SEC Charges Robert Vitale for Lying l Securities Lawyer 101
On May 30, 2013, the Securities and Exchange Commission (the “SEC”) announced Robert Vitale, the subject of an SEC enforcement inquiry plead guilty to criminal charges by the Justice Department for obstructing justice and lying to SEC attorneys investigating a real estate securities offerings to investors. Read More
Can Finders Raise Funds without Registration as a Securities Broker?
Companies seeking capital are frequently approached by finders who offer to find investors in exchange for a percentage of funds raised. Most finders are not registered as broker-dealers with the Securities and Exchange Commission (the “SEC”). The possibility of receiving money even through the efforts of a finder creates a tempting opportunity for issuers and a lucrative proposition for the finder. While it may seem harmless enough, the SEC does not think so, and in fact, the SEC frequently brings cases against unregistered finders and those who aid and abet them. Read More
Auditor Review of Form 10-Q l Securities Lawyer 101
Form 10-Q is used to file quarterly reports under Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”). Rules 13(a)-13 and 15(d)-13, which require that SEC reporting issuers file a Form 10-Q for each of the first three quarters of each fiscal year.
Rules 8-03 and 10-01(d) of Regulation S-X require that a company‘s interim financial statements contained within its Form 10-Q reports be reviewed by its independent auditors in accordance with the Statement on Auditing Standards (“SAS”) prior to the filing of its Form 10-Q with the SEC.
When a company completes its quarterly report on Form 10-Q but its auditor cannot or will not complete its review in a timely manner, the issuer is presented with a dilemma. Absent an auditor review, if it files its 10-Q with the SEC, the filing is considered incomplete and not timely filed.
Even though a company is not obliged to state that the timely interim auditor review was completed, the filing of the report implies that the requirements of Form 10-Q have been met, including the review. A company may decide to file its Form 10-Q by the original or extended filing date without its auditor’s review. In such circumstances, the company must explicitly disclose that the filing is incomplete because Form 10-Q’s required auditor SAS 100 review was not performed and/or completed. Additionally, the company should explain the reason the SAS 100 review was not performed and/or completed and offer an anticipated completion date.
Once the auditor’s SAS 100 review is ready, the company should file an amendment to its Form 10-Q, reflecting that fact. The issuer should include the report of the SAS 100 review in its amended 10-Q report.
For more information about Form 10-Q please see our blog post at:
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. For more information about going public and the rules and regulations affecting the use of Rule 144, Form 8K, crowdfunding, FINRA Rule 6490, Rule 506 private placement offerings and memorandums, Regulation A, Rule 504 offerings, SEC reporting requirements, SEC registration statements on Form S-1 , IPO’s, OTC Pink Sheet listings, Form 10 OTCBB and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, direct public offerings and direct public offerings please contact Hamilton and Associates at (561) 416-8956 or [email protected]. 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
SEC Charges NASDAQ for Facebook IPO l Securities Lawyer 101
On May 29, 2013, the SEC charged NASDAQ with violating the securities laws as a result of its poor systems and decision-making during the initial public offering (IPO) and secondary trading of Facebook’s common shares. NASDAQ has agreed to pay the largest settlement ever handed down against an exchange – $10 million. Read More
Going Public For a Smaller Reporting Company l Securities Lawyer 101
The federal securities laws establish different levels of disclosure and reporting requirements under the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), depending upon the size of a company. There are many benefits to the status of smaller reporting companies in going public transactions, including reduced disclosure and reporting obligations in comparison to larger companies.A company that has Smaller Reporting Company status during its going public transaction may apply Smaller Reporting Company disclosure requirements to its registration statement, including two years of audited financial statements instead of the three years required for larger reporting companies.
If a company does not qualify as a Smaller Reporting Company at the time of its initial filing of a registration statement in connection with its going public transaction, it must provide three years of audited financial statements in its registration statement. Read More
SEC Settles Charges against RINO International
On May 15, 2013, Dejun “David” Zou and Jianping “Amy” Qiu settled the enforcement action brought by the Securities and Exchange Commission stemming from their alleged looting of Chinese reverse merger company, RINO International Corp. According to the SEC, Rino overstated its revenues by hundreds of millions of dollars. Zou and Qiu respectively the Read More
Investor Relations 101 l Securities Lawyer 101 Blog
Investor relations or stock promotion involves the dissemination of information about a public company to increase its stock price and trading Read More
Short Sales 101 – Going Public Attorneys
In recent years, the activities of short sellers have been the subject of considerable controversy. While the average investor profits if he invests in a stock whose price increases, a short seller profits when a stock’s price declines. While short selling is a simple process, it is widely misunderstood. Simply put, a short sale is the sale of a security that the seller does not own.
Short sales can only be made on margin, and all the rules applicable to margin trading are enforced. To sell short, a trader must borrow stock and then sell it into the market. The sale is not complete until the trader ensures delivery of the security to the new buyer. His or her brokerage firm arranges the loan. The stock may come from the firm’s own inventory, the accounts of other clients on margin, or from another lender. Read More
Rule 144 For OTC Pink Companies – Going Public Lawyers
Rules of the Road l Uplisting to the OTCMarkets OTC Pink Sheets
The OTCMarkets Group operates an electronic inter-dealer quotation system called OTC Link that broker-dealers use to trade securities not listed on a national securities-related exchange. OTCMarkets rank issuers in tiers; each issuer’s rank depends upon the amount of disclosure provided. Issuers using SEC Rule 15c2-11 qualify for the “OTC Pink Current Information” tier. Read More
15c2-11 Application Going Public Attorney
Many private companies that go public are opting for the listing on the OTCMarket’s Pink Sheets due to the increased costs and more stringent regulations associated with Securities and Exchange Commission (“SEC”) reporting. Rule 15c2-11 (“SEC Rule 15c2-11”) of the Securities Exchange Act of 1934 (the “Exchange Act”) can be used by a private company seeking to go public without an SEC registration statement by a sponsoring market maker submitting a Form 211 with the Financial Industry Regulatory Authority (“FINRA”). Read More
SEC Sues Daniel Peterson for Fraud
On April 25, 2013, the Securities and Exchange Commission Division of Enforcement (“SEC”) announced that it had charged Daniel Peterson of Spokane, Washington, and his company USA Real Estate Fund 1 with securities fraud. According to the SEC, Daniel Peterson misled investors with false claims of enormous potential returns that could be generated by the wonderful investment opportunity he touted. He told his victims that his securities offering would be in Read More
How Can I Register Shares On Form S-8 ?
Registration of securities on Form S-8 (“Form S-8”) is a short-form registration statement under the Securities Act of 1933, as amended (“Securities Act”). Form S-8 is available to register securities offered to employees and consultants under benefit plans under limited circumstances. Because a registration statement on Form S-8 is effective upon filing it offers benefits to Securities and Exchange Commission (“SEC”) reporting companies, most significantly that an S-8 registration statement becomes effective upon filing and the shares registered may be issued without a restrictive legend. Read More
Market Makers in Going Public Matters l Securities Lawyer 101
The last step in going public transactions is most often obtaining a stock trading or ticker symbol from the Financial Industry Regulatory Authority (“FINRA”). For a company to obtain a ticker, a market maker must file a Form 211 with the Finance Industry Regulatory Authority (“FINRA”). Only a Market Maker can file a Form 211 to obtain a ticker symbol assignment.
What is a Market Maker?
A market maker is a FINRA registered broker-dealer firm that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security. Broker-dealers must register with the Financial Industry Regulatory Authority (“FINRA“) to act as a market maker of a security. Read More
Informational Requirements of Rule 144 – Rule 144 Legal Opinion Requirements
Rule 144(c) of the Securities Act of 1933, as amended (the “Securities Act”) requires that stockholders of public companies relying upon Rule 144 satisfy its adequate current public information requirement. The requirements depend upon whether the issuer is a reporting or non-reporting company.
SEC Reporting Companies l Adequate Current Public Information
Rule 504 l OTC Pink Offerings
Rule 504 of Regulation D is a transactional exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) for non-reporting companies when they offer and sell securities. OTC Pink Sheet issuers often rely upon Rule 504 to offer and sell their securities.
Maximum Offering Amounts l Rule 504 Offerings
The aggregate amount raised for an offering of securities under Rule 504 cannot exceed $1,000,000, less the aggregate offering price for all securities sold within the twelve months before the start of and during the offering of securities under this Rule 504, in reliance on any exemption under section 3(b), or in violation of section 5(a) of the Securities Act. Read More
Form 10-Q Requirements l Securities Lawyer 101 Blog
Public companies with a class of securities registered under Section 12 or subject to Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are subject to the periodic and current reporting requirements of Section 13 or 15(d) of the Securities Exchange Act. The Exchange Act contains ongoing disclosure requirements that provide investors with current information on an ongoing basis. These include an obligation to file periodic reports on Form 10-K and Form 10-Q and current reports on Form 8-K with the Securities and Exchange Commission (the “SEC”). Read More
Rule 504 l OTC Markets OTC Pink Market Checklist
Rule 504 of Regulation D is a transactional exemption from the registration statement requirements of the Securities Act of 1933, as amended (the “Securities Act”) for non-reporting companies when they offer and sell securities. OTC Pink Sheet issuers often rely upon Rule 504 to offer and sell their securities.
Why Both Private and Public Companies Need a Securities Attorney
Every offer and sale of securities is regulated by both state and federal securities laws. Generally, all securities offerings must be registered or exempt from federal and state securities registration laws. Failure to comply with these laws can have significant consequences that include rescission to investors, and enforcement actions by the Justice Department or Securities and Exchange Commission.
Taking a company public is an intricate process, and it is important to have an experienced securities lawyer who will help you navigate through the process.
Common matters for which companies and their management consult with securities lawyers include but are not limited to the following: Read More
Brenda Hamilton, Securities Attorney, In Linkedin’s Top 1 %
Brenda Hamilton, a securities attorney and founder of Hamilton & Associates Securities Lawyers has been honored as a Top 1 Percent LinkedIn Subscriber. LinkedIn.com reports that Ms. Hamilton’s profile was in the top 1 percent of all profiles for 2012. Ms. Hamilton attributes the rating to the law firm’s leading role in representing microcap issuers in SEC investigations and DTC matters, and for its securities-related blog www.Securitieslawyer101.com, which focuses on securities law and issues affecting the microcap securities markets. Read More
Securities Lawyers Gone Wild l Carrillo Huettel
On March 15, 2013, the Securities and Exchange Commission (the “SEC”) charged securities law firm Carrillo Huettel and others in an alleged international “pump-and-dump” scheme involving two publicly traded U.S. companies, Pacific Blue Energy Corporation and Tradeshow Marketing Company Ltd.
According to the SEC’s complaint, Canadians John Kirk, Benjamin Kirk, Dylan Boyle, and James Hinton ran false and misleading promotions to pump the stock of Pacific Blue and Tradeshow so they could dump their shares. Read More
FINRA Bars Jeffrey Rubin for Transactions Involving 31 NFL Players
On March 7, 2013, the Financial Industry Regulatory Authority (“FINRA”) barred Jeffrey Rubin of Lighthouse Point, Florida, from the securities industry. Rubin was sanctioned for making unsuitable recommendations to an NFL player, advising him to invest in high-risk securities offered in a now-bankrupt casino project in Alabama. According to FINRA, the NFL player lost his investment of approximately $3,000,000. Thirty other players acting on Rubin’s advice invested funds in the same casino project. They lost approximately $40 million. Read More
Securities Lawyers Gone Wild l Brian Reiss
Securities Lawyers Gone Wild Series
On March 8, 2013, the Securities and Exchange Commission (the “SEC”) charged Brian Reiss, a California securities lawyer, with churning out baseless legal opinions for penny stocks traded on the OTC Markets platform. Transfer agents require legal opinions from securities lawyers in order to remove restrictive legends from stock issued in reliance upon an SEC exemption from registration. The SEC alleges that Reiss created a business and accompanying website called 144 letters.com to promote his opinion writing services. He proudly advertised “volume discounts” and assured potential clients that “penny stocks [are] not a problem.” Read More
Dead Stock Walking l Chinese Reverse Mergers
Recent actions by the Securities and Exchange Commission (the “SEC”) and the media have alerted the public to fraud involving reverse mergers and Chinese issuers. In the last two years, the number of securities fraud cases filed by the SEC and the Justice Department against Chinese companies in U.S. courts has soared.
Securities Fraud and the SEC
In nearly all of these cases (according to the SEC), the problem was bad accounting. Some of the companies even kept two sets of books. As a result, investors have begun to demand more aggressive regulation of Chinese and other foreign issuers who offer and sell securities in the United States, as well as of the securities lawyers who represent accounting firms that audit them.
The Securities and Exchange Commission and the Public Company Accounting and Oversight Board (“PCAOB”) have taken steps to focus on securities fraud by Chinese companies, particularly those going public in reverse mergers. The SEC has issued investor bulletins warning of the risks of Chinese reverse merger issuers’ potential for securities fraud. Both the SEC and PCOAB have prepared accounting bulletins relating specifically to publicly traded Chinese companies.
Some critics suggest that the focus on securities fraud involving Chinese issuers does not reflect a growing problem with Chinese companies, but rather with U.S. reverse merger facilitators who have polluted our markets with securities fraud for years.
Reverse Mergers
A reverse merger is a transaction in which a private company acquires a public company to go public. Almost always the public company itself is inactive but its stock still trades. By structuring the transaction as a reverse merger, the private company goes public while skirting the requirements of an initial public offering.
Any foreign or domestic private company seeking to have its securities publicly traded should proceed with caution when considering whether to engage in a reverse merger. Similarly, investors should proceed with caution when considering whether to invest in reverse merger companies. Many reverse merger issuers either fail or struggle to remain viable. Often the public company into which the private company merges has more than a few skeletons in its closet. If potential problems are not discovered at the time of the merger, the “new” company could suffer down the road. One possible consequence might be an SEC enforcement action. In light of these considerations, private companies should consult a qualified and independent securities attorney to perform thorough research and due diligence before engaging in a reverse merger.
To the extent that a private company is willing to expend the time and resources to become public, it should do so the proper by way by filing a registration statement with the SEC and conducting an underwritten or direct public offering, thereby avoiding the growing risks and new requirements involved in reverse merger transactions with public shell companies.
More information about Reverse Mergers can be found in our blog post:
https://www.securitieslawyer101.com/reverse-mergers/
The SEC’s bulletins concerning reverse merger issuers can be found at:
http://www.sec.gov/investor/alerts/reversemergers.pdf
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
Supreme Court Says the Securities Statute of Limitations is 5 Years
On February 27, 2013, in the case of Gabelli v. Securities and Exchange Commission, the U.S. Supreme Court unanimously concluded that the securities statute of limitations for SEC enforcement actions seeking civil penalties expires 5 years after the time when the alleged fraud takes place, not when it is discovered. In 2008, the SEC brought a civil enforcement action against Gabelli, its Chief Operating Officer, and a former portfolio manager, alleging that they allowed an investor to engage in “market timing.” This activity ended in 2002. The SEC alleged violations of 15 U.S.C. §§ 80b-6(1) and (2) and sought civil penalties under § 80b-9. Read More
SEC Approves FINRA Rule 5123
The Securities and Exchange Commission recently approved the Financial Industry Regulatory Authority (“FINRA”) proposals to amend Rule 5123 governing FINRA members who participate in private offerings of securities (“Rule 5123”). Rule 5123 requires FINRA members selling securities in non-public offerings, such as private placements, or participating in the preparation of private placement documents such as memoranda, term sheets or other disclosure documents, to submit such disclosure documents with FINRA within fifteen days after the first sale of securities, or state that no offering documents were used. Rule 5123 became effective on December 3, 2012. Read More
What is a SCOR Offering? l Securities Lawyer 101
State Blue Sky laws play a significant role in the enforcement of the securities laws. Each State has its own securities laws and regulations. Issuers selling securities must comply with both federal and state securities laws and regulations in the states where they choose to offer and sell securities. An offering exempt under state securities laws is not necessarily exempt from federal securities laws. Each state’s securities laws have their own separate registration requirements and exemptions from registration. Read More
Bogus State Court Actions Used in Unico Fraud
On January 22, the U.S. Attorney’s Office in San Diego unsealed an indictment charging Mark Anthony Lopez, the former CEO of Unico Inc., with conspiracy to commit securities fraud and obstruction of justice. Much of the evidence used to indict Lopez was based on state court proceeding filed in Sarasota, Florida. Unico was a fully-reporting penny company purportedly engaged in the mining business. According to the SEC, under Lopez’s governance, what Unico really mined was investors’ pockets.
