SEC Amends Financial Responsibility Rules for Broker-Dealers
On July 31, 2013, the Securities and Exchange Commission (“SEC”) announced the adoption of amendments to the net capital, customer protection, books and records, and notification rules for broker-dealers.
The amendments to the broker-dealer financial responsibility rules are designed to better protect a broker-dealer’s customers Read More
More Paperwork for Broker-Dealers l Securities Lawyer 101
On July 31, 20113, the Securities and Exchange Commission (the “SEC”) announced the adoption of rules created to increase safeguards for investor assets held at broker-dealers registered with the SEC and Financial Industry Regulatory Authority (“FINRA”). According to the SEC, the new rules require broker-dealers to file new reports with the SEC which will result in higher levels of compliance with the SEC’s financial responsibility rules.
A New Crowdfunding Watchdog in Massachusetts
Consumer watchdogs and the Securities and Exchange Commission (“SEC”) as well are aware that certain provisions of the new Rule 506 created in connection with the JOBS Act could encourage fraud if not effectively policed, resulting in significant losses for non-accredited investors who choose to participate in 506 offerings.
These provisions include those making advertising and general solicitation permissible, and those allowing “crowdfunding” initiatives. Read More
SEC Charges Investor Relations Provider With Insider Trading
On July 26, 2013, the Securities and Exchange Commission (the “SEC”) charged Stephen B. Gray, an investor relations provider with insider trading in the securities of his firm’s clients. The SEC action alleges that Gray obtained confidential information about his firm’s clients while the firm assisted them with drafting and publishing press releases announcing to quarterly and annual earnings, mergers and acquisitions, and other major events. Read More
SEC Settles Charges For Registration Violations in Unregistered Securities
On July 23, 2013, the Securities and Exchange Commission (the “SEC”) settled charges against Florida resident Jorge Bravo, Jr., for unlawful sales of millions of shares of unregistered securities without complying with the registration statement requirements of the Securities Act of 1933. Read More
Securities Violator Patrick Kiley Sentenced to 20 Years in Prison
On July 15, 2013, Patrick Kiley was sentenced to 20 years in prison and ordered to pay $155 million in restitution in connection with his conviction on 15 criminal counts including mail and wire fraud, conspiracy to commit mail and wire fraud, and money laundering. The conviction arose from his role in a $194 million foreign currency trading scheme that defrauded approximately 1,000 investors. Read More
Securities Attorney, Richard Kranitz Sentenced to 18 Months
On July 17, 2013, Richard Kranitz, a Wisconsin securities attorney was sentenced to 18 months in federal prison Wednesday for his role in a securities fraud involving an FBI Sting operation. Kranitz was also sentenced to 12 months of supervised release following his prison time. Read More
SEC Issues Trading Suspension of Camelot Entertainment and 5 Other Issuers
Rule 506 Gives Bad Actors The Boot l Going Public Lawyers
On July 10, 2013, the Securities and Exchange Commission (the “SEC” or “Commission”) adopted amendments to rules promulgated under Regulation D of the Securities Act of 1933, as amended (the “Securities Act”) to Read More
When the SEC Investigates l Securities Lawyer 101
No company wants to become the target of a Securities and Exchange Commission (“SEC”) investigation, and no investor welcomes an inquiry into a stock he holds. Issuers and shareholders alike need to understand how an investigation begins, how it proceeds Read More
Securities Lawyers Gone Wild l Michael Scaglione Indicted
Securities Lawyers Gone Wild Series
On July 10, 2013, Michael Scaglione, a Coral Gables securities attorney, was arrested by the FBI and charged in the the Eastern District of New York, with laundering more than $750,000 he believed were the proceeds from a penny stock scam. Read More
The JOBS Act l Rule 506
The Jumpstart Our Business Startups (“JOBS”) Act was signed into law by President Obama on April 5, 2012. The JOBS Act required the Securities and Exchange Commission (the “SEC”) to issue final regulations regarding the portions of the JOBS Act relating to the elimination of general solicitation in Rule 506 offerings within 90 days of its enactment to allow general advertising and solicitations of Read More
The SEC Blacklists Bad Actors ln Rule 506 Offerings
On July 10, 2013, the SEC approved a rule banning the use of the Rule 506 exemption from securities registration if the issuer and bad actors had a “disqualifying event.” The new ban on bad actors becomes effective 60 days after publication in the federal register.
The Rule 506 Bad Actor Blacklist
The SEC’s final disqualification of bad actors in 506 offerings covers the issuer, including its predecessors and affiliated issuers, as well as: Read More
Promissory Notes l Securities Lawyer 101
Private companies going public seek to raise capital for a variety of reasons. This capital may be sought from the sale of equity ownership of the corporate entity or debt such as a loan. Frequently, loans are considered to be securities and as such, are subject to federal and state securities laws. It is important for any company going public to know whether its debt instruments are securities to ensure compliance with relevant securities laws. Read More
What is the OTC Pink Current Tier? Going Public Lawyers
Q. What is the OTC Markets OTC Pink Current Tier?
A. Companies on the 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 OTCMarkets. Read More
What Does Rule 506 of Regulation D Require? Going Public Lawyers
To offer and sell securities in the United States, an issuer must comply with the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), or must offer and sell the securities pursuant to an exemption from the registration statement requirements. A commonly used private offering exemption is Rule 506 of Regulation D. Rule 506 is a non-exclusive “safe harbor” for the statutory exemption provided by Section 4(2) of the Securities Act. The Rule 506 exemption is often used by issuers who engage in go public direct transactions and conduct underwritten and direct public offerings. With a Regulation D offering only a notice filing on Form D is required to be filed with the SEC.
SEC Sues Imaging and CEO Dean Janes for Fraud
On June 26, 2013, the Securities and Exchange Commission (“SEC”) filed an enforcement action charging Imaging3, Inc. (IMGGQ), and Dean Janes, its CEO, with securities fraud, accusing Janes of misleading shareholders about actions taken by the Food and Drug Read More
Rule 144 C & D l Ask Securities Lawyer 101
The SEC‘s Compliance and Disclosure Interpretations provide its interpretations of the rules adopted under the Securities Act of 1933, as amended (the “Securities Act”). A summary and excerpts of the portions relevant to restricted securities and Rule 144 as interpreted by the SEC are set forth below.
Question: Is Rule 144 available to the issuer of the securities?
Answer: No. Rule 144 is not available to the issuer of the securities.
Question: How long must an underwriter wait before it resells the unsold portion of a “sticky” public offering as if it were compensation? Read More
SEC Suspends Biozoom After Publication of Private Report
On June 25, 2013, the Securities and Exchange (“SEC”) suspended trading in the securities of Biozoom, Inc. (BIZM). In connection with the SEC action, it stated that “certain Biozoom affiliates and shareholders may have unjustifiably Read More
Ask Securities Lawyer 101 l Financial Intermediaries
It is not unusual for a private or public company to be approached by financial intermediary (“Intermediary”) that offers to locate investors in exchange for a fee. Most Intermediaries are not registered as broker-dealers with the Securities and Exchange Commission (the “SEC”).
While many Intermediaries are aware of the factors that will determine whether their services will be deemed unregistered broker dealer activity, few are aware of the Read More
FINRA Prohibited Conduct l Broker-Dealer Lawyers
The Financial Industry Regulatory Authority (“FINRA”) require that broker-dealers and market makers observe “high standards of commercial honor and just and equitable principles of trade.” FINRA rules also prohibit broker-dealers and market makers from “any manipulative, deceptive, or fraudulent actions.”
Prohibited Conduct l Broker-Dealers l Market Makers
As a warning to the public, FINRA has drawn up a list of specific examples of activities that constitute serious violations of its rules and regulations. These violations harm investors and jeopardize the integrity of the securities markets. Some of the examples used by FINRA are self evident and apply to all market participants, not just those regulated by FINRA. Read More
Penny Stock CEO and Co-Conspirator Convicted of Securities Fraud
On May 3, 2013, in connection with an action that went unnoticed by most penny stock observers, the U.S. Attorney’s Office for the District of Massachusetts announced that John Jordan, of Cameron Park, California, and James Prange, of Greenbush, Wisconsin, Read More
Five Charged by SEC in Venezuelan Fraudulent Bond Kickback Scheme
In June 12, 2013, the Securities and Exchange Commission (“SEC”) brought an action against an additional defendant for his role in a frauduent kickback scheme involving the payment of millions of dollars in bribes to a Venezuelan finance official in order to obtain the bond trading business of a state-owned Venezuelan bank, the Banco de Desarrollo Económico y Social de Venezuela (“BANDES”).
In its latest SEC action, the SEC charged Ernesto Lujan of Miami, the former head of the Miami office of Direct Access Partners. The four original defendants named in Read More
SEC Revokes Registration of Sunrise Solar
Securities Lawyers Gone Wild Series
Sunrise Solar’s most recent financial report filed was a 10-Q for the period ended March 31, 2009.
According to the SEC action, Sunrise Solar purported to be in the solar power business, and was located in San Antonio, Texas. The Read More
SEC Brings Charges in California Alzheimer’s Scam
Company President Lies to Investors
Most people think of the Securities and Exchange Commission (“SEC”) as a regulator of publicly traded companies. But the SEC’s authority extends to any company or individual—public or private—that offers or sells securities. If the Read More
Securities Lawyers Gone Wild – Michael Stewart
On June 21, 2013, the Securities and Exchange Commission (“SEC”), suspended Michael Stewart, a California securities attorney, from practicing before the SEC. The sanction stemmed from an SEC enforcement action brought by the agency in May 2012; Stewart agreed to settle.
In it, the SEC charged Stewart, John J. Packard, Randall A. Smith, and Apartments Read More
San Diego Penny Stock Promoter Charged with Securities Fraud
In the latest twist to the Bermuda Short Sting of 2003, on June 19, 2013, the Securities and Exchange Commission (“SEC”) Division of Enforcement charged David F. Bahr of Rancho Santa Fe, California, with securities fraud for attempting to generate the appearance of market interest in a penny stock in an effort to cause investors to buy the stock. Unfortunately for Bahr, his problems didn’t end with the SEC’s investigation of his securities fraud.
Bahr’s target was iTrackr Systems (IRYS), a Florida company. According to the SEC’s Division of Enforcement, Barr participated in securities fraud by conspiring with a purported businessman who claimed to have access to a network of crooked brokers willing to help out with the fraudulent scheme in return for kickbacks in the amount of 30% of the price of stock they’d purchase through their customers’ accounts. Read More