that end, its Enforcement Division cooked up an initiative it called “Operation Shell-Expel”. It began with a bang on May 14, 2012, when the agency coupled an announcement of Operation Shell-Expel with the suspension of trading in the stock of 379 dormant penny companies. It was, the SEC said, the largest such action in agency history. If Operations Shell Expel was such a priority to the SEC why is that we were able to locate more than 700 dormant public companies in the state of Nevada with minimal effort? What danger do these sorry companies present and if they are so dangerous why are there so many dormant shell companies still out there being fraudulently taken over?

The existence of empty shell companies can be a financial boon to stock manipulators who will pay as much as $750,000 to assume control of the company in order to pump and dump the stock for illegal proceeds to the detriment of investors. But with this trading suspension’s obligation to provide updated financial information, these shell companies have been rendered essentially worthless and useless to scam artists.

The shells were “rendered essentially worthless” because the suspension meant they’d be delisted to the Grey Market, the graveyard of bad pennies, in which market makers are forbidden to publish quotes.

Critics of rampant abuse in the OTC market cheered the SEC on, hoping Operation Shell-Expel signaled a new, and far less tolerant, attitude toward dormant shells that were often serially pumped and dumped. The following June, the agency suspended trading in another 61 issuers, and in February 2014, it followed up by shutting down another 255 shells. The hammer came down on 128 more in March 2015. There’s been no similar action in 2016. At the time of the 2015 suspensions, Enforcement director Andrew J. Ceresney remarked, “We are getting increasingly aggressive and adept at ridding the microcap marketplace of dormant shells within a year of the companies becoming inactive.” Many market participants see the SEC’s failure to pursue corporate hijackers of dormant shells as one of the greatest enforcement failures of the penny stock markets in the last decade. We have identified hundreds of hijacked tickers and/or companies involving fraudulent state court actions such as with minimal effort yet these types of shell companies continue to be hijacked by two or three penny stock law firms who assist the hijackers or sell the vehicles to unsuspecting companies seeking public company status. Our research reveals these shells have been used as the vehicles for many of the largest and most publicized securities fraud cases pursued by the Department of Justice and SEC. Yet there are at least 740 of these companies domiciled in the state of Nevada alone.
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Going Public Bootcamp – Going Public Attorneys – Securities Lawyer 101

The going public process involves a number of steps that vary depending on the characteristics of the private company wishing to go public, and whether it will become subject to the Securities and Exchange Commission (“SEC”) reporting requirements. Companies seeking public company status must meet certain SEC requirements before its securities can be publicly traded. This applies to reporting and non-reporting issuers. A going public lawyer can assist the issuer in complying with the SEC’s requirements.

Shareholder Requirements in Going Public Transactions

The first step in a going public transaction is most often obtaining the number of shareholders required by the Financials Industry Regulatory Authority (FINRA). The shares issued to them must be unrestricted at the time of the filing of the Form 211 with FINRA, so that a public float will exist when the company’s stock begins trading.

SEC Obtains Final Judgment Against Vincent Cassano Charged with Fraudulent Stock Promotion Scheme

On April 10, 2018, the U.S. District Court for the Western District of Washington entered a final judgment against Vincent Cassano for his role in a fraudulent stock promotion scheme. According to the SEC’s complaint, Lidingo Holdings, LLC hired writers like Vincent Cassano to publish hundreds of bullish articles on its clients, which appeared to be independent research pieces but, in fact, were paid advertisements.

The final judgment permanently enjoins Vincent Cassano from violating Sections 17(a) and 17(b) of the Securities Act, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Vincent Cassano consented to the entry of the final judgment, and neither admitted nor denied the allegations in the SEC’s complaint. Read More

JH Darbie Charged in Calissio Resources Scam – Securities Lawyer 101

On March 27, 2018, the Securities and Exchange Commission (SEC) announced a settled administrative proceeding against broker-dealer J.H. Darbie & Co., Inc., and Robert Y. Rabinowitz, Darbie’s majority owner and CEO. On its surface, the suit is both simple and unexciting: between September 2015 and July 2016, Darbie operated with a net capital deficiency, and failed to record it properly. It therefore violated Section 15(c)(3) of the Securities Exchange Act of 1934, which provides that broker-dealers “at all times have and maintain net capital” no less than the greatest of the minimum requirement applicable to its business. But the legal action is related to several others involving a variety of unsavory players in the penny stock world.

Darbie is a small New York firm that’s been sanctioned by its regulator, the Financial Industry Regulatory Authority (FINRA), a number of times. In 2015, it and Wolf A. Popper, Inc., a brokerage controlled by Rabinowitz and Wolf Popper, were the subjects of a complex FINRA enforcement action involving violations that had taken place between 2008 and early 2014. According to FINRA, the violations were mostly Darbie’s; the firm had, the regulator said, “facilitated the deposit and liquidation of billions of shares of low-priced, microcap stocks for customers without having in place adequate procedures to assure that such liquidation transactions were scrutinized sufficiently.” Read More

William Schantz and Verto Capital Management LLC Settle Claims for Additional Investments in Scheme Involving Life Settlements

On February 27, 2018, the United States District Court for the District of New Jersey entered an amended judgment against Verto Capital Management LLC and William Schantz, of Moorestown, New Jersey. Verto Capital Management LLC and William Schantz had previously agreed to pay more than $4 million to settle charges that they used new investor money to repay earlier promissory note investors, tapped investor funds for William Schantz’s personal use, and made misrepresentations to investors about the safety of the notes and life settlement collateral underlying them. As reflected in the amended judgment, Verto Capital Management LLC and William Schantz have agreed to pay an additional $620,594 to cover investments that were identified after the initial judgment and to correct the amount of interest owed to some investors on certain notes. Without admitting or denying the allegations, Verto Capital Management LLC and William Schantz consented to this additional relief as well as the pledge of a policy and property to repay investors. A Fair Fund has been created and has been returning money collected in the settlement to harmed investors. Read More

SEC Charges Charlie Chen and Shui Foon Mok in Multi-Year Trading Scheme

On April 5, 2018, The Securities and Exchange Commission charged Charlie Chen for making an extraordinarily profitable series of unlawful trades in the securities of Massachusetts-based VistaPrint, N.V.

According to the SEC’s complaint, Charlie Chen used private information obtained directly or indirectly from a VistaPrint insider to place illegal trades in advance of eight VistaPrint quarterly earnings announcements over a two-year period. Each time, Charlie Chen’s trades were consistent with the news – whether good or bad-in VistaPrint’s pending earnings announcements. On some occasions, Charlie Chen placed extremely aggressive bets, wagering a substantial portion of his retirement savings on risky VistaPrint options before the company’s announcement of disappointing earnings results in April 2014. Charlie Chen generated approximately $390,000 on the April 2014 trade and more than $900,000 in illicit profits over the course of the scheme.

In addition to detailing Charlie Chen’s uncannily successful pattern of trading, the SEC also alleges that upon being questioned by the Federal Bureau of Investigation, Charlie Chen claimed that he did not know anyone who worked at VistaPrint and falsely denied having a close relationship with a VistaPrint insider and her husband with whom he had vacationed. Read More

Mohammed Rashid Charged With Secretly Billing Clients for His Vacations and Salon Visits

On October 25, 2017, the Securities and Exchange Commission charged Mohammed Rashid, a former senior partner at Apollo Management L.P., with defrauding his fund clients by secretly billing them for approximately $290,000 in personal expenditures, including his family vacations, visits to a hair salon, and purchases of designer clothing and high-end electronics.

The SEC’s complaint alleges that Mohammed Rashid falsely claimed that certain individuals accompanied him to dinners to make it appear his various personal expenses had a business purpose, and he doctored a receipt in an effort to justify his purchase of a $3,500 suit for his father as a business expense. Read More

Which Companies Are Eligible for Regulation A + Offerings?

A correctly designed Regulation A Offering Program can minimize your financial risk and significantly enhance your ability to raise money, but not how you may think. Both issuers and selling shareholders can benefit from Regulation A +. A few of the many benefits of Regulation A + include:

You can aggressively advertise your Regulation A+ Offering over social media and elsewhere in all 50 states BEFORE you spend any money to prepare and file a Form 1-A. As a side note, you may want to consider a small Crowdfunding Regulation CF offering to start as that will tell you accurately whether potential investors will actually buy your stock at the price you set, which you cannot do under A+
You do not have to register your A+ Offering by making separate state “Blue Sky” filings, meaning you are free to advertise sell your A+ Offering in all 50 states, even in states that have “merit review.” An S-1 offering, on the other hand, requires separate registrations in every state, making it practically impossible to sell. Think how well this A+ Offering structure works if you want to sell stock from your website not only to potential investors but also to your customers and visitors to your website!

Regulation A+ -v- Form S-1 Registration By: Regulation A Attorneys

Almost three years ago, the SEC radically changed Regulation A for smaller companies desiring to raise money by going public. This seismic shift is called Regulation A+. In this blog post, we will explain how new Regulation A+ can work for you, making it easier to raise money and significantly lowering costs of going and staying public.

However, let’s first examine just how Regulation A+ changed the Raising Money world compared to the filing a Registration Statement on Form S-1.

A correctly designed A+ Offering Program can minimize your financial risk and significantly enhance your ability to raise money, but not how you may think. The disclosure standards and SEC review process for A+ and S-1 are essentially the same. But there are other significant differences, as follows.: Read More

SEC Charges Marc Tager and Jersey Consulting with Defrauding Investors in “Soil Remediation” Scam

The Securities and Exchange Commission announced charges against Marc Andrew Tager and Jersey Consulting LLC, a Utah-based company and several solicitors of the company’s securities in an ongoing offering fraud that has already targeted more than 80 individual investors.

The SEC’s complaint, filed in federal district court in Salt Lake City, Utah, alleges that, since September 2014, Marc Andrew Tager of Utah and his company, Jersey Consulting LLC, have engaged in the fraudulent offering of unregistered Jersey securities and employed paid telemarketers to raise at least $6 million from investors located across the U.S. None of the telemarketers-Suzanne Aileen Gagnier, Kenneth Stephen Gross, Jeffrey Rowland Lebarton, and Jonathan Edward Shoucair-are registered to sell securities. According to the complaint, Jersey investors were promised extraordinary returns of 100% or more within 12 months from the application and licensing of Jersey’s “soil remediation” technology, and were misled about the commercial viability of Jersey’s technology and Jersey’s purported rights to a “mineral rich” claim in Arizona. Jersey in fact had no rights to the claim and its technology was not commercially viable. Jersey also failed to disclose Tager’s prior felony conviction and that investor funds were diverted to pay for Tager’s personal expenses, including the purchase of a Harley-Davidson motorcycle. Read More

SEC Charges Beaufort Securities for Manipulative Trading in Microcap Penny Stocks

On March 2, 2018, the Securities and Exchange Commission The SEC announced securities fraud charges against Beaufort Securities, a U.K.-based broker-dealer and its investment manager in connection with manipulative trading in the securities a U.S.-based microcap issuer. The SEC also announced charges against HD View’s CEO, another individual, and three entities they control for manipulating HD View’s securities as well as the securities of another microcap issuer, West Coast Ventures Group Corp. The SEC further announced the institution of an order suspending trading in the securities of HD View. The SEC also announced charges against HD View’s CEO, another individual, and three entities they control for manipulating HD View’s securities as well as the securities of another microcap issuer, West Coast Ventures Group Corp. The SEC further announced the institution of an order suspending trading in the securities of HD View.

These charges arise in part from an undercover operation by the Federal Bureau of Investigation, which also resulted in related criminal prosecutions against these defendants by the Office of the United States Attorney for the Eastern District of New York.

In a complaint filed in the U.S. District Court for the Eastern District of New York, the SEC alleges that Beaufort Securities Ltd. and Peter Kyriacou, an investment manager at Beaufort, manipulated the market for HD View’s common stock. The scheme involved an undercover FBI agent who described his business as manipulating U.S. stocks through pump-and-dump schemes. Kyriacou and the agent discussed depositing large blocks of microcap stock in Beaufort accounts, driving up the price of the stock through promotions, manipulating the stock’s price and volume through matched trades, and then selling the shares for a large profit. Read More

What SEC Disclosure Is Required By Section 17(b) For Investor Relations Firms?

Section 17(b) of the Securities Act of 1933 requires anyone who advertises a stock, even if he does not purport to offer the security for sale to disclose the “consideration received or to be received, directly or indirectly, from an issuer, underwriter, or dealer, the receipt, whether past or prospective, of such consideration and the amount thereof.”We are often contacted by investors, stock promoters and investor relations firms about the disclosures that must be provided in promotional websites, emails and other investor relations materials.

Section 17(b) disclosure is not sufficient to satisfy disclosure obligations under all circumstances. Investor relations firms must also be aware of the requirements of the CAN-SPAM Act and SEC prohibitions against stock scalping activity. Read More

Americrude Charged by SEC – Posted by Brenda Hamilton, Securities Attorney

On March 8, 2018, the Securities and Exchange Commission charged Americrude, Inc. a Dallas-based oil-and-gas company and two of its executives with defrauding investors out of at least $950,000 through a string of fraudulent oil-and-gas securities offerings.

The SEC’s complaint alleges that Shezad Akbar used his company, Americrude, Inc., to defraud multiple investors in seven securities offerings that purportedly raised funds to acquire working interests in oil-and-gas prospects. The SEC alleges that Americrude, Akbar, and Daniel Waite, who was Americrude’s nominal President, used a combination of cold calls, high-pressure sales pitches, and false and misleading statements to lure investors into Americrude’s fraudulent offerings. The defendants misrepresented Americrude’s track record, the reserve potential of its oil-and-gas prospects, and its intended use of proceeds from the offerings. Akbar is also alleged to have used an alias to conceal his involvement in the offering fraud and to hide his prior felony convictions from potential investors. Read More

SEC Charges Elizabeth Holmes and Theranos Inc – Securities Lawyers

On March 14, 2018, the Securities and Exchange Commission charged Elizabeth Holmes and Silicon Valley-based private company Theranos Inc., with raising more than $700 million from investors through an elaborate, years-long fraud scheme in which they exaggerated or made false statements about the company’s technology, business, and financial performance. Theranos and Elizabeth Holmes have agreed to resolve the SEC charges against them. Importantly, in addition to a penalty, Holmes has agreed to give up majority voting control over the company, as well as to a reduction of her equity which, combined with shares she previously returned, materially reduces her equity stake.

The SEC complaints allege that Theranos, Elizabeth Holmes, and Balwani made numerous false and misleading statements in investor presentations, product demonstrations, and media articles by which they deceived investors into believing that its key product – a portable blood analyzer – could conduct comprehensive blood tests from finger drops of blood, revolutionizing the blood testing industry. In truth, according to the SEC’s complaint, Theranos’ proprietary analyzer could complete only a small number of tests, and the company conducted the vast majority of patient tests on modified and industry-standard commercial analyzers manufactured by others. Read More

SEC Charges Jon E. Montroll and Bitfunder with Bitcoin Fraud

On February 21, 2018, the Securities and Exchange Commission charged a former bitcoin-denominated platform known as BitFunder and its operator with operating an unregistered securities exchange and defrauding users of that Bitcoin exchange. The SEC also charged the operator with making false and misleading statements in connection with an unregistered offering of securities.

The SEC alleges that BitFunder and its founder, Jon E. Montroll, operated BitFunder as an unregistered online securities exchange and defrauded exchange users by misappropriating their bitcoins and failing to disclose a cyberattack on BitFunder’s system that resulted in the theft of more than 6,000 bitcoins. The SEC also alleges that Montroll sold unregistered securities that purported to be investments in the exchange and misappropriated funds from that investment as well in connection with BitFunder. Read More

SEC Charges Niket Shah and Spark Trading for Targeting Retail Investors

On March 23rd the Securities and Exchange Commission announced charges and a preliminary injunction and asset freeze against Niket Shah, a New Jersey resident who it alleges stole more than $250,000 in a Ponzi scheme in which his friends and coworkers invested.

Based on investor complaints, the SEC moved quickly to investigate and charge Shah. According to the SEC’s complaint, unsealed on March 22, 2018, in federal court in Brooklyn, New York, Shah used Spark Trading Group, LLC to defraud more than 15 investors into contributing hundreds of thousands of dollars to two funds that Shah marketed. Shah obtained investments for the funds by lying about his success as a trader, Spark Trading’s returns, and how he intended to use investors’ money, including altering financial statements to make the funds appear profitable when they were actually losing money. For instance the complaint alleges that Shah promised investors he would pay them monthly returns and guaranteed against losses. According to the complaint, Shah misused investor money for his own benefit and suffered substantial losses on the amounts actually invested. When investors sought their money back, he lied and said the money had been frozen by government agencies, including the Commission. Read More

EDGAR Filer, Robert W. Murray Sentenced to Two Years in Fitbit Stock Manipulation Scheme

On March 9, 2018, Robert W. Murray was sentenced to two years imprisonment in connection with a scheme to manipulate Fitbit securities through false filings on the SEC’s EDGAR system. Murray pled guilty on November 7, 2017.

The criminal charges against Murray arose from the same conduct alleged in the complaint the SEC filed on May 19, 2017, the same day the criminal charges were announced. According to the SEC’s complaint, Murray allegedly purchased Fitbit call options just minutes before a fake tender offer that he orchestrated was filed on the SEC’s EDGAR system purporting that a sham company sought to acquire Fitbit’s outstanding shares at a substantial premium. Fitbit’s stock price temporarily spiked when the tender offer became publicly available on Nov. 10, 2016, and Murray sold all of his options for a profit of approximately $3,100. Murray took steps to conceal his identity and actual location, including using an alias to create an email account and using an IP address registered to a company located in another state.

SEC Charges McKinley Mortgage with Scheme to Defraud – Posted by Brenda Hamilton

One March 22nd the Securities and Exchange Commission announced settled charges against McKinley Mortgage, the operators of a real estate investment business who engaged in a years-long scheme to bilk hundreds of investors – including many retail investors – out of millions of dollars. As a result of the settlement, Defendants will be ordered to return all ill-gotten funds to investors.

The SEC alleges that from 2012 through 2016, Tobias Preston, his brother, Charles Preston, and his son, Caleb Preston, along with their investment advisory entity, McKinley Mortgage Co. LLC (McKinley), raised more than $66 million from approximately 300 investors, most of whom were retail investors, by falsely stating that investments in their fund, Alaska Financial Company III, LLC (AFC III), were secure and that AFC III earned high returns from its portfolio. In reality, AFC III has been insolvent and unable to generate sufficient revenue to meet its interest obligations for years. According to the SEC, although a portion of the funds raised by McKinley Mortgage were invested as promised to investors. However, Tobias Preston misused more than $17 million to fund personal businesses and to pay for personal expenses, and McKinley Mortgage misused an additional $14 million to pay for its own operational expenses. The SEC also alleges that Charles Preston, Caleb Preston, and Accounting Manager Laura Sanford helped hide the fraud by preparing or distributing investor materials with false information and concealing information from AFC III’s auditors. Read More

Court Orders Former F-Squared CEO to Pay Over $13 Million

A federal judge has ordered the co-founder and former CEO of investment management firm F-Squared Investments to pay over $13 million after a federal jury found him liable for making false and misleading statements to investors as the public face of F-Squared.

The SEC charged Present and F-Squared in 2014 with misleading investors about the AlphaSector strategy, the flagship product of F-Squared which Present launched in the wake of the financial crisis. F-Squared agreed to pay $35 million and admit wrongdoing to settle the agency’s charges. After a three-and-a-half week trial, the jury deliberated for less than one day before finding Present guilty on all of the agency’s charges against him. Read More

SEC Charges Robert Ritch in Penny Stock Plan to Pump Stock

On March 9th the Securities and Exchange Commission barred Tobert Ritch, the president of a penny stock company from ever again serving as a public company officer or director after he was caught making false and misleading statements about the company to investors in an effort to increase demand for the stock.

The false statements were removed from the Internet and social media before any dramatic spike in stock price typically seen in pump-and-dump schemes could occur. Following such spikes, fraudsters dump their shares and stop hyping the stock, the price typically falls, and investors lose their money. Read More

SEC Charges Brian Sodi, the Penny Stock “Mailman” With Scalping Investors In Gold Mining Stocks

The Securities and Exchange Commission has charged Brian Sodi, a penny stock promoter based in Florida with defrauding investors in a pair of gold mining stocks by secretly amassing shares before touting the companies publicly. He allegedly sold the bulk of his stock and reaped more than $1.1 million in illicit profits after his promotions caused the share prices and trading volumes to skyrocket.

The SEC’s complaint alleges that Brian Sodi, known in penny stock circles as “Mailman” for his pervasive participation in direct-mailed penny stock promotions, committed a fraud known as scalping. He allegedly disseminated promotions recommending the purchase of the stocks in Southern USA Resources Inc. and Goff Corporation without disclosing he owned shares and planned to sell them through a foreign bank. Sodi also allegedly hid from investors that he was being paid in stock for one of these promotions. According to the SEC’s complaint, Brian Sodi proceeded to unload hundreds of thousands of his own shares to the detriment of other investors who bought in to the hype. The unlawful practice of promoting a stock while secretly selling is known as scalping. Read More

Electronic Transaction Clearing -ETC- Charged With Repeatedly Putting Customer Assets At Risk

On March 19th the Securities and Exchange Commission announced that Electronic Transaction Clearing (ETC), a registered broker-dealer headquartered in Los Angeles, has agreed to settle charges that it illegally placed more than $25 million of customers’ securities at risk in order to fund its own operations.

Among other things, the SEC found that ETC violated the Customer Protection Rule, which is intended to safeguard customers’ cash and securities so that they can be promptly returned if a broker-dealer fails. It requires broker-dealers to maintain physical possession or control of customers’ fully paid and excess margin securities. Read More

Foreign Affiliates of KPMG, Deloitte, BDO Charged in Improper Audits

On March 13th the Securities and Exchange Commission charged foreign affiliates of KPMG, Deloitte & Touche, and BDO for their involvement in audit work that circumvented the full oversight of the Public Company Accounting Oversight Board (PCAOB).

The firms agreed to settle the charges by paying penalties or disgorging their profits from the audits.

According to the SEC’s orders, the Zimbabwe affiliates of Deloitte & Touche and KPMG improperly audited the majority of assets and revenues of a publicly traded company without registering with the PCAOB. The two principal auditors – KPMG’s affiliate in South Africa and BDO’s Canadian affiliate – were registered with the PCAOB but improperly relied upon the work of the two unregistered foreign component auditors to complete their audits of the company. This violated PCAOB standards requiring sufficient analysis and inquiry when using the work of another auditor. Read More

Former Equifax Executive, Jun Ying Charged With Insider Trading

On March 14th the Securities and Exchange Commission charged Jun Ying, a former chief information officer of a U.S. business unit of Equifax with insider trading in advance of the company’s September 2017 announcement about a massive data breach that exposed the social security numbers as well as other personal information of about 148 million U.S. customers.

According to the SEC’s complaint, Jun Ying, who was next in line to be the company’s global CIO, allegedly used confidential information entrusted to him by the company to conclude that Equifax had suffered a serious breach. The SEC alleges that before Equifax’s public disclosure of the data breach, Ying exercised all of his vested Equifax stock options and then sold the shares, reaping proceeds of nearly $1 million. According to the complaint, by selling before public disclosure of the data breach, Ying avoided over $117,000 in losses. Read More

SEC Proposes Targeted Changes to Public Liquidity Risk Management Disclosure

On March 14, 2018, the Securities and Exchange Commission proposed amendments to public liquidity risk related disclosure requirements for certain open-end investment management companies. Under the proposal, funds would discuss in their annual report the operation and effectiveness of their liquidity risk management program, replacing a pending requirement that funds publicly provide the aggregate liquidity classification profile of their portfolios on Form N-PORT on a quarterly basis.

The Commission adopted the open-end fund liquidity rule in October 2016 in an effort to promote effective liquidity risk management programs in the fund industry. Management of liquidity risk is important to funds’ ability to meet their statutory obligation — and their investors’ expectations — regarding redeemability of their shares. Since adoption, staff has engaged in extensive outreach to identify potential issues associated with the effective implementation of the rule.

Sponsoring Market Makers 101 – Form 211 and 15c-211 Requirements

The Role of Market Makers in Going Public Transactions

Market Makers play a critical role in the going public process when compiling information required by Rule 15c-211 and submitting the Form 211. The last step in a going public transaction is for the soon-to-be-public company to locate its sponsoring market maker for its Form 211. In order to obtain a ticker symbol, the company must be listed on a national securities exchange or qualify for quotation on the OTC Markets’ Pink Sheets, OTCQB, or OTCQX markets.

SEC Files Action Against Ariel Quiros & Jay Peak Resort

According to an SEC complaint filed in 2016 in federal court in Miami, Ariel Quiros allegedly misused more than $50 million in investor funds to purchase a different ski resort and to fund personal expenses such as income taxes and two luxury New York City condominium purchases. Investors were told their money would specifically be used for construction projects at the Jay Peak Resort and a nearby proposed biomedical research facility. Read More

Will My Rule 506 Offering Be Integrated? – Going Public Attorneys

Securities Lawyer 101 Blog

Issuers should consider the impact of offering integration when raising funds in Regulation D, Rule 506 offerings. The Securities & Exchange Commission‘s integration rules addresses the circumstances under which an issuer can raise capital privately while a Form S-1 registration statement is pending for a public offering. The integration rule was created to prevent companies from improperly avoiding registration by dividing a single securities offering into multiple offerings to take advantage of Securities Act exemptions that would not be available for the combined offering.

A pending registration statement does not prevent an issuer from raising funds in a concurrent private offering if certain conditions are met. Read More

SEC Suspends OTC Markets Issuers-Posted by Brenda Hamilton

SEC Suspends Penny Stock Issuers-Posted by Brenda Hamilton. The SEC has suspended four penny stock issuers who failed to comply…

On January 9, 2018, the U.S. Securities and Exchange Commission (“SEC”) announced the temporary suspension of trading in the securities of three penny stock issuers:

Blacksands Petroleum, Inc. (BSPE),
China Education Alliance, Inc. (CEAI),
DoMark International, Inc. (DOMK), and
East Coast Diversified Corp. (ECDC)

The SEC suspended trading in the securities of the foregoing penny stock issuers due to a lack of current and accurate information about the companies. Each issuer had not filed certain periodic reports with the Commission. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (“Exchange Act”). The SEC cautions brokers, dealers, shareholders and prospective purchasers that they should carefully consider the foregoing information along with all other currently available information and any information subsequently issued by these companies.

All three penny stock issuers were quoted by the OTC Markets interdealer link. Each of the issuers had undergone name changes and engaged in reverse merger transactions before becoming delinquent with their SEC filings. Read More

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