On April 10, 2015, the Securities and Exchange Commission (“SEC”) charged Mieka Energy Corporation, and its founder and president Daro Ray Blankenship, with fraudulently offering oil and gas investments. Two of Mieka’s salesmen, Robert William Myers, Jr. and Stephen Romo, were charged with acting as unregistered brokers.

The SEC action also charged Mieka’s publicly traded parent company, Vadda Energy Corporation, with fraud and reporting violations for deceptively touting the success of Mieka’s investments. The SEC action alleges that, between September 2010 and October 2011, Blankenship and Mieka raised $4.4 million from approximately 60 investors by selling interests in joint ventures that were to drill and complete two gas wells. Read More

On March 6, 2015, the Securities and Exchange Commission (“SEC”) announced that the United States District Court of New Jersey entered a judgment against Michael M. Cohen. Cohen received a lifetime officer-director bar, lifetime penny stock bar and an injunction prohibiting him from violating certain provisions of the federal securities laws.

The District Court’s judgment, which was entered by consent, permanently enjoined Cohen from violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933; Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (the “Exchange Act”); Rules 10b-5, 13a-14, and 13b2-1 thereunder; and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, and 13a-13 thereunder. Read More

The Securities and Exchange Commission (“SEC”) recently approved Rule 2040 proposed by the Financial Industry Regulatory Authority (“FINRA”) which applies to the payment of transaction based compensation to unregistered persons by member firms.  Rule 2040 will allow member firms to pay fees, concessions, discounts, commissions or other allowances to unregistered persons if the member firm determines the unregistered person’s activities do not require registration as a broker-dealer.

Support for the determination of whether registration is required can be derived by reasonably relying on previously published releases, no-action letters or SEC staff interpretations, seeking a no-action letter from the SEC, or obtaining a legal opinion from an independent securities attorney. Read More

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.

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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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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

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

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

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

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

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

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