Penny Stock Emails 101- Securities Lawyer 101
Often times investor relations firms touting microcap stocks use penny stock email containing newsletters and advertisements about a stock’s potential. Recent indictments and SEC cases have focused on the use of penny stock email lists that have been used to solicit investors. Read More
Craig Karlis Sentenced to 9 Years For Fraud Charges
The Securities and Exchange Commission (the “SEC”) announced that on September 16, 2014, the former owner of a Boston Trading and Research, LLC (“BTR”), was sentenced to nine years in prison after pleading guilty to charges that he and his business partner defrauded more than 700 investors out of more than $30 million. Craig A. Karlis, was sentenced to nine years in prison, three years of supervised release, and ordered to pay $4,378,306 in restitution to the fraud victims. In March 2014, Karlis pleaded guilty to nine counts of wire fraud, among other charges. Read More
SEC Charges 28 With Insider Reporting Failures
On September 10, 2014, the Securities and Exchange Commission (the “SEC”) announced enforcement actions and penalties of more than $2.6 million against 28 individual directors, officers, and beneficial owners and 6 issuers for failure to promptly report their holdings in Section 16(a) reports and Schedule 13D and Schedule 13G filings. Read More
Securities Lawyers Gone Wild – Svitlana Sangary
Business Lawyer Photoshops Her Way to a Six Month Suspension
Some wayward attorneys content themselves with writing fraudulent opinion letters, but Svitlana Sangary, a Los Angeles business lawyer, yearned for the red carpet. In an apparent attempt to convince prospective clients that she hobnobbed with the rich and powerful, she filled the “publicity” page at her website with photoshopped images of herself cozying up to a considerable number of celebrities and politicians. Read More
Zirk Englebrecht Indicted In Reverse Merger Scheme
On September 18, 2014, the Federal Bureau of Investigation announced that Izak Sirk De Maison (aka Izak Zirk Engelbrecht, aka Zirk Engelbrecht). Zirk Englebrecht, a self-described “merchant banker,” devised a scheme and artifice to defraud investors by creating public “shell” companies, executing a merger of an emerging business with the shell to create a publicly traded company, and then paying undisclosed kickbacks to brokers, including Wilshinsky, in exchange for using their clients’ funds to purchase shares of the resulting penny stock. One such company was Gepco Ltd. Read More
SEC Charges 8 in Pump and Dump Scheme
On September 18, 2014, the Securities and Exchange Commission (the “SEC”) announced charges against eight individuals for their roles in an alleged pump-and-dump scheme involving a penny stock company based in California that has repeatedly changed its name and purported line of business over the past several years.
The SEC alleges that the pump and dump scheme was orchestrated by Izak Zirk de Maison, who was named Izak Zirk Engelbrecht before taking the surname of his wife Angelique de Maison.
Both de Maisons are charged by the SEC in the case along with others enlisted to buy, sell, or promote stock in the company now called Gepco Ltd. Zirk de Maison installed some of these associates as officers and directors of Gepco while he secretly ran the company behind the scenes. Collectively, they amassed large blocks of shares of Gepco common stock while the de Maisons manipulated the market to create the appearance of genuine investor demand, allowing an associate to sell his stock at inflated prices to make hundreds of thousands of dollars in illicit profits. Read More
SEC Issues Multiple Trading Suspensions
On September 18, 2014, the Securities and Exchange Commission (the “SEC”) announced temporary trading suspensions of multiple issuers. The trading suspensions commenced at 9:30 a.m. EDT on September 18, 2014 and terminate at 11:59 p.m. EDT on October 1, 2014: Read More
SEC Issues Trading Suspension of Gepco Ltd.
On September 18, 2014, the Securities and Exchange Commission issued a temporary trading suspension of the securities of Gepco, Ltd securities due to concerns about the accuracy and adequacy of information in the marketplace and potentially manipulative transactions in Gepco’s common stock. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act). Read More
Robert Bandfield, Andrew Godfrey and Jim Can Indicted
On September 9, 2014, the United States Attorney for the Eastern District of New York announced a multi-count indictment against six individual defendants: Robert Bandfield, a U.S. citizen; Andrew Godfrey, a citizen of Belize; Kelvin Leach, a citizen of the Bahamas; Rohn Knowles, a citizen of the Bahamas; Brian De Wit, a citizen of Canada; and Cem Can, a citizen of Canada; and six corporate defendants. The six corporate defendants are IPC Management Services, LLC; IPC Corporate Services Inc.; IPC Corporate Services LLC (collectively, IPC Corp); Titan International Securities, Inc. (Titan); Legacy Global Markets S.A. (Legacy); and Unicorn International Securities LLC (Unicorn).
The charges include conspiracy to commit securities fraud, tax fraud, and money laundering. Read More
What is a Secondary Offering? Going Public Lawyers
Going public transactions can be structured a variety of ways. Many going public transactions involve the filing of a registration statement with the Securities and Exchange Commission (“SEC”) registering shares held by existing stockholders so that the issuer can meet FINRA’s requirements. This type of offering is known as a secondary offering or resale registration statement. In a secondary offering, the issuer does not receive any proceeds from the sale of the securities subject to the registration statement and any proceeds from the sale are received by the selling stockholders. Read More
Bank Secrecy 101 By: Brenda Hamilton, Attorney
Securities Lawyer 101 Blog
Posted By: Brenda Hamilton Attorney
The Bank Secrecy Act (“BSA”) requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering activity. The Act’s regulations apply to broker-dealers as well as to banks and other depository institutions. The BSA, also called the Currency and Foreign Transactions Reporting Act, was passed by Congress in 1970. Most people know that it requires the reporting of cash purchases of negotiable instruments greater than $10,000, but are unaware that its mandate is much broader, and that its implementation is entrusted to a number of government agencies and financial institutions. Read More
Panama and U.S. To Share More Than $36 Million in Forfeitures
In October of 2013, Deputy Attorney General James M. Cole and Panamanian Attorney General Ana Belfon signed an agreement to share more than $36 million in government forfeitures of criminal assets with the Government of Panama. Read More
Securities Lawyers Gone Wild – Justin Lee Charged in EB-5 Scheme
On September 3, 2014, the Securities and Exchange Commission (the “SEC”) charged an immigration and securities attorney, his wife, and his law firm partner with conducting an investment scheme to defraud foreign investors trying to come to the U.S. through the EB-5 Immigrant Investor Program. According to the allegations, Justin Moongyu Lee, Rebecca Taewon Lee and Thomas Kent raised nearly $11.5 million from investors seeking to participate in the EB-5 program. Read More
Can I Register An Equity Line In My Going Public Transaction?
In going public transactions, issuers consider many capital raising options. One capital raising option is the equity credit line. Most equity lines are structured so that the investor enters into an agreement with the Company giving it has the right, during the equity line term and subject to certain conditions, to put its securities to the investor. Equity credit lines are also commonly structured in private placements pursuant to Rule 506 of Regulation D with an obligation for the Company to file a registration statement on Form S-1 to register the resale of the securities sold under the equity line.
Where a Rule 506 offering is combined with a Form S-1 registration statement, due to the delayed nature of the investment, and because the investor’s funds are not at risk at the time the resale registration statement is filed, the SEC deems the registration to be an indirect primary offering. Read More
Rule 144’s Current Public Information Requirement
Rule 144 of the Securities Act provides a safe harbor from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) for resales of restricted and control securities if specified conditions are met. One of the requirements of Rule 144 is that the issuer have current public information available to the public at the time of the resale. When applicable, issuers must satisfy the current public informational requirements as set forth in Rule 144(c) at the time of each sale of securities in reliance on Rule 144.
What constitutes current information depends upon whether the issuer is an SEC reporting issuer or shell company.
SEC Reporting Issuers
SEC reporting issuers must have been subject to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) for at least 90 days. The 90 day period begins on the date of effectiveness of the issuer’s registration statement under Section 12 of the Exchange Act. If the issuer filed an S-1 registration statement under the Securities Act which precedes effectiveness of a Section 12 registration statement, the 90-day waiting period will commence on the effective date of the Form S-1. If an issuer is delinquent in its SEC reports it may not satisfy the current public information requirement because it provided SEC Rule 15c2-11 information.
Additionally, SEC reporting companies must have filed all reports required to be filed during the preceding 12 months or such shorter period that reports were required to be filed in order to have provided current public information.
Where an SEC reporting company fails to make a required SEC filing, the safe harbor of Rule 144 is not available for the resale of its shareholders’ shares. Shareholders relying upon Rule 144 must be selling until the current public information requirement is satisfied by the issuer.
Shareholders risk non-compliance with Rule 144 if they sell securities after an issuer files a Form 12b-25 because if the issuer fails to file the late report, any sales made during the delinquent period do not satisfy the requirements of Rule 144. Where a public company files the report late, sales made after the filing of the 12b-25 but before the late filing, must satisfy Rule 144’s current public information requirements.
Non-Reporting Issuers
A non-reporting issuer may satisfy the current public information requirement of Rule 144 by providing the information specified in Rule 15c2-11of the Exchange Act, making it publicly available and keeping the information current. Securities of issuers quoted by the OTC Markets with a Pink Sheet Current information disclosure tier satisfy the requirements of Rule 15c2-11.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com
FINRA Proposes Pilot Program to Widen Tick Sizes
On August 27, 2014, the Securities and Exchange Commission (the “SEC”) announced that the national securities exchanges and the Financial Industry Regulatory Authority (“FINRA”) filed a proposal to establish a national market system plan to implement a 12-month pilot program to widen tick sizes for certain stocks with smaller capitalization. Read More
Investor Relations Firm Employee Michael Lucarelli Indicted
On August 26, 2014, the U.S. Attorney’s Office for the Southern District of New York announced charges against Michael Anthony Dupre Lucarelli. Lucarelli is charged with 13 counts of criminal insider trading over his alleged scheme to trade on announcements in impending news releases in the days before they were made public. According to the allegations, Lucarelli while the director of market intelligence at a Manhattan-based investor relations firm, traded ahead of impending news announcements by more than a dozen of the firm’s clients. According to the charges, Lucarelli garnered nearly $1 million in illicit profits. An SEC investigation and ongoing forensic analysis of Lucarelli’s work computers uncovered that he repeatedly accessed clients’ draft press releases stored on his firm’s computer network prior to public announcements. Earlier this year, Lucarelli was sentenced to 30 months in prison followed by three years of supervised release, and the forfeiture order against him became final.
According to the charges, Lucarelli, who had no legitimate work-related reason to access the draft press releases, routinely purchased stock or call options in advance of favorable news and sold short or bought put options ahead of unfavorable news. Lucarelli traded in securities belonging to companies that his firm was advising in advance of announcing their earnings or other significant events such as a merger or clinical drug trial result. Lucarelli began taking a position in a client’s securities in the days immediately preceding the announcement, although in a few instances he began making his purchases weeks in advance. Lucarelli started divesting himself of his position immediately after the announcement in order to reap instant profits. Read More
What Are EB-5 Offering Requirements? Going Public Lawyer
The EB-5 offering visa program grants foreign investors a green card for themselves and their immediate family in exchange for a capital investment of at least $500,000 in a qualified U.S. business enterprise. To qualify under the EB-5 offering program, a foreign investor has two options. These are to make an individual investment of at least $1 million in a qualified, for-profit U.S. business enterprise; or invest a minimum of $500,000 or he or she must create a business in a Targeted Employment Area (TEA) or in a rural area which has experienced high unemployment.
If the second option is chosen, the investment must result in the creation of full-time employment for at least 10 U.S. workers for a minimum of two years.
Whichever investment option is chosen, investors in EB-5 offerings must proceed with caution and be able to clearly show their source of the funds they used for their investment. Should they fail to do so, their EB-5 Visa could be denied even after an investment is made.
To that point, assets acquired, directly or indirectly, by unlawful means—such as criminal activities—do not qualify as legitimate capital for the purposes of an EB-5 offering.
Historically, Rule 506 of Regulation D, promulgated under the Securities Act of 1933, offered EB-5 investors an exemption that was cost effective and a relatively quick way for private companies to raise capital prior to their going public transactions. However, the 506 exemption prohibited any form of general solicitation or advertising in connection with the offering.
Beginning September 23, 2013, issuers conducting EB-5 offerings that rely on the Rule 506 exemption are no longer banned from general solicitation and advertising, if they choose to use the new Rule 506(c). EB-5 issuers, like others, will be able to employ broad-based marketing methods of advertising in offerings made to accredited investors, making it easier for issuers to raise capital under the EB-5 program. EB-5 issuers still need to ensure proper compliance, particularly when choosing a credible EB-5 entity to invest in and verifying that all EB-5 investors are accredited.
Companies interested in attracting substantial funding from EB-5 offerings may now target their desired audience by advertising abroad.
An accredited investor, as defined by Rule 501 of Regulation D, is any individual having: (1) a net worth of at least $1 million, not including the value of his or her primary residence, or (2) income of at least $200,000 in each year of the last two years or $300,000 together with his or her spouse if married and have a reasonable expectation to earn the same amount in the current year.
Using the EB-5 offering program in conjunction with the Rule 506(c) exemption provides the issuer with a roadmap for a successful capital raising offering. However, investors need to be fully compliant with all the SEC rules and regulations and it is of utmost importance to verify the source of funds for EB-5 investors. While EB-5 and Rule 506 provide guidance, this area of the law is filled with many complexities and all investors should seek professional guidance as a single misstep could ruin an investment.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com
Social Media and Being Publicly Traded
Publicly traded companies are increasingly using their company websites and the social media to communicate information to the public. Investors are increasingly turning to electronic media as a principal source of information about publicly traded companies. In 2000, the SEC adopted Regulation FD under the Securities Exchange Act of 1934 to address selective disclosure of information by publicly traded companies and other issuers.
Preparing and Filing SEC Form D
Regulation D under the Securities Act of 1933, as amended (the “Securities Act”) provides exemptions that permit a company to offer and sell its securities without complying with the registration statement requirements of the Securities Act if certain conditions are met. A company claiming an exemption under Regulation D is required to file a Form D – Notice of Sales with the Securities and Exchange Commission (the “SEC”), within fifteen days after the first sale of securities in the offering. This publication is intended to serve as a summary of the SEC requirements for filing Form D, and does not purport to be a complete discussion of the issues summarized herein and does not create an attorney client relationship. For more information regarding the Amendments or regarding their application to securities offerings under Regulation D, please contact Hamilton & Associates Law Group, P.A. by telephone at 561-416-8956 or email at [email protected].
Summary of the Regulation D Exemptions
Regulation D provides three transactional exemptions from registration. These are Rules 504, 505 and 506. Regardless of the exemption, Regulation D requires that the issuer file a Form D with the SEC.
What is a Notice of Sales on Form D?
Form D serves as the official notice of an offering of securities made without registration under the Securities Act in reliance on the exemptions provided by Regulation D, Section 3(c) or Section 4(6) under the Securities Act. Form D serves as a means (i) to collect data for use in the SEC’s rule-making efforts and (ii) to enforce the federal securities laws, including enforcement for the exemptions found in Regulation D. An issuer relying on a securities registration exemption provided by Regulation D, Section 3(c) or Section 4(6) is currently required to file a paper copy of Form D with the SEC not later than 15 days after the first sale of securities.
State Blue Sky Laws
Under Section 18(b)(4)(D) of the Securities Act, any private placement made in compliance with Rule 506 of Regulation D preempts state Blue Sky laws. Section 18(c) of the Securities Act, grants states the authority to require a Company to make a notice filing and pay a filing fee in connection with its Rule 506 offering. As a result, many states adopted statutes and rules mirroring Regulation D. Most states require the filing of Form D and the payment of a filing fee.
Amending Form D
Rule 503 requires that a Form D be amended in the following three circumstances:
(i) to correct a material mistake of fact or error in the previously filed Form D;
(ii) to reflect a change in the information provided in a previously filed Form D that occurs prior to the termination of the offering; and
(iii) annually, on or before the first anniversary of the Form D filing or the most recent amendment, if the offering is ongoing at that time.
Electronic Filing of Form D
Like most filings made with the SEC, Form D must be filed electronically through its Electronic Data Gathering And Retrieval System (“EDGAR”). Form D may be signed electronically. The Form D is publicly available on the SEC Website upon filing. In order to file a Form D electronically, the issuer must file a Form ID with the SEC to obtain EDGAR filer codes.
Form D Information
The following summary is intended to provide a by item description of the new Form D resulting from the Amendments. A copy of the new Form D is attached to this client publication.
Item 1 – Identity of the Issuer
Form D requires basic identifying and contact information about the Company and related persons.
Item 2 – Principal Place of Business and Contact Information
Form D requires that companies provide their principal place of business addresses and telephone number.
Item 3 – Related Persons Disclosure
Form D Item 3 requires that Company’s disclose “related persons” to the extent such persons are promoters or are the company’s executive officers and directors.
Item 4 – Industry Group
Form D requires companies to identify their industry group from the form’s specified list.
Item 5 – Issuer Size
Form D requires companies provide a revenue range from information in the Form D or choose the “Decline to Disclose” or “Not Applicable” option for a fund that seeks asset appreciation only. The revenues should be calculated based on the company’s most recently completed fiscal year. Where a company has been in existence for less than a year, it may identify its revenues from inception until the date of the filing of the Form D.
Item 6 –Exemption and Exclusion
As carried over from the current Form D requirement, the issuer must still identify the exemption or exemptions being claimed for the offering (i.e. Rule 504, 505 or 506 and Section 4(6), as applicable). However, the issuer is now required to identify the specific paragraph or subparagraph of any Rule 504 exemption being claimed as well as any specific paragraph of Investment Company Act Section 3(c) that the issuer claims for an exclusion from the definition of “investment company” under the Investment Company Act.
Item 7 – Type of Filing
Item 7 requires the company to indicate whether the Form D filing is a new filing or an amendment to a previously filed Form D. With respect to an amendment to a previously filed Form D, the SEC requires an amendment for an ongoing offering where there has been a material change in information filed about the offering and where basic information previously submitted about the issuer has materially changed.
Item 8 – Duration of Offering
Item 8 requires the issuer to indicate whether the offering will last more than a year.
Item 9 – Type of Securities Offered
Item 9 requires that the company specify the type of securities being offered, such as debt or equity, with additional categories of securities added. The company must specify all categories that apply to the securities that are the subject of the exemption specified in Item 6 of the Form D.
Item 10 – Business Combination Transactions
Item 10 requires the company to indicate whether the offering is being made in connection with a business combination such as an exchange (tender) offer, a merger or acquisition, regardless of the type of offering.
Item 11 – Minimum Investment Amount
Item 11 requires the company to specify the minimum investment amount per investor that was or will be accepted in the offering.
Item 12 – Sales Compensation
Item 12 generally requires the company provide information relating to sales compensation. Item 12 requires the issuer to provide the Central Registration Depository (“CRD”) number of each person that is a compensation recipient named in response to Item 12, provided the person has a CRD number. Item 12 also requires the issuer to provide the CRD number for any person that receives sales compensation and the person’s associated broker-dealer, if any.
Item 13 – Offering and Sales Amounts
Item 13 requires the company provide the amount of total sales and the total amount of the offering.
Item 14 – Investors
Item 14 requires the issuer disclose that it intends to sell securities to persons who do not qualify as accredited investors and the number of such persons who already have invested. The company must specify the total number of investors in the offering including both accredited and non-accredited investors.
Item 15 – Expenses and Use of Proceeds of Offering
Item 15 requires that the issuer provide the amounts paid for sales commissions and, separately state, finders’ fees paid or to be paid in the offering.
Item 16 – Use of Proceeds
Item 16 requires the company to report the gross proceeds used or proposed to be used for payments to related persons including officers and directors.
Signature and Submission
Form D may be electronically signed and the form includes an undertaking to provide offering materials to the SEC upon request.
This client publication is intended only as a general discussion of these issues. It should not be regarded as legal advice. We would be pleased to provide additional details or advice about specific circumstances if desired. For more information on the topics covered in this issue, please contact Hamilton & Associates Law Group, P.A. at 561-416-8956 or visit https://www.securitieslawyer101.com.
Please note that the prior results discussed herein do not guarantee similar outcomes.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com
Going Public Attorneys Helping Issuers
Going public is a big step for any company. The process of “going public” is complex and at times precarious. While going public offers many benefits it also comes with risks and quantities of regulations with which issuers must become familiar. Despite the risks even in a down economy, the U.S. market remains one of the most attractive sources of capital in the world for companies seeking capital. Going public 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 the (“SEC”), Financial Regulatory Industry 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”). Hamilton & Associates will design your going public transaction. Before planning a going public transaction, companies should engage a competent attorney with experience in taking companies public. An experienced going public attorney can structure the most favorable plan to go from private to public company status. Unlike most securities attorneys, a going public attorney focuses on helping companies become SEC reporting issuers with a stock ticker symbol. Read More
How Does the JOBS Act Benefit A Foreign Issuer?
As the Securities and Exchange Commission (“SEC”) finishes the rule making that provides a structure for full implementation of the JOBS Act, much has been written about its impact on going public transactions and foreign issuers. Less has been said about the benefits it may confer on foreign issuers trading in U.S. markets.
Emerging Growth Companies
Foreign issuers, like their U.S.-based counterparts, may be defined as an “emerging growth companies” under the JOBS Act if they have less than $1 billion in annual gross revenues, have not raised more than $1 billion in debt, and have not conducted an SEC registered public offering prior to December 8, 2011. If they wish to make an initial public offering, the securities laws provided them with relaxed disclosure requirements. Read More
Section 16 Reporting & Going Public Transactions
Once the SEC staff declares a company’s Form S-1 registration statement effective in a going public transaction, the company becomes subject to Exchange Act reporting requirements even if it does not have its ticker symbol. Many issuers are not aware of the disclosure requirements that apply upon effectiveness of a Form S-1 Registration Statement.
Section 16
Section 16(a) of the Exchange Act of 1934 (the “Exchange Act”) requires the reporting of beneficial ownership by the officers, directors and stockholders who hold stock directly or indirectly, beneficially owning more than 10% of the company’s common stock or other class of equity securities registered under Section 12(b) or 12(g) of the Exchange Act.Section 16 reporting requirements apply only to companies that have registered a class of securities under Section 12(b) or Section 12(g).Issuers that voluntarily file periodic reports under Section 15(d) of the Exchange Act, and their directors, officers and large stockholders, are not subject to the reporting obligations of Section 16. Nor are issuers that are required to file periodic reports under the Securities Act of 1933 bound by the provisions of Section 16. Read More
Reefer Madness – More Indicted In Pot Stock Scams
On August 5, 2014, the Attorney’s Office for the Western District of Washington announced criminal charges against Mikhail Galas, Alexander Hawatmeh, and Christopher Mrowca in connection with two heavily touted pot stocks, Growlife and Hemp, Inc., and several other penny issues. According to the charges, the three young men—they’re in their early 20s–manipulated penny stocks, and then laundered the proceeds by purchasing precious metals. They were charged with conspiracy to commit securities fraud and conspiracy to launder monetary instruments. The defendants were all associated with a promotional group known as Money Runners that had been created by Mrowca in 2011. Read More
Court Awards SEC Judgments Of Almost $70 Million Against Defendants
On August 9, 2014, the SEC announced that the U.S. District Court for the Eastern District of Tennessee issued final SEC judgments against AIC, Inc., Community Bankers Securities, LLC, and Nicholas D. Skaltsounis and Relief Defendants Allied Beacon Partners, Inc. (f/k/a Waterford Investor Services, Inc.), Advent Securities, Inc., and CL Wealth Management, LLC (f/k/a Allied Beacon Wealth Management, LLC and CBS Advisors, LLC). These final judgments impose on Defendants AIC, Community Bankers Securities, and Skaltsounis permanent injunctive relief, disgorgement, prejudgment interest, and third tier civil penalties. Read More
Crucible Capital and Chuck Moore Indicted for Obstructing SEC Investigation
On August 9, 2014, the Securities and Exchange Commission (the “SEC”) announced charges against Chuck Moore and Crucible Capital Group, a New York-based brokerage firm for allegedly violating net capital requirements and falsifying books and records to conceal the capital deficiencies. The SEC’s Division of Enforcement alleges that Charles “Chuck” Moore and Crucible Capital Group attempted to disguise the firm’s extensive and repeated net capital insufficiencies. Read More
SEC Charges Julian Brown and Bahamian Brokerage Firm, Alliance Investment Management
On August, 8, 2014, the Securities and Exchange Commission (“SEC”) announced charges against Julian Brown and his firm Alliance Investment Management Limited (AIM). According to the SEC allegations, Julian Brown purported to be the “custodian” for assets under the management of Nikolai Battoo. The SEC obtained a court-ordered freeze over Battoo’s assets after charging him in 2012 with defrauding investors around the world by hiding major losses while falsely boasting that their investments were performing remarkably during the financial crisis. Read More
What Are Seed Stockholders? Going Public Lawyer
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 a Securities and Exchange Commission (“SEC”) reporting issuer. All companies seeking public company status must meet certain requirements in order for their securities to be publicly traded. One requirement is that the issuer obtain sufficient stockholders to establish a trading market. These initial investors are commonly referred to as “Seed Stockolders”.
Seed Stockholders Requirements in Going Public Transactions
The first step in a going public transaction is most often obtaining the number of Seed Stockholders required by the Financial 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.
Assuming the private company is not reporting to the SEC, in order for its shareholders to have shares that are unrestricted, the shareholders must have paid consideration for their stock 12 months prior to the filing of the Form 211 or the shares must be covered by an effective registration statement. Read More
Prospectus Disclosure Requirements – Going Public Attorneys
The prospectus is the most important document of a public offering. The prospectus is the document provided to investors in the issuer’s offering. The prospectus is contained in the registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”) and used by public companies who securities to the public. Section 5 of the 1933 Act provides that an issuer may not use the mails or other means of interstate commerce to offer or sell its securities unless a registration statement is in effect under the Securities Act. Read More
Officer and Director Disclosure of Background Matters
The securities laws require that public companies provide disclosure about the backgrounds of its officers and directors and describe certain material information that is “material to an evaluation of the ability or integrity of any director, person nominated to become a director or executive officer of the company. Additionally, companies must consider their obligation to disclose material information to investors. Read More
