SEC Halts Oil And Gas Scheme l Securities Lawyer 101
On December 6, 2013, the Securities and Exchange Commission (the “SEC”) announced charges and an emergency asset freeze against the perpetrators of a Texas-based Ponzi oil and gas scheme involving purported investments drilling projects. Read More
SEC Grants Waiver Of Rule 506 Bad Actor Ban
On November 25, 2013, the Securities and Exchange Commission granted a waiver of the ban against bad actors under Rule 506 of Regulation D of the Securities Act of 1933. The waiver was granted to RBS Securities Inc. (“RBS”).
RBS requested relief from disqualifications from exemptions available under Regulation A and Rules 505 and 506 of Regulation D that arose by reason of the Final Judgment entered Read More
SEC Report Reveals Foreigners Among Dodd Frank Whistleblowers
The SEC’s 2013 Annual Report to congress on the Dodd-Frank whistleblower Program shows whistleblowers from 55 countries submitted tips to the SEC.
Under the SEC’s whistleblower program, if a whistle-blower’s information leads to an enforcement case where more than $1 million is collected, the whistleblower could receive Read More
SEC Suspends Trading of Nevada Gold Corp
On November 27, 2013, the Securities and Exchange Commission (the “SEC”) announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”), of trading in the securities of Nevada Gold Corp. (“NVGC”), of Del Mar, California at 9:30 a.m. EST on Read More
Shell Traffickers Guilty in $137 Million Corporate Hijacking Scheme
Lawrence Hartman, a Florida securities lawyer, plead guilty to a charge of conspiracy to commit mail and wire fraud for his role in a Corporate Hijacking and shell trafficking fraud scheme that swindled victims out of more than $137,000,000.
According to the charges, the defendants in the case planned to steal the identities of dormant, publicly-traded shell companies, use the corporate identities they had stolen to create fraudulent empty-shell companies which had the appearance of being publicly-traded, and sell those fraudulent empty-shell companies for use in reverse merger transactions. Those involved in corporate hijacking schemes employ various methods to illegally obtain control of public shell companies. Read More
SEC Issues Compliance and Disclosure Interpretation of Rule 506(c)
On November 13, 2013, the Securities and Exchange Commission (the “SEC”) Division of Corporation Finance issued several useful Compliance and Disclosure Interpretations related to Rule 506(c) of the JOBS Act.
The Rule 506(c) Compliance and Disclosure Interpretations are summarized below.
If, prior to the effective date of Rule 506(c), an issuer started its offering in reliance on what was formerly Rule 506 (now Rule 506(b)), and that issuer now wants to Read More
House Committee Passes Law Reducing Business-Broker Regulation
On November 14, 2013, the Financial Services Committee of the U.S. House of Representatives voted unanimously to report HR 2274, as amended, to the full House with a favorable recommendation. HR 2274 is known as the Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act of 2013, and its intention is to amend the Securities Exchange Act of 1934 (“Securities Act”) to provide for a notice-filing registration procedure for business brokers performing services in connection with the transfer of ownership of small privately held companies and to provide for regulation appropriate to the limited scope of their activities. Read More
Foreign Issuers Embrace U.S. IPO Markets
As the number of U.S. companies launching initial public offerings (“IPOs”) by filing registration statements increased throughout 2013, foreign issuers joined in. While their numbers are still relatively small compared to their U.S. counterparts, statistics show that foreign IPOs have more than doubled from 2012. Read More
SEC Announces First Deferred Prosecution Agreement
On November 12, 2013, the Securities and Exchange Commission (the “SEC”) announced a deferred prosecution agreement with Scott Herckisa, a former hedge fund administrator at Hellelwhite Fund LP, who assisted the SEC in an investigation involving Berton Hochfeld, a hedge fund manager who allegedly stole assets from investors.
Deferred prosecution agreements reward individuals and companies who provide the SEC with forthcoming information about misconduct and assist with a subsequent investigation. In return for the information provided, the SEC refrains from prosecuting cooperators for their own violations if they comply with certain undertakings. Read More
The SEC Analyzes Rule 506 l Going Public Attorneys
In its recently proposed Regulation Crowdfunding (“Reg CF”), the Securities and Exchange Commission (“SEC”) produced some interesting statistics on the types of unregistered offerings that have been popular with smaller issuers and private companies over the past few years. Since the crowdfunding proposals won’t become effective until later this year, private and public companies interested in conducting offerings in the next few months should consider the impact of recent rules. Companies should follow the guidance of an experienced going public attorney prior to undertaking an offering.. Read More
What Are The Financial Statement Requirements of Form S-1?
The financial statements requirements of a Form S-1 registration statement depend upon the company’s size and revenues. If the company is not a smaller reporting company as defined by Rules 3-01 and 3-02 of SEC Regulation S-X, it must provide: Read More
OTC Pink Sheets 101 – Going Public Attorneys
Q. What are the OTC Markets OTC tiers available to OTC Pink Sheet companies?
A. Companies on the OTC Pink Sheets are assigned to one of three tiers by the OTC Markets based upon the amount of disclosure the Company provides to the public. The OTC Pink Current Information is the highest of these tiers, created for companies that voluntarily provide specific disclosures to the OTC Markets. OTC Pink Attorneys must render an opinion for the OTC Pink Current tier.
Q. Are Companies quoted on the OTC Pink Sheets required to file reports with the Securities and Exchange Commission?
A. No. OTC Pink Sheet companies are typically non-reporting issuers. Read More
170 Issuers Use Rule 506(c) For Offerings – Going Public
On October 30, 2013, Keith Higgins, the newly appointed Director of the Securities and Exchange Commission’s Division of Corporate Finance, provided some useful information about the number of issuers relying upon new Rule 506(c) of the JOBS Act in his recent speech to the U.S. Senate Committee on Banking, Housing, and Urban Affairs Subcommittee on Securities, Insurance, and Investment
According to Higgins, since the effectiveness of Rule 506(c) on September 23, 2013, more than 170 issuers have relied upon the rule. Read More
SEC Suspends 14 Companies To Prevent Corporate Hijackings
On October 31, 2013, the Securities and Exchange Commission suspended trading in 14 zombie companies’ shares, due to their failure to file required SEC filings and reports. The SEC filed two Orders of Trading Suspensions, with each against seven issuers. The first order of trading suspension was filed against Heritage Worldwide, Impala Mineral Exploration Corp., Klondike Star Mineral Corp., MIV Therapeutics, Most Home Corp., Moventis Capital, and OrganiTECH USA. The second order of trading suspension was filed against Acies Corp., Immtech Pharmaceuticals, MRU Holdings, MSTI Holdings, Nestor, New Generation Holdings, and Nuevo Financial Center. When the SEC seeks to revoke registration, usually it first suspends the companies it has targeted.
What Disclosures Are Required in Form 10-K ? SEC Reporting Requirements
Form 10-K is a comprehensive annual report filed by SEC reporting companies that details information about the issuer and its operations. Form 10-K is required pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”). The Form 10-K includes most of the information that would also be provided in a Form S-1 registration statement for a securities offering filed under the Securities Act of 1933, as amended (the “Securities Act”).
Securities Lawyers Gone Wild l Brynee K. Baylor
On October 30, 2013, the United States District Court for the District of Columbia granted the SEC‘s motion for summary judgment against all defendants in a civil action arising from a prime bank investment scheme that defrauded investors out of more than $2 million. Pursuant to the court’s ruling and judgment issued on August 26, 2013, the court enjoined attorney Brynee K. Baylor, her law firm Baylor & Jackson, P.L.L.C., and the Milan Group, Inc. from violations of the antifraud and other securities law provisions, and from engaging in similar investment schemes. Read More
SEC Awards Whistleblower Bounty
On October 31, 2013, the Securities and Exchange Commission (the “SEC”) announced an award of more than $150,000 to a whistleblower whose tips helped the agency stop a scheme that was defrauding investors.
The award recipient, who does not wish to be identified, provided significant information that allowed the SEC to quickly open Read More
SEC Issues Trading Suspension of PVEN’s Common Shares
On October 30, 2013, the SEC announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”), of trading in the securities of Press Ventures, Inc. (“PVEN”), of Warsaw, Poland,. The trading suspension is in effect until November 12, 2013.
The SEC’s order suspended trading reflects concerns regarding potentially manipulative transactions in PVEN’s common stock. This order was entered pursuant to Section 12(k) of the Exchange Act. Read More
FINRA Issues Crowdfunding Portal Proposals l Securities Lawyer 101
Securities Lawyer 101 Blog
On October 25, 2013, FINRA announced the release a set of proposed crowdfunding portal rules and forms for equity crowdfunding. Crowdfunding portals that engage in crowdfunding on behalf of issuers relying on the JOBS Act’s crowdfunding exemption must register with the SEC and become a member of a national securities association.
FINRA’s proposals consist of rules and related forms for crowdfunding portals. Read More
Due Diligence in the Going Public Process l Going Public Attorneys
Private companies in going public transactions seeking to have their securities quoted on the OTC Markets OTCQB must first become reporting with the Securities and Exchange Commission (the “SEC”). This is typically accomplished by the private company registering a securities offering on a Form S-1 registration statement pursuant to the Securities Act of 1933, as amended (the “Securities Act”).
Form S-1 is the most common registration statement used in going public transactions.
The information required in a Form S-1 registration statement is expansive and must be complete and accurate. The information found in a registration statement is relied upon by investors in making investment decisions. One critical due diligence area is to ensure that management and stock promoters do not have undisclosed disciplinary background. Securities attorneys can easily check FINRA disciplinary matters using broker check assuming that the broker or former broker has properly notified FINRA of any name changes.
Registration Statement Liability Read More
What Is the Registration Statement Quiet Period ?
Companies going public by filing a registration statement on Form S-1 under the Securities Act of 1933, as amended (the “Securities Act”) are often unaware of the securities laws that apply to the “quiet period” of the Securities and Exchange Commission (“SEC”). The federal securities laws do not define the phrase “quiet period”.
The phrase “quiet period” refers to the period of time from a company’s filing of a registration statement with the SEC until the SEC’s staff declares the registration statement effective. Read More
Going Public For Foreign Private Issuers
The securities laws provide numerous benefits to issuers who qualify as foreign private issuers. Among those benefits are reduced disclosure obligations and relaxed financial statement requirements. Qualification as a foreign private issuer is not determined by the issuer’s country of domicile or the location of its operations or assets. The term foreign private issuer is defined by Rule 405 of Regulation C under the Securities Act of 1933 (the “Securities Act”) and Rule 3b-4 under the Securities Exchange Act of 1934 (the “Exchange Act”). If a foreign company does not qualify as a foreign private issuer, upon completion of its going public transaction, it will be subject to the same registration and disclosure requirements applicable to domestic reporting companies. Read More
SEC Issues Proposals On Crowdfunding
On October 23, 2013, the Securities and Exchange Commission (“SEC”) voted unanimously to propose rules under the JOBS Act to permit companies to offer and sell securities through crowdfunding. Crowdfunding has been used outside of the securities arena to raise funds through the Internet for a variety of projects ranging from innovative product ideas to artistic endeavors like movies or music. Title III of the JOBS Act created an exemption from the securities registration requirements to allow this type of funding to be used to offer and sell securities. At an open meeting today, SEC Chair Mary Jo White noted that the intent of the JOBS Act is to make it easier for startups and small businesses to raise capital from a wide range of potential investors and provide additional investment opportunities for those investors. Read More
Man Arrested In Leonard McCoy Themed Medical Device Scheme
On October 22, 2013, Howard Leventhal was arrested by the FBI for defrauding a Florida company of $800,000 and attempting to defraud an undercover law enforcement agent of more than $2.5 million. He will be prosecuted in the Eastern District of New York.
The colorful and creative Leventhal owns and operates an Illinois company called Neovision USA Inc. In May 2012 he entered into a factoring agreement with Paragon Financial Group Inc., a Florida company, by the terms of which Paragon would advance Neovision $800,000 in exchange for the right to collect a larger sum supposedly owed to Neovision by Health Canada.
Leventhal explained that Health Canada owed Neovision money for a device implausibly called “Heltheo’s McCoy Home Heath Tablet” that he claimed could instantly deliver detailed patient data to health care professionals. The puckish Leventhal named his tablet after Star Trek’s Dr Leonard McCoy. Read More
SEC Issues Trading Suspenion of Crown Alliance
On October 22, 2013, the Securities and Exchange Commission (“Commission”) announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”), of trading in the securities of Crown Alliance Capital Limited (“Crown Alliance”), of Ontario, Canada. The SEC temporarily suspended trading in the securities of Crown Alliance because of questions regarding the accuracy of Crown Alliance’s public filings concerning the company’s assets and shareholders and because of potentially manipulative conduct in the trading of its securities. Read More
SEC Issues Trading Suspension of ARX Gold
On October 22, 2013, the SEC announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”), of trading in the securities of ARX Gold Corp. (“ARX Gold”).
ARX Gold was created in May 2012 through a reverse merger consummated with Daulton Capital Corporation; the ticker symbol, DUCP, was never changed. The new owners were a group headed by Asian billionaire Arun Pudur. Read More
SEC Takes Action Against Potential Short Sellers For Manipulation
On September 16, 2013, the Securities and Exchange Commission (the “SEC”) brought enforcement actions against more than 20 broker dealers and other financial firms alleging violations of Rule 105 of Regulation M of the Securities Exchange Act of 1934 (“Rule 105”), which prohibits the purchase of securities in a secondary offering when the buyer has a short position in the same securities during a specified restricted period. Read More
SEC Chairman Mary Jo White Addresses SEC Disclosure Requirements
On October 15, 2013, Mary Jo White, new chairman of the Securities and Exchange Commission (“SEC”), delivered a speech before the National Association of Corporate Directors. She chose to discuss possible changes in SEC disclosure requirements for SEC registrants.
She began by pointing out that initial and periodic disclosure, which was mandated by the Securities Act of 1933 and the Securities and Exchange Act of 1934, is of critical importance because without proper SEC disclosures investors would be unable to make informed decisions.
As she put it, “They would not know about the financial condition of the company they are investing in”. Read More
SEC Charges China Based Chicken Provider
On October 18, 2013, the Securities and Exchange Commission (the “SEC”) charged Yuhe International, Inc. (“Yuhe”), a China-based provider of broiler chickens, and its Chief Executive Officer, Gao Zhentao (“Gao”), with fraud and other violations of the securities laws.
The SEC charges allege that Yuhe, under Gao’s direction and control, made false public statements concerning concerning the company over a two-and-one-half year period. Read More
NASAA Releases 2013 Top Ten Financial Frauds List
Securities Lawyer 101 Blog The North American Securities Administrators Association (“NASAA”) recently released a list of the the 2013 Top Ten financial frauds that can affect unwitting investors and small business owners alike.
According to the NASAA, fraudulent private placement offerings present the greatest danger to investors. Read More
