SEC Issues Trading Suspension of eCareer Common Shares
On April 8, 2014, the Securities and Exchange Commission (“SEC”) announced the temporary trading suspension of eCareer Holdings, Inc. of Boca Raton Florida. The trading suspension was issued pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”). The trading suspension will terminate at 11:59 p.m. EDT on April 21, 2015.
The trading suspension in the securities of eCareer was issued because of concerns about the accuracy and adequacy of publicly disseminated information concerning its SEC filings, among other things. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act). Read More
SEC Charges Brian Polito With Oil and Gas Fraud
The Securities and Exchange Commission (“SEC”) Division of Enforcement filed suit against GC Resources, LLC and Brian J. Polito for oil and gas fraud. According to the allegations, Polito defrauded investors through the sale of interests in oil and gas wells in a company he did not own. Through GC Resources, Polito solicited investors using cold calls and sent potential investors a package that included an accredited investor survey, joint venture agreement, operating agreement, and limited power of attorney. Despite using accredited investor questionnaires borrowed from another entity, GC Resources still sold investments to approximately thirty-five non-accredited investors. According to the allegations, Brian J. Polito had a falling out with his former colleagues, and then bought out their interests in GC Resources. GC Resources continued to conduct legitimate business until December 2011, selling interests in approximately twenty-five wells, some of which are still producing.
OTC Markets Q & A – Going Public Lawyers
Posted By Brenda Hamilton, Securities Lawyer
The OTC Markets offer several different tiers for companies to choose from when considering their services. These are the OTCQX, OTCQB and OTC Pink marketplaces. Companies that are trading on the OTC Markets span a broad range of sectors, from the ADRs of large cap conglomerates, to small and micro-cap growth companies, SEC reporting companies and community banks; and across all major industries, including metal and mining, financial services, oil & gas, utilities, telecommunications, media, pharma & bio tech, and many others. The 10,000 securities on the OTC Markets are traded through the OTC Market’s SEC-registered Alternative Trading System, OTC Link® ATS.
Q. What are the requirements for the OTCQX, OTCQB and OTC Pink marketplaces?
Broker Turned Bank Robber Sanctioned by the SEC
The Financial Industry Regulatory Authority (“FINRA”) and the Securities and Exchange Commission (“SEC”) regularly discipline errant brokers and financial advisers, but Leonard Eric Burd’s case is unusual by any standard. On March 31, the SEC announced that it had settled an administrative proceeding it had brought against Burd, a former stockbroker. Burd agreed to accept a permanent penny stock bar; he’d earlier been sanctioned by FINRA.
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SEC Subpoenas 101 – Securities Attorneys
Receiving a Securities and Exchange Commission (“SEC”) subpoena is a new and uncomfortable experience for most market participants. A SEC subpoena is an indication that the Division of Enforcement is investigating potential violations of the federal securities laws. SEC subpoenas can be issued to a variety of persons, many of which may not be suspected as securities law violators.
Most market participants understand that the Securities and Exchange Commission ( “SEC”) is a law enforcement agency. SEC Actions can involve a case in federal court or an administrative action. They can be informal or pursuant to an SEC formal order of investigation. SEC actions are common in the penny stock markets and the SEC frequently pursues shell packers, unregistered brokers stock promoters, investor relations firms, attorneys and auditors in connection with penny stock schemes.
Direct Public Offering Q & A – Going Public Lawyers
Going public transactions can be structured numerous ways. The going public process is a complicated & intricate procedure, and it is important to have an experienced securities attorney to help your company navigate through the process and deal with the Securities & Exchange Commission (“SEC”), Financial Regulatory Authority (“FINRA”) & Depository Trust Company (“DTC”). Upon completion of a going public transaction, most companies are subject to the regulations that apply to public companies, including those of the Securities Act of 1933, as amended (the “Securities Act”) and Securities Exchange Act of 1934, as amended (the “Exchange Act”). Read More
Brenda Hamilton Featured By Intuit About Direct Public Offerings and Going Public
Intuit Inc., a provider of small business software solutions, including QuickBooks, tackles accounting, taxes, budgets, and personal finances with TurboTax. Quicken featured an interview with Securities Attorney Brenda Hamilton.*
Brenda Hamilton practices Securities Law focusing on Direct Public Offerings /DPOs, Initial Public Offerings /IPOs, accredited crowdfunding, intrastate crowdfunding, and going public transactions for small and mid-sized businesses.
The interview’s focus included options for small businesses seeking to raise capital using direct public offerings/ DPO’s. Brenda Hamilton, a Securities & Going Public Lawyer, discussed direct public offerings /DPOs, accredited crowdfunding, and Form S-1 registration statements for small businesses going public. Read More
FINRA Sanctions Short Seller – Securities & Going Public Attorneys
Short sale conspiracy theorists will be pleased to learn that on March 25, 2015, The Financial Industry Regulatory Authority (FINRA) announced sanctions of $916,000 against Short Seller, First New York Securities L.L.C. for short selling ahead 14 public offerings of securities, of which it was participating, in violation of Rule 105 of Regulation M. First New York Securities was also sanction for related supervisory violations. FINRA ordered First New York to pay disgorgement of more than $516,000, plus interest, and fined the firm $400,000. Additionally, the firm is prohibited from participating in secondary or follow-on offerings for six months.
Rule 105 of Regulation M under the Securities Exchange Act of 1934 generally prohibits buying securities in secondary offerings when the purchaser sold short the security that is the subject of the offering during a specific restricted period – typically five business days – before the secondary offering is priced. Read More
SEC Charges 22 Unregistered Broker-Dealers-Going Public Attorneys
The Securities and Exchange Commission (SEC) Division of Enforcement is pursuing unregistered broker-dealer activity which runs rampant in the penny stock markets. With a reduction of the number of small broker-dealers, there have been limited sources of capital available to small business issuers. As such, many have turned to finders and intermediaries. Recent enforcement actions demonstrate there are serious consequences for those who engage in unregistered broker-dealer activity. We expect the regulatory focus on unregistered broker-dealer activity to increase with the use of general solicitation and general advertising in Accredited Crowdfunding Offerings under Rule 506(c) offerings and Regulation A+. Read More
The Going Public Attorney’s Document Review
The securities laws require companies to disclose a myriad of facts during the going public process. These disclosures are most often prepared by the company’s going public attorney. These stringent disclosure requirements apply to private companies that list on national securities exchanges like NASDAQ and the AMEX, and interdealer quotation systems like the OTC Markets. A going public attorney helps the company determine the best venue for listing its shares. An issuer must generally disclose information about its business operations, financial condition, risks, management, litigation and shareholders, in addition to how many shares will be offered and at what price. Read More
SEC Issues Trading Suspension of Winsonic Digital Media Group
The Securities and Exchange Commission (SEC) announced the temporary trading suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (“Exchange Act”), of trading in the securities of Winsonic Digital Media Group, Ltd. (WDMB), commencing at 9:30 a.m. EDT on March 24, 2015 and terminating at 11:59 p.m. EDT on April 7, 2015.
The SEC temporarily suspended trading in WDMG due to a lack of current and accurate information concerning WDMB’s securities because it has not filed any periodic reports since the period ending September 30, 2008, or any reports since June 2011.
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 the company. Read More
FINRA Reveals Fraud Victims Suffer Stress, Anxiety and Depression
Recently, the FINRA Investor Education Foundation issued a new research report about the impact of financial fraud on its victims. FINRA’s report revealed that nearly two thirds of self-reported financial fraud victims experienced at least one non-financial cost of fraud to a serious degree—including severe stress, anxiety, difficulty sleeping, and depression. FINRA Foundation’s research examines the broader psychological and emotional impact of securities and other forms of financial fraud.
“Financial Fraud’s effects linger and cause distress well after the scam is over. For the first time, we have data on the deep toll that fraud exerts on its victims, and the results are sobering. This new research underscores the importance of the FINRA Foundation’s work with an array of national, state and local partners to help Americans avoid fraud, and assist consumers who have been defrauded,” said FINRA Foundation President Gerri Walsh. Read More
Why Is There A Q On My Ticker Symbol?
When a company is involved in bankruptcy proceedings, the letter “Q” is added to the end of the company’s stock ticker/trading symbol.
More often than not, bankruptcy is the kiss of death for a public company.
In most cases, when a company emerges from bankruptcy, the bankruptcy reorganization plan will involve reverse stock splits or other acts which dilute or cancel the existing common shares and the old shares will be worthless. Given that risk, before investing in the shares of a bankrupt company, investors should read the company’s proposed plan of reorganization. Read More
What Is a Schedule 13D Insider Report? Going Public Attorneys
When a person or group of persons acquires beneficial ownership of more than 5% of a voting class of a company’s equity securities registered under Section 12 of the Securities Exchange Act of 1934 (“Exchange Act”), they are required to file a Schedule 13D with the SEC.
Once a company completes its going public transaction and the staff of the Securities and Exchange Commission (SEC) declares its Form registration statement effective under the Securities Act of 1933, as amended (Securities Act), the company will become subject to the SEC’s periodic reporting requirements. Companies can also become subject to the SEC’s reporting requirements by filing a registration statement under the Securities Exchange Act of 1934, as amended such as a Form 10 for Form 8-A.
These requirements stipulate that the company must file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K on an ongoing basis. Holders of 5% or more of a company that registers a class of securities under the Exchange Act become obligated to file certain beneficial ownership reports including Schedule 13D. Read More
Bad Actor Waivers- Regulation A+ – Rule 506 – Going Public
On March 13, 2015, the Securities and Exchange Commission (SEC) provided guidance addressing waivers of disqualification for bad actors under Regulation A and Rules 505 and 506 of Regulation D of the Securities Act of 1933, as amended. A waiver of disqualification under these provisions may be granted by the SEC’s Division of Corporation Finance if it determines after a review of all the facts and circumstances that the applicant has met its burden of showing good cause that it is not necessary under the circumstances that the exemptions from the bad actor provisions be denied. Read More
Form S-1 – Plan Of Distribution – Going Public Lawyers
Form S-1 requires companies to provide a Plan of Distribution as required by Item 508 of Regulation S-K. Item 508 requires a company to describe how it will offer its securities to the public. When a company indicates that its officers or directors, or any person(s) other than an underwriter, will sell its securities in what is called a Selling Stockholder or Resale Registration Statement, the SEC asks you to name those persons and describe the process through which these selling stockholders will offer and sell the company’s securities when going public.
One aspect of the disclosure in this section is that the SEC makes the issuer set a price on the stock that your selling stockholders will be selling. For example, “The selling stockholders will offer their shares at $___ (insert specific fixed price) per share until our shares are quoted on the OTC Markets, and thereafter at prevailing market prices or privately negotiated prices. We will not receive proceeds from the sale of shares from the selling stockholders.” Read More
Offering Proceeds And Going Public – Going Public Lawyer
A Going Public Lawyer helps the company comply with the expansive disclosures required in registration statements filed with the Securities and Exchange Commission (SEC). Proper disclosure is critical during the going public process. SEC disclosures are most often prepared by the company’s Going Public Attorney. Regardless of the venue for listing or trading, the securities laws require accurate and complete disclosure. A going public lawyer assists the issuer in determining whether it should conduct an initial public offering or a direct public offering as well as whether it qualifies for a national stock exchange and/or the most appropriate tier of the OTC Markets.
An issuer must generally disclose information about its business, operations, financial condition, risks, management, litigation and shareholders, in addition to how many shares it will offer and the share price. Issuers must also disclose the use of offering proceeds if they are registering shares for a capital raising transaction. As such, a going public lawyer reviews a mound of documents in going public transactions. Read More
Insiders Charged For Failure to Update Disclosures In Going Private Transactions
On March 13, 2015, the Securities and Exchange Commission (SEC) charged eight officers, directors, or major shareholders of public companies in connection with going private transactions. According to the SEC, the defendants failed to update their stock ownership disclosures to reflect material changes, including steps to take the companies private. Each of the respondents, without admitting or denying the SEC’s allegations, agreed to settle the proceedings by paying a financial penalty.
The charges involve outdated disclosures in reports filed by “beneficial owners” who hold more than 5 percent of a company’s stock. Federal securities laws require beneficial owners to promptly file an amendment when there is a material change in the facts previously reported by them on Schedule 13D, commonly referred to as a “beneficial ownership report.” The disclosure requirements include plans or proposals that would result in certain transactions, such as a going private transaction. Read More
Form D – Notice of Sales – Going Public Lawyers
Posted By Brenda Hamilton, Securities Lawyer
Companies may use an exemption under Regulation D to offer and sell securities without having to register the offering with the Securities and Exchange Commission (“SEC”). When relying on such an exemption, companies must file what’s known as a “Form D” after they first sell their securities. Form D is a brief notice that includes basic information about the company and the offering, such as the names and addresses of the company’s executive officers, the size of the offering and the date of first sale. Read More
What Documents Do Going Public Attorneys Review?
Proper disclosure is critical during the going public process. SEC disclosures are most often prepared by the company’s going public attorney. The securities laws require that companies provide expansive disclosures in registration statements filed with the Securities and Exchange Commission (SEC). Regardless of the venue for listing or trading, the securities laws require accurate and complete disclosure. A going public attorney assists the issuer in determining whether it should conduct an initial public offering or a Direct Public Offering as well as whether it qualifies for a national stock exchange and/or the most appropriate tier of the OTC Markets.
An issuer must generally disclose information about its business, operations, financial condition, risks, management, litigation and shareholders, in addition to how many shares it will offer and the share price. In addition, if Form S-1 is used, the company’s going public attorney must render a legal opinion as to certain corporate matters. Providing the required disclosures will help assure there are no future problems with DTC eligibility. Read More
SEC Charges HD Vest Investment Securities
On March 4, 2015, the Securities and Exchange Commission (SEC) announced it had charged HD Vest Investment Securities with violating key customer protection rules after failing to adequately supervise registered representatives who misappropriated customer funds.
HD Vest Investment Securities agreed to settle the charges by paying a financial penalty and retaining an independent compliance consultant to improve its supervisory controls.
According to the SEC’s order instituting a settled administrative proceeding, HD Vest has more than 4,500 registered representatives typically working as independent contractors who also operate tax businesses outside of their securities businesses. HD Vest failed to have proper policies and procedures in place to monitor its representatives’ outside business activities, and as a result some representatives used their outside businesses to defraud brokerage customers in such ways as transferring or depositing customer brokerage funds into their outside business accounts. Read More
SEC Adds Additional Defendant In Shaw Insider Trading Case
Posted by Brenda Hamilton Securities Lawyer
On March 6, 2014, the Securities and Exchange Commission (SEC) announced it had added Billy Joe Adcox, Jr. of Ruston, Louisiana to a civil injunctive action in the United States District Court for the Western District of Louisiana, alleging that Adcox, Scott Zeringue and Jesse Roberts, III engaged in insider trading in the securities of The Shaw Group, Inc. (“Shaw”) ahead of a public announcement that Shaw was going to be acquired by Chicago Bridge & Iron Company N.V. (“CBI”).
The SEC alleges that Adcox was tipped by his long-time friend, Jesse Roberts, III, also of Ruston, Louisiana. According to the SEC’s insider trading complaint, Adcox knew Roberts got the confidential information about the impending merger from Roberts’ brother-in-law, Zeringue, a Shaw insider. Adcox and his relative allegedly bought Shaw stock based on the tip and, about two weeks later, sold the stock for a profit of over $111,000. Adcox’s relative also tipped a third unnamed individual, who made about $43,000. Read More
FINRA Fines LaSalle Securities For Private Placements
The Financial Industry Regulatory Authority (“FINRA”) and the Securities and Exchange Commission require that broker-dealers perform adequate due diligence before letting a registered representative recommend private placements made pursuant to Regulation D of the Securities Act of 1933, as amended (the “Securities Act”). FINRA listed due diligence of private placements as a concern in its 2015 Regulatory and Examination Priorities). FINRA’s recent case against LaSalle St. Securities LLC (“LaSalle”) demonstrates that this due diligence obligation is mandatory even for private placement offerings made to accredited investors.
FINRA found certain deficiencies that occurred at various times during a four-year period in connection with the offerings of four issuers. The findings stated that with respect to private placement offerings, LaSalle Securities failed to exercise adequate due diligence before allowing a registered representative to recommend the offering to four accredited investors and distributed a private-placement memorandum to potential investors that did not include certain material facts and relied on a flawed methodology for projecting return on investment. Read More
SEC Periodic Reporting – SEC Reporting Requirements – Going Public Lawyers
Companies become subject to the SEC’s periodic reporting requirements a number of ways including by filing a registration under the Securities Act of 1933, as amended or pursuant to the Securities Exchange Act of 1934. The SEC periodic reporting rules require that publicly traded companies disclose a wealth of information to the public. Periodic reporting also requires that these reports be written in plain English. Understanding these reports helps investors make informed decisions regarding whether to buy, sell or hold a company’s securities.
Periodic reports provide issuers with the opportunity to provide shareholders with transparency by telling their story. Companies that provide materially false or misleading statements, or omit material information that is necessary to render a report not misleading in their periodic reports are subject to liabilities arising under federal and state securities laws. Investors can obtain a company’s Form 10-K, Form 10-Q and Form 8-K filings on the SEC’s EDGAR database. Read More
What is Form 13F? Going Public Attorneys
Institutional Investment Managers that exercise investment discretion of $100 million or more in Section 13(f) securities holdings, which include holdings in exchange-traded securities, shares of closed–end investment companies and certain convertible debt securities, must publicly disclose their holdings on Form 13F each quarter.
An “Institutional Investment Manager” is an entity that either invests in, or buys and sells, securities for its own account. As such, banks, insurance companies, and broker/dealers, corporations and pension funds that manage their own investment portfolios are subject to the rule if they invest in, or buy and sell securities for their own account. Read More
DTC Eligibility Q & A – Creating Liquidity with Electronic Trading
Posted By Brenda Hamilton, Securities Lawyer
The Depository Trust and Clearing Corporation (“DTCC”), through its subsidiaries, provides clearing, settlement and information services for securities. DTCC’s subsidiary, the Depository Trust Company (“DTC”) was created to improve efficiencies and reduce risk in the clearance and settlement of securities transactions. Not all securities are eligible to be settled through DTC. DTC Eligibility has become an often unexpected burden for companies in going public transactions.
Issuers must satisfy the criteria set by DTCC to be settled through DTC. All companies must satisfy this criteria in order to be DTC eligible, including both Securities and Exchange Commission (“SEC”) reporting and non-reporting issuers. This Securities Lawyer 101 Series discusses the most common questions we receive about DTC eligibility in going public transactions. Read More
How Does A Foreign Issuer Register Shares When Going Public?
A foreign issuer seeking to go public has several registration statement forms available for its going public transactions. Regardless of the registration statement form selected, all registration statements and other material filed with the Securities and Exchange Commission (“SEC”) must be submitted in electronic format on the SEC’s Electronic Data Gathering and Retrieval (“EDGAR”) system. All registration statements including those of foreign private issuers are subject to the SEC’s review and comment.
Some registration statement forms can be used exclusively by foreign private issuers under the Securities Act of 1933, as amended (“Securities Act”) and The Securities Exchange Act of 1934 (“Exchange Act”), depending upon the purpose for registration and whether the registration statement is used in connection with a going public transaction. Read More
Periodic Reporting for Foreign Issuers – Going Public Lawyers
A foreign private issuer seeking to go public in the U.S. can file a registration statement covering a public offering of securities under the Securities Act of 1933, as amended (“Securities Act”), register a class of equity securities under the Securities Exchange Act or it may do both. Foreign issuers can conduct direct public offerings or an initial public offering by filing a registration statement under the Securities Act. A Securities Act registration statement contains a prospectus, along with other information required by the securities laws. Under both the Securities Act and the Exchange Act, a registration statement filed by a foreign issuer must be declared effective by the SEC.
Foreign private issuers use the “F” series registration statements and Form 20-F and Form 6-K reports for their annual and current reports. The SEC disclosure forms available to foreign issuers are designed with reference to international disclosure standards, both in scope and timing requirements for filing. Read More
How Can a Foreign Issuer Use 12g3-2 To Go Public?
Under federal securities laws, a foreign company that meets the definition of the Securities and Exchange Commission (SEC) of a foreign private issuer must register an offering of its securities under the Securities Act of 1933, as amended (Securities Act) or a class of securities under the Securities Exchange Act of 1934 (the “Exchange Act”) or both, if:
- The foreign private issuer conducts a public offering of its securities in the U.S.
- The foreign private issuer seeks to list a class of its securities listed on a national securities exchange
- The foreign private issuer’s size; or
- The foreign private issuer has a certain number of shareholders.
Foreign Private Issuer Disclosure Obligations – Going Public Lawyers
Foreign issuers seeking to go public and access the U.S. capital markets must comply with the requirements of the Securities Act of 1933 (Securities Act) and the Securities Exchange Act of 1934 (Exchange Act). The Securities Act requires foreign issuers that offer and sell securities in the United States to file a registration statement with the SEC. The Exchange Act requires foreign issuers to register a class of equity securities in order to list their securities on a national securities exchange, or if certain asset and shareholder thresholds are met.
Once a foreign issuer completes a going public transaction, the Exchange Act requires it to provide certain information to the public in periodic reports published through its Electronic Data Gathering, Analysis, and Retrieval system also known as “EDGAR”. Read More
