DTC Conspiracy Theories Continue In 2015
We continue to receive inquiries from management and shareholders of public companies about the Depository Trust Company (“DTC”). Many of these people assert that there is a larger DTC conspiracy in the works. Frequently, companies engaging in certain types of reverse merger transactions find their securities without DTC eligibility. A closer review of these transactions reveals that in most instances the reverse mergers involved public shells that were illegally acquired by the shell purveyor. Read More
What Does a Going Public Lawyer Do Anyway?
The role of the Going Public Lawyer is one of the most important in the going public process. The Going Public Lawyers at Hamilton & Associates Law Group have provided private companies with their going public solutions for over ten years. A skilled Go Public Lawyer can design and implement the going public structure most beneficial to your company without the risks associated with reverse merger transactions. We have represented more than 300 market participants in securities law matters and going public transactions.
Our experience includes direct public offerings (“DPO”), slow public offerings (“Slow PO”), Initial Public Offerings (“IPO’s) and SEC registration statements. Private companies using an SEC registration statement have a variety of structures available to them when designing their going public transactions. A Going Public Lawyer should structure the most cost and time effective going public solution for your private company to become publicly traded.
Many private companies file a registration statement filing with the SEC in connection with their going public transaction. The most commonly used registration statement form is Form S-1. A going public lawyer can guide you through the S-1 registration statement process.
All companies qualify to register securities on a Form S-1 registration statement. Private companies going public should be aware of the expansive disclosure required by in registration statements filed with the SEC prior to making the decision to go public. A registration statement on Form S-1 has two principal parts which require expansive disclosures. Part I of the registration statement is the prospectus which requires that the company provide certain disclosures about its business operations, financial condition, and management. Part II contains information that doesn’t have to be delivered to investors. A skilled Going Public Lawyer can draft the disclosures for the Form S-1 and assist management in compiling information required for its auditor. Read More
Can Form S-1 Be Used To Go Public ? l Going Public Lawyers
Going Public Bootcamp – Securities Lawyer 101 Blog
Form S-1 is the basic registration statement form used to register securities. Form S-1 can be used to register securities for which no other form is authorized or prescribed, except securities of foreign governments or political sub-divisions thereof. Form S-1 is commonly the first form of SEC registration statement used by issuers during the going public process when a direct public offering (“Direct Public Offering” or “DPO”) is conducted. Unlike an Initial Public Offering (“IPO”), a Direct Public Offering allows an issuer to sell its shares directly to investors without the use of an underwriter as part of its going public transaction. If a Form S-1 is used in conjunction with a Direct Public Offering in a going public transaction, the issuer becomes an SEC reporting company with a ticker symbol.
This blog post discusses the use of Form S-1 in the going public process. Read More
Can I Go Public With an Exchange Act Registration Statement?
All public companies whose securities are registered on a national securities exchange, and generally issuers whose assets exceed $10,000,000 with a class of equity securities held by 500 or more persons, must register a class of their securities under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”). Companies can elect to become subject to the Exchange Act by filing an Exchange Act registration statement. An Exchange Act attorney can guide the issuer through the registration statement forms that will cause it to become subject to the reporting requirements of the Securities and Exchange Commission (the “SEC”). Many companies in going public transactions voluntarily register securities under the Exchange Act, so to provide transparency to investors and to have the prestige associated with SEC reporting. Read More
What is Stock Scalping ? Securities Lawyer 101
Stock promoters often engage in what is known as stock scalping. Stock scalping is the illegal and deceptive practice of recommending that others purchase a security while secretly selling the same security. In recent years, the SEC and Justice Department have brought an increasing number of cases alleging securities violations for stock scalping activity.
The Role of the Stock Promoter in Stock Scalping Schemes
Stock Promotion entails the dissemination of information about a publicly traded company intended to increase its stock price and trading volume. The person who publishes this information is called a “promoter” or a “stock tout.” Read More
Tips for Going Public With a Direct Public Offering
Direct Public Offering Lawyer – Securities Law Blog
More and more issuers going public opt for a direct public offering. In a direct public offering management sells shares of the company’s stock directly to investors, rather than through the efforts of an underwriter. Going public with a direct public offering eliminates costs and risks associated with a reverse merger transaction. Private companies conducting a direct public offering should consider the pointers below to ensure a successful and cost-effective going public transaction.
The direct public offering process provides options for multiple structures, each with its own unique benefits and requirements. The decision about the appropriate going public structure often involves complex legal issues that vary depending upon the needs of the particular company involved.
Direct public offerings involve complex disclosures and legal issues, including those required by the Form S-1 registration statement. Forms S-1 are reviewed by the Corporation Finance Division of the Securities and Exchange Commission (“SEC”). Each of the multiple reviews prompts comments to which the company must respond with the help of its securities attorney. The attorney will draft these responses and file amendments to the registration statement. When the SEC examiners feel the Form S-1 has satisfied all requirements, the registration statement will be deemed effective. Read More
Public Company Disclosure Controls and Procedures
To back up the officer and director certifications in periodic reports, issuers must establish and maintain a system of disclosure controls and procedures designed to ensure that the company records, processes, summarizes and discloses on a timely basis information required to be disclosed in 1934 Act filings. Issuers must evaluate on a quarterly basis the effectiveness of their disclosure controls and procedures. The requirement that an issuer have disclosure controls and procedures extends beyond financial matters and includes all controls and procedures relating to required SEC disclosures, including interactive data. Read More
Form 8-K Disclosure of Shareholder Meetings
Companies with a class of securities registered under the Securities Exchange Act of 1934, as amended are required to file periodic reports with the Securities and Exchange Commission (“SEC”). These reports include annual reports on Form 10-K, quarterly reports on Form 10-Q and current information reports on Form 8-K. Under Item 5.07 of Form 8-K, issuers must disclose the results of a shareholder vote within four business days after the meeting at which the vote was held or the action was taken by written consent. Read More
Crowdfunding Platforms to Watch in 2015
It has been more than a year and the SEC has not finalized its rules with respect to equity crowdfunding under the Title III of the JOBS Act, which would allow an issuer to raise up to $1 million from the sale of securities from non-accredited investors through online funding portals.
Despite this equity and intrastate crowdfunding have progressively marched forward with four viable crowdfunding platforms including the intrastate crowdfunding platform, partnership or fund model, broker-dealer and lending platforms.
E-Cigarette Scams – American Heritage International
Last week, the Financial Industry Regulatory Agency (“FINRA”) issued an investor alert concerning companies touting new technology for electronic cigarettes, often called e-cigarettes. The SEC recently announced a trading suspension of American Heritage International (AHII), a company that purports to make disposable electronic cigarettes, because of concerns about manipulative activity related to its common shares. E-cigs have been around for ten years or more. At its website, American Heritage boasts that it makes “America’s original premium electronic cigarette.” Read More
NASAA Announces Form D Electronic Filing Portal
The North American Securities Administrators Association (“NASAA”) has launched its Electronic Filing Depository (“EFD”) for Rule 506 Form D filings. NASAA’s EFD was created to allow companies to post Form D’s for Rule 506 offerings online through NAASA’s EFD website. Rule 506 of Regulation D is a “safe harbor” for private offerings under Section 4(a)(2) of the Securities Act. Issuers relying on the Rule 506 do not have to register their securities offering with the Securities and Exchange Commission (the “SEC”) or state securities regulators. Read More
SEC Proposes Exchange Act Registration Thresholds
On December 18, 2014, the SEC issued proposals required by the JOBS Act intended to permit non-reporting issuers to delay or avoid becoming SEC reporting companies. To accomplish this, the Securities Exchange Act of 1934, as amended (the “Exchange Act”) was amended to increase the threshold number of record holders that triggering an issuer’s obligation to file a registration statement covering a class of equity securities under Section 12 of the Exchange Act, and to exclude certain records holders entirely from the calculation. Form 10 and Form 8-A are Exchange Act registration statements. Read More
SEC Charges Staten Island Company in Boiler Room Scam
On December 18, 2014, the Securities and Exchange Commission (“SEC”) charged a Staten Island company called Premier Links Inc. and its former president and two sales representative, Dwayne Malloy, Chris Damon, and Theirry Ruffin, with running a boiler room scheme that targeted seniors. The SEC has warned of the vulnerability of the elderly and others to cold-calling campaigns in an investor alert.
Between December 2005 and August 2012, Premier Links operated as an unregistered broker-dealer in Staten Island, New York. It was an old-fashioned boiler room that targeted elderly investors from all over the country. Its sales representatives, including Damon and Theirry, used high-pressure tactics to persuade their victims to invest in the unregistered securities of speculative startups, often telling them the companies would soon be conducting IPOs. Read More
Operator of a Ponzi Scheme Uses Proceeds to Cryogenically Freeze Wife
Ponzi schemes are nothing new, but unwary investors continue to fall for them, lured by the prospect of improbably large returns. Typically, the scammer who runs the ponzi scheme makes few actual investments in the markets; they simply keep the money they collect for themselves. Should an investor seek to withdraw all or some of the funds said to be in his account, he’ll be paid with money contributed by a new mark. The criminals behind the schemes are fast-talking and confident, and often seek to impress their victims with tall tales of their expertise and success. Read More
SEC Proposes Amendments to Implement JOBS Act
On December 19, 2014, the SEC approved the issuance of proposed amendments to revise the rules related to the thresholds for registration, termination of registration, and suspension of reporting under Section 12(g) of the Securities Exchange Act. Registration under the Exchange Act is accomplished on Form 10 or Form 8-A.
The SEC voted on a proposal that would implement the mandate of the JOBS Act by: Read More
NASAA Launches Rule 506 Form D EFD
The North American Securities Administrators Association (“NASAA”) has launched its Electronic Filing Depository (“EFD”) for Rule 506 Form D filings. NASAA’s EFD was created to allow companies to post Form D’s for Rule 506 offerings online through NAASA’s EFD website. Rule 506 of Regulation D is a “safe harbor” for the private offering exemption of Section 4(a)(2) of the Securities Act. Issuers relying on the Rule 506 do not have to register their securities offering with the Securities and Exchange Commission (the “SEC”) or state securities regulators. Even though registration is not required, issuers must file a “Form D” with the SEC and state securities regulators after they first sell their securities. The Form D contains limited information about the securities being offered and the issuer offering those securities.
SEC Settles Charges Against Joseph Saranello
On December 17, 2014, the Securities and Exchange Commission (the “SEC”) announced settled charges against Joseph Saranello who participated in a pump-and-dump scheme involving the stock of Rudy Nutrition. The SEC previously charged thirteen other individuals in the District of Nevada for engaging in this scheme to manipulate the stock of Rudy Nutrition that netted over $11 million in illicit profits. Read More
Avon Products Charged with Foreign Corrupt Practices Act Violations
On December 17, 2014, the Securities and Exchange Commission (the “SEC”) charged Avon Products Inc. with violating the Foreign Corrupt Practices Act (FCPA) by failing to put controls in place to detect and prevent payments and gifts to Chinese government officials from employees and consultants at a subsidiary. Avon entities agreed to pay a total of $135 million to settle the SEC’s charges. The U.S. Department of Justice and the U.S. Attorney’s Office for the Southern District of New York announced parallel charges. Read More
Why The Rules That Apply To Transfer Agents Are Passé
On December 17, 2014, Luis A. Aguilar released a public statement about why the rules surrounding transfer agents should be updated and modernized. [1] Unfortunately, the rules governing transfer agents were adopted in the 70’s and 80’s and have not kept up with technological advances in the industry. In the informative release, Commissioner Aguilar explains the important role that transfer agents play in the public markets including as a gatekeeper to securities violations. Read More
CANN Settles Lawsuit Against Stephen Calandrella
On September 25, 2014, Advanced Cannabis Solutions, Inc. (“CANN”) sued Stephen G. Calandrella, one of the company’s biggest investors. Though that may seem paradoxical, CANN alleges in a lawsuit that Calandrella critically damaged the company. Last spring, on March 27, the Securities and Exchange Commission (“SEC”) suspended trading in CANN’s stock, citing “questions regarding whether certain undisclosed affiliates and shareholders of Advanced Cannabis common stock engaged in an unlawful public distribution of securities.”
SEC Charges Treaty Energy, Management & Attorney
On December 15, 2014, Securities and Exchange Commission (the “SEC”) charged Treaty Energy Corporation, Ronald L. Blackburn, Andrew V. Reid, Bruce A. Gwyn, Michael A. Mulshine, Lee C. Schlesinger and Samuel E. Whitley for a stock trading scheme in which they claimed to have struck oil in Belize in order to manipulate the company’s stock price as they illegally sold shares to the public. Read More
Doug Furth Indicted in Kickback Scheme
On December 12, 2014, the Securities and Exchange Commission (“SEC”) filed a civil injunctive action in the United States District Court for the Eastern District of New York, charging Douglas Furth, a stock promoter who resides in Solon, Ohio, with manipulating the common stock of SearchPath HCS, Inc. (“SearchPath”). On the same day Furth was indicted in connection with the same conduct. Read More
SEC Sanctions Firms For Lack of Auditor Independence
On December 8, 2014, the Securities and Exchange Commission (the “SEC”) sanctioned eight firms for violating auditor independence rules when they prepared the financial statements of brokerage firms that were their audit clients. The SEC determined that the audit firms generally took data from financial documents provided by clients during audits and used it to prepare their financial statements and notes to the financial statements. Under auditor independence rules, firms cannot jeopardize their objectivity and impartiality in the auditing process by providing such non-audit services to audit clients. Read More
SEC Sanctions Bitcoin Stock Exchange Operator
On December 8, 2014, the Securities and Exchange Commission (the “SEC”) announced sanctions against a computer programmer for operating two online venues that traded securities using virtual currencies Bitcoin or Litecoin without being registered as broker-dealers or stock exchanges. The programmer, Ethan Burnside, also was sanctioned for conducting unregistered offerings. He significantly cooperated with the SEC’s investigation and agreed to settle the case by paying more than $68,000 comprising his profits from the unregistered venues plus interest and a penalty.
Section 3(a)(10) l The Paper Crime Exemption
Section 3(a)(10) of the Securities Act of 1933 (the “Securities Act”) provides an exemption from registration that permits a company to issue common stock to public investors “in exchange for one or more bona fide outstanding securities, claims or property interests” without having to file a registration statement with the Securities and Exchange Commission (the “SEC”), “where the terms and conditions of such issuance and exchange are approved after a hearing upon the fairness of such terms and conditions” by any court or any governmental authority “expressly authorized by law to grant such approval.” Read More
SEC Targets Another Promoter In a Reverse Merger Scheme
The Securities and Exchange Commission (the “SEC”) charged another promoter in connection with a reverse merger issuer. Matthew Carley, a penny stock promoter in Montana with orchestrating a fraudulent pump-and-dump scheme involving the stock of reverse merger issuer, Red Branch Technologies, a company quoted by the OTC Markets OTC Link with an OTC Pink tier. The SEC alleges that Carley engineered a reverse merger with Red Branch Technologies then orchestrated two blast e-mail campaigns promoting its shares. It is unclear how Carley received free-trading shares or located the public shell company. According to the SEC charges, Carley timed e-mails to coincide with the release of materially false and misleading press releases touting technology related to airport and homeland security. Read More
SEC Charges Traders Cafe Founders As Unregistered Brokers
The Securities & Exchange Commission (the “SEC”) announced securities fraud charges against Albert J. Scipione and Matthew P. Ionno who they allege pursued investors to set up accounts at their Traders Cafe for day trading. Traders Cafe functioned as a broker-dealer for day trading customers despite not being registered as a broker-dealer. Read More
Executives of Assisted Living Concepts Charged with Fraud
On December 3, 2014, the Securities and Exchange Commission (the “SEC”) announced securities fraud charges against Laurie Bebo and John Buono two executives at an assisted living facility accused of listing fake occupants to meet the requirements to operate the facilities.
The SEC Enforcement Division alleges that then-CEO Laurie Bebo and then-CFO John Buono devised the securities fraud scheme involving false disclosures and manipulation of internal books and records when it appeared likely that their company Assisted Living Concepts Inc. would default on covenants in a lease agreement with a real estate investment trust called Ventas Inc., which owned the facilities.
The financial covenants required Assisted Living Concepts to maintain minimum occupancy rates and coverage ratios while operating the facilities, and failure to meet the covenants constituted a default on the lease. A default would have required Assisted Living Concepts to pay the remaining rent amount due for the full term of the lease, which amounted to tens of millions of dollars at the time. Read More
FINRA’s OTCBB Replacement To Report Six Digit Trade Prices
Recently, the Financial Industry Regulatory Authority (“FINRA”) announced its intention to shut down the OTCBB.com website it had run for many years. FINRA originally tried to sell the site and the accompanying trading platform, but the effort failed as OTC Markets Group’s OTC Link became the platform of choice for nearly all OTC issuers. That was because the OTCBB never automated its system—all trades were executed by telephone—and charged market makers hefty fees to use the service. Read More
What is a Sponsoring Market Maker? Sponsoring Market Maker Lawyers
The last step in a going public transaction is for the company to receive a stock trading or ticker symbol from the Financial Industry Regulatory Authority (“FINRA”). For a company to obtain its ticker symbol, a sponsoring market maker (“Sponsoring Market Maker”) must sponsor the company’s application and submit a Form 211 to FINRA on the issuer’s behalf. Sponsoring Markets Makers have become one of the most important participants in the going public process because they are the only ones who can apply for a ticker symbol.
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