Securities Lawyer 101 l Brenda Hamilton

Securities Lawyer 101 l Brenda Hamilton

Friday, February 28, 2014

Keeping Draft Registration Statements Confidential

Securities Lawyer 101 Blog The Jumpstart Our Business Startups Act (the “JOBS Act”) allows an “emerging growth company” to submit a draft of its registration statement and exhibits to the Securities and Exchange Commission (the “SEC”) on a confidential basis.  This is particularly useful to companies in going public transactions who are unfamiliar with the SEC registration statement process.  This... Read More
http://www.securitieslawyer101.com/registration-statement-2/

SEC Suspends Trilliant Exploration

Securities Lawyer 101 Blog On February 28, 2014, the Securities and Exchange Commission (“Commission”) ordered the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”), of trading in the securities of Trilliant Exploration Corp. (“Trilliant”) of New York, New York due to the lack of complete and accurate publicly available information concerning, among... Read More
http://www.securitieslawyer101.com/trilliant-2/

Section 16 Reporting & Going Public Transactions

Securities Lawyer 101 Blog 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... Read More
http://www.securitieslawyer101.com/reporting-obligations/

OTCQX Proposes Amendments to its OTCQX Rules

Securities Lawyer 101 Blog On February 13, 2014, the OTC Markets proposed amendments to its OTCQX rules. The will impact US and international companies seeking listings on the OTCQX. The OTC Markets OTCQX is the premier market tier of the OTC Markets. These proposals include changes to the rules governing OTCQX market professionals, initial eligibility standards and issuer requirements for... Read More
http://www.securitieslawyer101.com/otcqx-2/

FBI Brings Securities Fraud Charges in $125 Million Medical Glove Scheme

Deepal Wannakuwatte, 63, has been arrested and charged with operating a massive Ponzi scheme that raised over $125 million from investors who believed they were investing in a company that had valuable contracts to supply gloves to the U.S. Department of Veterans Affairs.
 

SEC Charges Arizona Based Equity Fund l Securities Lawyer 101

On February 25, 2014, the Securities and Exchange Commission (the “SEC”) announced charges against an Arizona-based private equity fund manager and his investment advisory firm for orchestrating a scheme to misallocate their expenses to the funds they manage.

 The SEC Enforcement Division alleges that Scott A. Brittenham and Clean Energy Capital LLC (CEC) improperly paid more than $3 million of the firm’s expenses by using assets from 19 private equity funds that invest in private ethanol production plants.  CEC and Brittenham did not disclose any such payment arrangement in fund offering documents. 

Richard Altamore Convicted of Securities Fraud

On February 26, 2014, the United States Attorney for the Southern District of Florida, and Federal Bureau of Investigation (FBI), Miami Field Office, announce that a federal jury convicted Richard Altomare, 65, of Palm Beach County,  on four counts of an indictment, including one count of mail fraud and

George Louis Theodule Sentenced to 150 Months


On February 26, 2014, theUnited States Attorney for the Southern District of Florida and Federal Bureau of Investigation (FBI), announced the unsealing of an indictment charging George Louis Theodule, former resident of Wellington, Florida. Theodule was charged with multiple counts of wire fraud, securities fraud, and money laundering. Theodule was arrested on August 23, 2013, and had his initial appearance before U.S. Magistrate Judge Dave Brannon later that morning.
 
According to the indictment, Theodule engaged in an investment fraud or Ponzi scheme, wherein he induced individuals to invest money with his companies, Creative Capital Consortium and A Creative Capital Concepts, based upon the representation that he would be able to double their money in 90 days, primarily by trading in stock options. Theodule, the indictment alleges, targeted the Haitian community in South Florida.

Thursday, February 27, 2014

Prospectus Disclosure Requirements in Going Public Transactions

Private companies which offer and sell their securities to the public before completion of a going public transaction are subject to the same requirements under the Securities Act of 1933, as amended (the “Securities Act”) as 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.
 
Many companies involved in going public transactions are unfamiliar with the SEC’s prospectus disclosure requirements. Under the Securities Act, issuers that

Anthonie R. Sparrow Sentenced in $16 million Scheme

On February 25, 2014, the FBI announced that Anthonie R. Sparrow pled guilty for his role in perpetrating a $16 million securities fraud scheme that victimized hundreds of investors around the world. Sparrow was charged in December 2009 and extradited from Spain.
 
Sparrow pled guilty in Manhattan federal court before U.S. Magistrate Judge Debra Freeman.

Tuesday, February 25, 2014

OTC Markets Proposes Amendments to OTCQX


http://www.securitieslawyer101.com/otcqx-2/

NASAA Comments On Regulation A+ l Securities Lawyer 101

Securities Lawyer 101 Blog On February 19, 2014, the North American Securities Administrators Association ( NASAA ) sent correspondence to the SEC in response to pending Regulation A+ proposals objecting to the SEC s preemption of state authority over small corporate offerings in its Regulation Continue reading
http://www.securitieslawyer101.com/regulation-a-3/

NASAA Comments On Regulation A+


http://www.securitieslawyer101.com/regulation-a-3/

Sunday, February 23, 2014

SEC Provides Going Public Guidance l Securities Lawyer 101


http://www.securitieslawyer101.com/registration-statements-2/

Going Dark 101

Securities Lawyer 101 Blog The Sarbanes-Oxley Act, the declining U.S. economy and increasing legal, auditing and other compliance costs reduced the number of issuers electing to become Securities & Exchange Commission (“SEC”) reporting issuers, particularly in the microcap markets. With new Continue reading
http://www.securitieslawyer101.com/go-dark/

Going Dark l Securities Lawyer 101


http://www.securitieslawyer101.com/go-dark/

Going Dark l Securities Lawyer 101


http://www.securitieslawyer101.com/go-dark/

Wells Notice Disclosure Obligations


http://www.securitieslawyer101.com/wells-notice-2/

Wells Notice Disclosure Obligations


http://www.securitieslawyer101.com/wells-notices/

Saturday, February 22, 2014

Bitcoin 101 l Hamilton & Associates


http://www.securitieslawyer101.com/bitcoin/

Bitcoin 101


http://www.securitieslawyer101.com/bitcoin/

Florida’s Revised Limited Liability Company Act

Securities Lawyer 101 Blog On Jan. 1, 2014, Florida s Revised Limited Liability Company Act ( the Florida LLC Act ) became effective. The new law will impact both new and existing Florida limited liability companies. The Florida LLC Act creates Chapter 605 of Continue reading
http://www.securitieslawyer101.com/llc/

Florida's Revised Limited Liability Company Act


http://www.securitieslawyer101.com/llc/

Friday, February 21, 2014

The Securities Attorney’s Review of Corporate Records, Stock Issuances & Shareholder Records in the Going Public Process


http://www.securitieslawyer101.com/securities-lawyer-going-public/

Manhattan U.S. Attorney Charges Swiss Asset Manager With Conspiring To Hide Millions Of Dollars


http://www.securitieslawyer101.com/peter-amrein/

Manhattan U.S. Attorney and FBI Announce Insider Trading Charges

Securities Lawyer 101 Blog On February 21, 2014, Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director in Charge of the New York Office of the Federal Bureau of Investigation Continue reading
http://www.securitieslawyer101.com/perkins-hixon/

Manhattan U.S. Attorney and FBI Announce Insider Trading Charges Against Former Senior Managing Director of Investment Bank


http://www.securitieslawyer101.com/perkins-hixon/

SEC Charges Wall Street Investment Banker With Insider Trading to Pay Child Support


http://www.securitieslawyer101.com/hixon/

Donna Levy Sentenced to 126 months


http://www.securitieslawyer101.com/donny-levy/

Donny Levy Sentenced to 126 months


http://www.securitieslawyer101.com/donny-levy/

Donny Levy Sentenced to 126 months

Securities Lawyer 101 Blog On February 19, 2014, Donna Levy was was sentenced to 60 years for in connection with her conviction for Conspiracy to Commit Securities Fraud and Manipulation for Hire on Counts and 66 months for Securities Fraud concerning Banneker, Continue reading
http://www.securitieslawyer101.com/donny-levy/

Donny Levy Sentenced to 126 months


http://www.securitieslawyer101.com/donny-levy-sentenced-to-126-months/

SEC Announces Cybersecurity Roundtable


http://www.securitieslawyer101.com/sec-cybersecurity/

Thursday, February 20, 2014

Why Both Private and Public Companies Need a Securities Attorney


http://www.securitieslawyer101.com/securities-attorney-going-public/

Ask Securities Lawyer 101 l Form S-8 Q &


http://www.securitieslawyer101.com/forms8/

Ask Securities Lawyer 101 l Form S-8 Q & A


http://www.securitieslawyer101.com/forms8/

The SEC's Registration Statement Comment and Review Process


http://www.securitieslawyer101.com/sec-comment/

Direct Public Offerings & Registration Statements 2014


http://www.securitieslawyer101.com/dpo/

SEC Brings Charges In Movie Scam


http://www.securitieslawyer101.com/sec-brings-charges-in-movie-scam/

SEC Suspends Premier Beverage Solutions l Securities Lawyer 101


http://www.securitieslawyer101.com/premier-beverage/

SEC Suspends Premier Beverage Solutions l Securities Lawyer 101


http://www.securitieslawyer101.com/premier-beverage/

Monk Ordered to Pay Over $9,000,000

On February 12, 2014, the Securities and Exchange Commission (the “SEC”) announced that a Connecticut federal court entered judgments against a former Connecticut-based stock promoter, Jerry S. Williams, and two companies that he controlled, Monk’s Den, LLC and First In Awareness, LLC, who are defendants in a Commission enforcement action filed in 2012 alleging that they operated a fraudulent Internet-based stock touting and scalping scheme. The judgments order the defendants to pay a total of over $9.6 million.

Monk Ordered to Pay Over $9,000,000

Securities Lawyer 101 Blog On February 12, 2014, the Securities and Exchange Commission (the SEC ) announced that a Connecticut federal court entered judgments against a former Connecticut-based stock promoter, Jerry S. Williams, and two companies that he controlled, Monk s Den, Continue reading
http://www.securitieslawyer101.com/monk/

Monk's Den Founder Ordered to Pay Over $9,000,000


http://www.securitieslawyer101.com/monk/

Wednesday, February 19, 2014

Selling Shareholder Registration Statements in Going Public Transactions

Going public transactions can be structured a variety of ways.   An initial public offering or primary offering involves a registration statement covering shares for sale by an issuer. 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 shareholder requirements.
This type of registration statement is referred to as a resale registration statement or secondary offering.  The issuer does not receive proceeds from the sale of the securities subject to a resale registration statementCompanies often file resaleregistration statements when they have granted existing shareholders registration rights.  An issuer can file a Form S-1 statement covering both a secondary offering by selling shareholders and a primary offering of its own behalf.  This structure is common in going public transactions  particularly when an issuer does not have enough stockholders for a ticker symbol assignment.

Rule 506(C) Q & A

Private placement offerings under Rule 506 of Regulation D of the Securities Act of 1933, as amended (the “Securities Act”) are a cost effective and relatively quick way for private companies to raise capital before, during and after a  going public transaction.  Rule 506(c) fundamentally changes the way unregistered offerings may be conducted. While the rule imposes stringent requirements, these requirements are manageable for issuers putting effective compliance strategies into place.
As of September 23, 2013, issuers were allowed to use general solicitation and advertising in Rule 506 (c) offerings made to accredited investors.

Thursday, February 13, 2014

Reverse Merger Bootcamp l Toxic Reverse Mergers


Over the last eight years, the Securities and Exchange Commission (“SEC”) and theFinancial Industry Regulatory Authority (“FINRA”) have overhauled the rules and regulations applicable to reverse merger transactions. Not only have the SEC and FINRA jumped on the bandwagon to eliminate them, but, as will be explained,Depository Trust Company and national securities exchanges have joined
in their efforts.  Among the SEC’s efforts to stem microcap fraud is a campaign to eliminate dormant shell companies to prevent them from being used in reverse merger transactions.

FINRA Issues $8 Million Fine for Anti-Money Laundering Compliance Failures

The Financial Industry Regulatory Authority (FINRA) announced today that it has fined New York-based Brown Brothers Harriman & Co. (BBH) $8 million for substantial anti-money laundering compliance failures including, among other related violations, its failure to have an adequate anti-money laundering program in place to monitor and detect suspicious penny stock transactions. BBH also failed to sufficiently investigate potentially suspicious penny stock activity brought to the firm’s attention and did not fulfill its Suspicious Activity Report (SAR) filing requirements. In addition, BBH did not have an adequate supervisory system to prevent the distribution of unregistered securities. BBH’s former Global AML Compliance Officer Harold Crawford was also fined $25,000 and suspended for one month.

Criminal Charges in Corporate Hijackings on the Rise

The Justice Department has increasingly pursued criminal charges against corporate hijackers and their conspirators for illegal takeovers of publicly traded shell companies. In  many instances, a securities attorney or transfer agent have been charged in connection with the schemes.  Recent examples include the criminal convictions ofIrwin Brook and Lawrence S. Hartman.  Broock  a Florida securities lawyer. Hartman recently pled guilty to a charge of conspiracy to commit mail and wire fraud in connection with a corporate hijacking and shell trafficking fraud scheme. Hartman faces up to 20 years’ imprisonment and a maximum fine of $250,000.

SEC Explains Merger & Acquisiton Brokers

On February 4, 2014, the Securities and Exchange Commission (the “SEC”) released a No Action Letter  in response to a request from the American Bar Association Task Force on Private Placement Brokers.  The SEC’s response confirmed the circumstances under which Merger and Acquisition Brokers are exempt from the SEC’s broker-dealer registration provisions.

Diane Dalmy Announces She Was the Victim of Form S-1 Identity Theft

Diane D. Dalmy, a securities attorney, announced today that she is the victim of identity theft in connection with the unauthorized use of her name on 20 Form S-1 registration statements filed with the Securities and Exchange Commission.  The 20 issuers in question  were charged by the Securities and Exchange  Commission with filing misleading S-1 registration statements for twenty  mining companies. Last week, the SEC filed administrative stop order proceedings. Today, Ms. Dalmy has stated that the filings were made without her knowledge and the use of her name was unauthorized.

SEC Suspends Amogear, Inc.

On February 10, 2014, 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 Amogear Inc. (“Amogear”), of Boston, Massachusetts, at 8:30 a.m. EST on February 10, 2014, and terminating at 11:59 p.m.EST on February 24, 2014.
The SEC suspended trading in the securities of Amogear because it has recently been the subject of spam e-mails touting the company’s shares and because of potentially manipulative conduct in the trading of the company’s shares.

Zombie Tickers 101

The Securities and Exchange Commission (“SEC”) has continued its trend of instituting administrative proceedings to revoke the registrations of hundreds of dormant issuers. The issuers are being suspended pursuant to the Securities Exchange Act of 1934, after being delinquent in the filing of their periodic financial reports required by the Commission.
The SEC has been proactive in preventing corporate hijackings of dormant shell companies for reverse merger transactions and has suspended hundreds of issuers.  We expect to see many enforcement actions arisng from corporate hijackings of dorman shells in the near future.

Former Sheriff’s Deputy Sentenced in Ponzi Scheme Fraud

David N. Hawkins, a former sheriff’s deputy was sentenced to thirty months in federal prison for his role in a Ponzi scheme that raised more than $1.2 million from victims many of which were law enforcement personnel.  Hawkins will also serve three years of supervised release upon completion of the sentence.  Hawkins pleaded last year to one count of wire fraud and one count of money laundering.

SEC Suspends Trading of Centor Energy, Inc.

On February 11, 2014, the Securities and Exchange Commission (the “SEC”) announced the temporary suspension of trading in the securities of Centor Energy, Inc. (“Centor”), of Winter Park, Florida, commencing at 9:30 a.m. EDT on February 11, 2014, and terminating at 11:59 p.m. EST on February 25, 2014.  The SEC temporarily suspended trading in the securities of Centor because of questions regarding the accuracy and adequacy of assertions by Centor, and by others, to investors in press releases and promotional material concerning, among other things, the Company’s assets, operations operations, and financial prospects. The SEC’s order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (the “Exchange Act”).

Bangers, Bashers & Regulation SHO


When a manipulated stock’s price declines, it has become common practice for penny stock issuers and their disciples to scream foul play and claim their company is the victim of a stock basher-naked short seller conspiracy, working with nefarious clearing firms to send their stock price to the triple-zero graveyard.  These same issuers also complain vociferously about the purported “agenda” of the United States Securities and Exchange Commission (“SEC”) andDepository Trust Company (“DTC”) to wipe out penny stocks altogether by turning a blind eye to illegal short sale activities.

Tuesday, February 11, 2014

Going Public For Canadian Issuers

The Multijurisdictional Disclosure System (“MJDS”) was adopted in July 1991 by the U.S. Securities and Exchange Commission (“SEC”) and the Canadian Securities Administrators to facilitate cross-border public offerings of securities between the U.S. and Canada. The Multijurisdictional Disclosure System provides Canadian issuers with appealing options for accessing the U.S. capital markets and completing going public transactions.
In many securities offerings in going public transactions in the U.S., Canadian issuers can register their securities offerings using a Canadian prospectus, in accordance with Canadian disclosure requirements.   Further, the registration statement will be declared by the SEC upon receipt of notification of clearance from the principal Canadian securities regulator.

Confidential Submission of Draft SEC Registration Statements l Ask Securities Lawyer 101

The Jumpstart Our Business Startups Act (the “JOBS Act”) allows an “emerging growth company” to submit a draft of its registration statement and exhibits to the Securities and Exchange Commission (the “SEC”) on a confidential basis.  This blog posts addresses the common questions we receive about confidential submission of registration statements.

Hamilton & Associates l Reverse Merger Due Diligence

Going Public transactions involving reverse mergers involve unique risks and expansive disclosures.  Hamilton and Associates has extensive experience in reverse merger due diligence and transactions.
Traditionally, private companies become publicly traded by registering an offering under the Securities Act of 1933, as amended. Reverse Mergers involve backdoor going public transactions that are often plagued with bad actors.  Many reverse merger companies have dodgy histories and undisclosed liabilities that taint the public vehicle for years.  Additionally, the general perception in the securities industry among regulators is that Reverse Mergers are used as vehicles for fraud either by stock promoters or others including securities lawyers who manufacture them.

Custodianship Fraud

A new form of fraudster is distinguishing itself among the bottom feeders who prey upon small, financially distressed private companies seeking public company status. These fraudsters, who are often securities professionals including transfer agents, accountants and lawyers, engage in corporate takeovers using custodianship and/or receivership actions that are based on fabricated pleadings filed under the penalties of perjury.

FINRA Issues $8 Million Fine for Anti-Money Laundering Compliance Failures

The Financial Industry Regulatory Authority (FINRA) announced today that it has fined New York-based Brown Brothers Harriman & Co. (BBH) $8 million for substantial anti-money laundering compliance failures including, among other related violations, its failure to have an adequate anti-money laundering program in place to monitor and detect suspicious penny stock transactions. BBH also failed to sufficiently investigate potentially suspicious penny stock activity brought to the firm’s attention and did not fulfill its Suspicious Activity Report (SAR) filing requirements. In addition, BBH did not have an adequate supervisory system to prevent the distribution of unregistered securities. BBH’s former Global AML Compliance Officer Harold Crawford was also fined $25,000 and suspended for one month.

Criminal Charges in Corporate Hijackings on the Rise

The Justice Department has increasingly pursued criminal charges against corporate hijackers and their conspirators for illegal takeovers of publicly traded shell companies. In  many instances, a securities attorney or transfer agent have been charged in connection with the schemes.  Recent examples include the criminal convictions ofIrwin Brook and Lawrence S. Hartman.  Broock  a Florida securities lawyer. Hartman recently pled guilty to a charge of conspiracy to commit mail and wire fraud in connection with a corporate hijacking and shell trafficking fraud scheme. Hartman faces up to 20 years’ imprisonment and a maximum fine of $250,000.

SEC Explains Merger & Acquisiton Brokers

On February 4, 2014, the Securities and Exchange Commission (the “SEC”) released a No Action Letter  in response to a request from the American Bar Association Task Force on Private Placement Brokers.  The SEC’s response confirmed the circumstances under which Merger and Acquisition Brokers are exempt from the SEC’s broker-dealer registration provisions.
The SEC’s response provides useful information for both small and large business owners seeking to sell their businesses.
Generally, Merger & Acquisition Brokers are intermediaries that effect the sale to transfer ownership and control of a company through the purchase, sale, exchange, issuance, repurchase, or redemption of, or a business combination involving, securities or assets of the company, to a buyer that will actively operate the company or the business conducted with the assets of the
The SEC’s No Action Letter discusses the exemption from broker-dealer registration found in Section 15(b) of the Exchange Act of 1934.
The SEC’s No Action Letter applies only to the federal broker-dealer registration requirements and Merger & Acquistion Brokers myst still comply with any applicable state and Blue Sky statutes, rules, and regulations that impact their activities.
The SEC’s No Action Letter and related No Action Request Letter are provided below.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549
Faith Colish, Esq., Carter Ledyard & Milburn LLP Martin A. Hewitt, Esq., Attorney at Law Eden L. Rohrer, Esq., Crowell & Moring, LLP Linda Lerner, Esq., Crowell & Moring, LLP Ethan L. Silver, Esq., Carter Ledyard & Milburn LLP Stacy E. Nathanson, Esq., Crowell & Moring, LLP
RE: M&A Brokers
Dear Ms. Colish, Mr. Hewitt, Ms. Rohrer, Ms. Lerner, Mr. Silver and Ms. Nathanson:

Zombie Tickers 101

The Securities and Exchange Commission (“SEC”) has continued its trend of instituting administrative proceedings to revoke the registrations of hundreds of dormant issuers. The issuers are being suspended pursuant to the Securities Exchange Act of 1934, after being delinquent in the filing of their periodic financial reports required by the Commission.