DTC Again Proposes Procedures For Issuers Subject To Chills And Locks
On June 3, 2016, the DTC filed a new set of proposed rules to specify procedures available to issuers when the DTC imposes or intends to impose chills or locks. The issue of persistent and increasing chills and global locks which once dominated many discussions related to the small- and micro-cap space has dwindled in the last year or two. The new proposed rule release explains the change in DTC procedures and mindset related to its function in combating the deposit and trading of ineligible securities.
Background
On October 8, 2013, I published a blog and white paper providing background and information on the Depository Trust Company (“DTC”) eligibility, chills and locks and the DTC’s then plans to propose new rules to specify procedures available to issuers when the DTC imposes or intends to impose chills or locks (see my blog HERE). On December 5, 2013, the DTC filed these proposed rules with the SEC and on December 18, 2013, the proposed rules were published and public comment invited thereon. Following the receipt of comments on February 10, 2014, and again on March 10, 2014, the DTC amended its proposed rule changes (see my blog HERE).
Then on August 14, 2014, the DTC quietly withdrew its proposed rules and was silent until the release of new proposed rules on June 3, 2016.
A DTC chill is the suspension of certain DTC services with respect to an issuer’s securities. Those services can be book entry clearing and settlement services, deposit services (“Deposit Chill”) or withdrawal services. A chill can pertain to one or all of these services. In the case of a chill on all services, including book entry transfers, deposits, and withdrawals, it is called a “Global Lock.”
From the DTC’s perspective, a chill does not change the eligibility status of an issuer’s securities, just what services the DTC will offer for those securities. For example, the DTC can refuse to allow further securities to be deposited into the DTC system or while an issuer’s securities may still be in street name (a CEDE account), the DTC can refuse to allow the book entry trading and settlement of those securities.
The proposed rule change would add new Rule 33 to address: (i) the circumstances under which the DTC would impose and release a restriction on deposits (“Deposit Chill”) or on book entry services (a “Global Lock”); and (ii) the fair procedures for notice and an opportunity for the company to challenge the Deposit Chill or Global Lock.
As stated in the rule release, the current proposed rules “specify procedures available to issuers of securities deposited at DTC when DTC blocks or intends to block the deposit of additional securities of a particular issue (‘Deposit Chill’) or prevents or intends to prevent deposits and restrict book-entry and related depository services of a particular issue (‘Global Lock’).”
Background and Purpose for the Rule
The DTC serves as the central securities depository in the U.S. facilitating the trading and operation of the country’s securities markets. I’ve written about the DTC on numerous occasions, including recently in this blog HERE – on the settlement and clearing process, which provides basic background and history on the role and function of the DTC in the clearing of trillions of dollars in securities on a daily basis.
Once a security is approved as eligible for DTC depository and book-entry services, banks and broker-dealersthat are participants with the DTC (which is almost all such entities) may deposit securities into their DTC accounts on behalf of their respective clients. Securities deposited into the DTC may be transferred among brokerage accounts by book-entry (electronic) transfer, facilitating quick and easy transactions in the public marketplace. Eligible securities are registered on the books of a company in the DTC’s nominee name, Cede & Co.
A basic premise to use of the DTC is that securities be fungible. To be fungible all deposited securities must be freely tradable and devoid of unique characteristics or features such as restrictions on transfer. Since deposited securities are in fungible bulk, the deposit or existence of any illegally or improperly deposited securities (restricted securities) taints the bulk of all securities held by the DTC for that company.
Previously, upon detecting suspiciously large deposits of thinly traded securities, the DTC imposed or proposed to impose a Deposit Chill to maintain the status quo while it contacted the company and required such company to provide a legal opinion from independent counsel confirming that the securities met the eligibility requirements. As a reminder, the basic eligibility requirements that counsel confirmed were that the company’s securities were (i) issued in a transaction registered with the SEC under the Securities Act of 1933, as amended (“Securities Act”); (ii) issued in a transaction exempt from registration under the Securities Act and that, at the time of seeking DTC eligibility, are no longer restricted; or (iii) eligible for resale pursuant to Rule 144A, Regulation S or other applicable resale exemption under the Securities Act.
The Deposit Chill could, and often did, remain in place for years due to a company’s non-responsiveness, refusal or inability to submit the required legal opinion. As a practitioner that wrote such opinions, I can say that they were very expensive for a company. In order to satisfy the obligations as an attorney, we would be required to review each questionable deposit, including all paperwork, and satisfy ourselves that the securities qualified for deposit. In other words, for each deposit we would review the documents as if we were writing the initial opinion letter. Many times the company did not have all the records available and the shareholder that had made the deposit was not available, non-responsive or no longer had any supporting records. Sometimes the list of questionable deposits was in the hundreds and reviewing each and every one was extremely time-consuming. On more than one occasion, a company would spend significant funds attempting to comply only to realize that they fell short and no opinion could be rendered.
Regarding Global Locks, the DTC monitored enforcement actions, regulatory actions and pronouncements alleging Section 5 violations and would impose a Global Lock upon learning of such proceedings. At the time, the DTC had the policy to release the Global Lock when the action was withdrawn, dismissed on the merits with prejudice or otherwise resolved in favor of the company or shareholder defendants. However, over time this system was problematic as many enforcement proceedings are only resolved after several years and often without any definitive determination of wrongdoing.
On March 15, 2012, the Securities and Exchange Commission (SEC) issued an administrative opinion stating that an issuer is entitled to due process proceedings by the DTC as a result of a DTC chill placed on an issuer’s securities (In the Matter of the Application of International Power Group, Ltd. Admin. Proc. File No. 3-13687). The SEC stated, “DTC should adopt procedures that accord with the fairness requirements of Section 17A(b)(3)(H), which may be applied uniformly in any future such issuer cases”; “Those procedures must also comply with Section 17A(b)(5)(B) of the Exchange Act, which requires clearing agencies when prohibiting or limiting a person’s access to services, to (1) notify such person of the specific grounds for the prohibition or limitation, (2) give the person an opportunity to be heard upon the specific grounds for the prohibition or limitation, and (3) keep a record.”
At the time, the SEC confirmed that the DTC could still put a chill on an issuer’s security prior to giving notice and an opportunity to be heard to that issuer, in an emergency situation, stating, “[H]owever, in such circumstances, these processes should balance the identifiable need for emergency action with the issuer’s right to fair procedures under the Exchange Act. Under such procedures, DTC would be authorized to act to avert imminent harm, but it could not maintain such a suspension indefinitely without providing expedited fair process to the affected issuer.”
Following International Power, the DTC filed proposed rules on December 5, 2013, which were withdrawn on August 14, 2014.
In the time since International Power, the DTC has determined that its proposed procedures for imposing Deposit Chills and Global Locks are more appropriately directed to current trading halts or suspensions imposed by the SEC, FINRA or a court of competent jurisdiction. In fact, the DTC seems to think that the Deposit Chill and Global Lock process they were using only created more problems. In the proposed rule release, DTC states, “DTC believes that wrongdoers have seemingly taken into account DTC’s Restriction process, and have been avoiding it by shortening the timeframe in which they complete their scheme, dump their shares into the market and move on to another issue.”
Moreover, imposing Global Locks in response to an SEC enforcement action did nothing to curtail the behavior which had already occurred. As the DTC notes, “by the time of an enforcement action, the wrongdoers had long since transferred the subject securities.” Further, neither the Deposit Chill nor the Global Lock affected the trading in the security. In short, the DTC realized that its methods were not working.
New Proposed Rule 33
Imposing Chills and Locks
The proposed new Rule is dramatically simplified from the early 2014 proposals. Under the proposed new Rule 33, the DTC will establish the basis for the imposition of Deposit Chills and Global Locks premised directly on current judicial or regulatory intervention or the threat of imminent adverse consequences to the DTC or its participants.
In particular, if FINRA or the SEC halts or suspends trading in a security, the DTC will impose a Global Lock. The DTC will also impose a restriction (Chill or Lock) if ordered to do so by a court of competent jurisdiction. The DTC, however, recognizes that FINRA and the SEC may issue a trading halt or suspension for other reasons than fraud or wrongdoing, such as due to a technical glitch. Accordingly, if the DTC reasonably determines that a Global Lock will not further its regulatory purposes.
The DTC will also impose a Chill (or Lock) when it becomes aware of a need for immediate action to avert an imminent harm, injury, or other material adverse consequence to the DTC or its participants. It is expected that these circumstances will be rare, but an example would be if the DTC becomes aware that persons were about to deposit securities at the DTC in connection an ongoing corporate hijacking, market manipulation, or in violation of the law, or if a company notifies the DTC of stolen certificates. In support of its ability to impose such as Chill or Lock, the DTC quotes the SEC’s opinion in International Power, as discussed above.
Releasing Chills and Locks
New Rule 33 also address the release of Chills and Locks. From a high level, a Chill or Lock can be released if it was imposed in error in the first instance, such as based on clerical error.
Where a Global Lock has been imposed as a result of an SEC or FINRA trading suspension or halt, the Global Lock will be lifted when the suspension or halt is lifted. Where a Global Lock or Chill is imposed based on court order, the DTC will release it when also ordered to do so by a court.
Where a Chill or Lock is imposed as a result of imminent adverse consequences, it would be lifted when the DTC reasonably determines that lifting such Chill or Lock would not pose a threat of imminent adverse consequences such that the original basis for imposition has passed. Examples of when such a Chill or Lock could be lifted include: (i) the perceived harm as passed or is significantly remote; (ii) when the basis for the issue no longer exists (for example, lost certificates found); or (iii) there is a prior Global Lock based on an SEC enforcement action, but there is no current indication that illegally distributed securities are about to be deposited.
Proposed Fair Procedures
The DTC has established procedures to give a company timely notice of the imposition of a Chill or Lock, an opportunity to respond or object in writing, and a review and determination by an independent DTC officer. The DTC will also maintain complete records of all actions and proceedings. The DTC will send the initial written notice to the company’s last known business address and to the company’s transfer agents, if any, on record with the DTC.
The notice will be sent within 3 days of the imposition of the Chill or Lock. The company will have 20 business days to respond. An independent DTC officer will review the file. The independent DTC officer may request additional information from the company. Once the review is complete, a final written decision will be sent to the company. The company will then have 10 business days to submit a supplement; however, the supplement will only be reviewed if the objection is based on a clerical mistake or clear oversight or omission. If a supplement is submitted, the DTC must respond within 10 business days.
The Rule change will not modify of affect the DTC’s current ability to (i) lift or modify a Chill or Lock; (ii) restrict services in the ordinary course based on other rules not associated with Chills or Locks; (iii) communicate with the company, its transfer agent, or its representative as long as communications are memorialized in writing; or (iv) send out a restriction notice in advance of imposing a Chill or Lock.
Chart Summary of DTC Proposed Rules
The Author
Laura Anthony, Esq.
Founding Partner
Legal & Compliance, LLC
Corporate, Securities and Going Public Attorneys
LAnthony@LegalAndCompliance.com
Securities attorney Laura Anthony and her experienced legal team provides ongoing corporate counsel to small and mid-size private companies, OTC and exchange traded issuers as well as private companies going public on the NASDAQ, NYSE MKT or over-the-counter market, such as the OTCQB and OTCQX. For nearly two decades Legal & Compliance, LLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions as well as registration statements on Forms S-1, S-8 and S-4; compliance with the reporting requirements of the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; Regulation A/A+ offerings; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers, ; applications to and compliance with the corporate governance requirements of securities exchanges including NASDAQ and NYSE MKT; crowdfunding; corporate; and general contract and business transactions. Moreover, Ms. Anthony and her firm represents both target and acquiring companies in reverse mergers and forward mergers, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. Ms. Anthony’s legal team prepares the necessary documentation and assists in completing the requirements of federal and state securities laws and SROs such as FINRA and DTC for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the OTC Market’s top source for industry news, and the producer and host of LawCast.com, the securities law network. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Las Vegas, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Contact Legal & Compliance LLC. Technical inquiries are always encouraged.
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Legal & Compliance, LLC makes this general information available for educational purposes only. The information is general in nature and does not constitute legal advice. Furthermore, the use of this information, and the sending or receipt of this information, does not create or constitute an attorney-client relationship between us. Therefore, your communication with us via this information in any form will not be considered as privileged or confidential.
This information is not intended to be advertising, and Legal & Compliance, LLC does not desire to represent anyone desiring representation based upon viewing this information in a jurisdiction where this information fails to comply with all laws and ethical rules of that jurisdiction. This information may only be reproduced in its entirety (without modification) for the individual reader’s personal and/or educational use and must include this notice.
© Legal & Compliance, LLC 2016
« Smaller Reporting Companies vs. Emerging Growth Companies FinCEN Updates Due Diligence Rules »
Smaller Reporting Companies vs. Emerging Growth Companies
The topic of reporting requirements and distinctions between various categories of reporting companies has been prevalent over the past couple of years as regulators and industry insiders examine changes to the reporting requirements for all companies, and qualifications for the various categories of scaled disclosure requirements. As I’ve written about these developments, I have noticed inconsistencies in the treatment of smaller reporting companies and emerging growth companies in ways that are likely the result of poor drafting or unintended consequences. This blog summarizes two of these inconsistencies.
As a reminder, a smaller reporting company is currently defined as a company that has a public float of less than $75 million in common equity as of the last business day of its most recently completed second fiscal quarter, or if a public float of zero, has less than $50 million in annual revenues as of its most recently completed fiscal year-end. I note that on June 27, 2016, the SEC issued a proposed rule to change that definition. The SEC proposes to amend the definition of a smaller reporting company to include companies with less than a $250 million public float as compared to the $75 million threshold in the current definition. In addition, if a company does not have an ascertainable public float, a smaller reporting company would be one with less than $100 million in annual revenues, as compared to the current threshold of less than $50 million. Once considered a smaller reporting company, a company would maintain that status unless its float drops below $200 million or its annual revenues drop below $80 million.
An emerging growth company (“EGC”) is defined as a company with total annual gross revenues of less than $1 billion during its most recently completed fiscal year that first sells equity in a registered offering after December 8, 2011. An EGC loses its EGC status on the earlier of (i) the last day of the fiscal year in which it exceeds $1 billion in revenues; (ii) the last day of the fiscal year following the fifth year after its IPO (for example, if the issuer has a December 31 fiscal year-end and sells equity securities pursuant to an effective registration statement on May 2, 2016, it will cease to be an EGC on December 31, 2021); (iii) the date on which it has issued more than $1 billion in non-convertible debt during the prior three-year period; or (iv) the date it becomes a large accelerated filer (i.e., its non-affiliated public float is valued at $700 million or more). EGC status is not available to asset-backed securities issuers (“ABS”) reporting under Regulation AB or investment companies registered under the Investment Company Act of 1940, as amended. However, business development companies (BDC’s) do qualify.
The Fast Act
The FAST Act, passed into law on December 4, 2015, amended Form S-1 to allow for forward incorporation by reference by smaller reporting companies. A smaller reporting company may now incorporate any documents filed by the company, following the effective date of a registration statement, into such effective registration statement. In what was probably unintended in the drafting, the FAST Act changes only include smaller reporting companies and not emerging growth companies. Generally, forward incorporation by reference requires that the company be S-3 eligible. The FAST Act change has created an anomaly whereby a smaller reporting company can utilize forward incorporation by reference but an EGC could not unless it was also S-3 eligible.
Testing the Waters in an IPO
Test-the-waters communications involve solicitations of indications of interest for an offering prior to the effectiveness of a registration statement. Where Regulation A freely allows, and even encourages, test-the-waters communications, the standard IPO process using a Form S-1 still strictly limits pre-effectiveness solicitations of interest and offering communications overall. Section 5(a) of the Securities Act prohibits the sale of securities before the registration statement is deemed effective. Communications made by the company during an IPO process, depending on the mode and content, result in violations of Section 5 of the Securities Act of 1933 (the “Securities Act”). Communication-related violations of Section 5 during the pre-filing and pre-effectiveness periods are often referred to as “gun jumping.”
In April 2012, the Jumpstart Our Business Startups Act (the “JOBS Act”) was enacted, which, in part, established a new process and disclosures for public offerings by EGC’s.
Section 105(c) of the JOBS Act provides an EGC with the flexibility to “test the waters” by engaging in oral or written communications with qualified institutional buyers (“QIB’s”) and institutional accredited investors (“IAI’s”) in order to gauge their interest in a proposed offering, whether prior to (irrespective of the 30-day safe harbor) or following the first filing of any registration statement, subject to the requirement that no security may be sold unless accompanied or preceded by a Section 10(a) prospectus. Generally, in order to be considered a QIB, you must own and invest $100 million of securities, and in order to be considered an IAI, you must have a minimum of $5 million in assets. For a more complete discussion on the test-the-waters provisions available to EGC’s, see my blog HERE.
Section 105(c) is not available for smaller reporting companies. Where a smaller reporting company is not also an EGC, it cannot engage in Section 105(c) test-the-waters communications made available under the JOBS Act. This is clearly a legislative miss. The JOBS Act is intended to create capital-raising opportunities for small companies. Although I understand that the thought was to assist EGC’s in the IPO process, the fact is that many smaller reporting companies engage in a series of follow-on public offerings before reaching a size and level of maturity where they no longer need the assistance of rules and laws designed to encourage capital in smaller companies. Ironically, by that point, these companies will be able to engage in additional communications only available to eligible larger issues, such as free writing prospectus and Rule 163 communications.
Refresher on Regulation S-K and S-X Differences for Smaller Reporting Companies and EGC’s
The scaled-down disclosures for smaller reporting companies and emerging growth companies include, among other items: (i) only 3 years of business description as opposed to 5; (ii) 2 years of financial statements as opposed to 3; (iii) elimination of certain line item disclosures such as certain graphs and selected financial data; and (iv) relief from the 404(b) auditor attestation requirements. However, although similar, there are differences between the scaled disclosure requirements for an emerging growth company vs. a smaller reporting company. In particular, the following chart summarizes these differences:
The Author
Laura Anthony, Esq.
Founding Partner
Legal & Compliance, LLC
Corporate, Securities and Going Public Attorneys
LAnthony@LegalAndCompliance.com
Securities attorney Laura Anthony and her experienced legal team provides ongoing corporate counsel to small and mid-size private companies, OTC and exchange traded issuers as well as private companies going public on the NASDAQ, NYSE MKT or over-the-counter market, such as the OTCQB and OTCQX. For nearly two decades Legal & Compliance, LLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions as well as registration statements on Forms S-1, S-8 and S-4; compliance with the reporting requirements of the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; Regulation A/A+ offerings; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers, ; applications to and compliance with the corporate governance requirements of securities exchanges including NASDAQ and NYSE MKT; crowdfunding; corporate; and general contract and business transactions. Moreover, Ms. Anthony and her firm represents both target and acquiring companies in reverse mergers and forward mergers, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. Ms. Anthony’s legal team prepares the necessary documentation and assists in completing the requirements of federal and state securities laws and SROs such as FINRA and DTC for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the OTC Market’s top source for industry news, and the producer and host ofLawCast.com, the securities law network. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Las Vegas, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Contact Legal & Compliance LLC. Technical inquiries are always encouraged.
Follow me on Facebook, LinkedIn, YouTube, Google+, Pinterest and Twitter.
Download our mobile app at iTunes.
Legal & Compliance, LLC makes this general information available for educational purposes only. The information is general in nature and does not constitute legal advice. Furthermore, the use of this information, and the sending or receipt of this information, does not create or constitute an attorney-client relationship between us. Therefore, your communication with us via this information in any form will not be considered as privileged or confidential.
This information is not intended to be advertising, and Legal & Compliance, LLC does not desire to represent anyone desiring representation based upon viewing this information in a jurisdiction where this information fails to comply with all laws and ethical rules of that jurisdiction. This information may only be reproduced in its entirety (without modification) for the individual reader’s personal and/or educational use and must include this notice.
© Legal & Compliance, LLC 2016
« SEC Continues Efforts To Prevent Microcap Fraud DTC Again Proposes Procedures For Issuers Subject To Chills And Locks »
SEC Continues Efforts To Prevent Microcap Fraud
As I’ve written about numerous times in the past, a primary agenda of the SEC and FINRA is to prevent small- and micro-cap fraud. On March 23, 2016, the SEC charged Guy Gentile with penny stock fraud. The SEC complaint, as well as numerous industry articles and a blog by Mr. Gentile himself, reveal in-depth efforts by the SEC together with FINRA and the FBI and DOJ to remove recidivist and bad actors from the micro-cap system. While the methods used by the regulators have been the subject of heated debates and articles, the message and result remain that the SEC is committed to its efforts to deter securities law violations.
Although small- and micro-cap fraud has always been an important area of concern and enforcement by the SEC since the financial crisis of 2008, it has increasingly been a focus. Regulators have amplified their efforts through regulations and stronger enforcement, including the SEC Broken Windows policy, increased Dodd-Frank whistleblower activity and reward payments, CEO and CFO liability for SEC reports under the Sarbanes-Oxley Act and increased bad actor prohibitions. See my blog HERE related to the SEC Broken Windows policy and CEO/CFO liability (as an aside, I note that the proposed Stronger Enforcement of Civil Penalties Act never made it past its introduction in July 2015) and HERE related to Rule 506 and Regulation A bad actor prohibitions.
The fight against small- and micro-cap fraud is an industry positive overall. While not a regulator, OTC Markets itself has taken great strides in improving the quality of and information available related to OTC Markets-traded companies, including through qualitative and quantitative standards for quotation on both the OTCQB (see my blog HERE) and OTCQX (see my blog HERE).
The Guy Gentile Case
On March 23, 2016, the SEC charged Guy Gentile with penny stock fraud. The SEC litigation release alleges that Gentile, who owned and operated Sure Trader, a registered broker-dealer, engaged in manipulative trading, provided illegal kickbacks, illegally issued unregistered stock and distributed promotional mailings of glossy newsletters using fake publication names to pump the stocks of at least two penny stocks (KYUS and RVNG). The SEC continues that Gentile misled investors with positive but fake price and volume trends while concealing the control persons’ identities and compensation. Apparently, Gentile, together with attorney Adam Gottbetter and a few stock promoters, controlled large blocks of the companies’ stock, which control was not disclosed in company filings or the promotional activities.
The SEC complaint, filed in March 2016, details Gentile’s actions involving KYUS and RVNG, which actions occurred in 2007 and 2008. As alleged by the SEC, the entire history of RVNG and KYUS was a fraud, from its creation using a sham registration (see my blog HERE for more on this) to its issuances of freely tradable securities to insiders, manipulative trades and promotional activities.
The SEC complaint does not address the fact that a period of 8-9 years went by between the illegal activities and the filing of the complaint. Guy Gentile has written a detailed blog explaining his version of events, or more precisely, what happened in the missing years. In particular, Gentile claims that he was arrested in 2012 and that from that time until the complaint against him in March 2016, he acted as a cooperating witness and SEC and FBI informant, assisting in the indictment of over a dozen individuals related to hundreds of millions of dollars in pump-and-dump and other illegal activities and resulting in over $12 million in fines and disgorgements with the potential of tens of millions more to come.
Gentile details his involvement in elaborate, and sometimes dangerous, undercover operations. The complaint, together with Gentile’s blog and numerous industry articles on the events, reads like a movie. It is undisputed that Gentile’s brokerage firm, Sure Trader, which was based in the Bahamas, remained in business and continued to market to U.S.-based retail customers after Gentile’s arrest in 2012 and through at least July 2015. It appears that the entire firm was wired up and all happenings were being recorded by the FBI.
Guy Gentile’s biggest defense is the statute of limitations, which is five years. However, apparently he signed a waiver of the statute of limitations while acting as an informant.
The prevention of fraud has been on the SEC agenda since the commission was founded in 1933, with efforts intensifying as the sophistication of the marketplace has grown. On November 17, 2009, President Obama established, by executive order, an Interagency Financial Fraud Enforcement Task Force to strengthen efforts to combat financial crime. To start, the Department of Justice led the task force and the Department of Treasury, HUD and the SEC served on the steering committee. The task force’s leadership, along with representatives from federal agencies and regulatory authorities, continue to work with state and local partners to investigate and prosecute significant financial crimes, address discrimination in the lending and financial markets, and recover proceeds for victims.
Putting aside the entertainment value of the entire case, it does fully illustrate the commitment by regulators to attack small- and micro-cap fraud. Clearly, the more of these egregious activities that are uncovered and prosecuted, the more success legitimate small businesses will have raising capital, growing, and supporting the U.S. economy including through job creation.
Conclusion
It is undisputed that emerging companies play a critical role in the U.S. economy, supporting growth, innovation and job creation. The JOBS Act made dramatic changes to the landscape for the marketing and selling of both private and public securities. These significant changes include: (i) the creation of Rule 506(c), which came into effect on September 23, 2013, and allows for general solicitation and advertising in private offerings where the purchasers are limited to accredited investors; (ii) the overhaul of Regulation A creating two tiers of offerings, which came into effect on June 19, 2015, and allows for both pre-filing and post-filing marketing of an offering, called “testing the waters”; (iii) the addition of Section 5(d) of the Securities Act, which came into effect in April 2012, permitting emerging-growth companies to test the waters by engaging in pre- and post-filing communications with qualified institutional buyers or institutions that are accredited investors; and (iv) Title III crowdfunding, which came into effect on May 19, 2016, and allows for the use of Internet-based marketing and sales of securities offerings.
Furthermore, the OTC Markets has proven itself as a small-cap venture exchange, supporting the secondary trading of small and emerging growth companies and providing a respected trading platform for companies prior to moving on to an exchange such as NASDAQ or the NYSE MKT.
The other side of these initiatives is the real concern of fraud. I’m not expressing an opinion on the methods used by the regulators in this case, but I do support the efforts. I also believe in the basic principle that it is better for the industry that investors believe egregious fraudulent activities will be prosecuted.
This firm does not participate in SEC enforcement proceedings or related litigation matters; however, as with any good securities attorney, we keep our clients informed of the law so that they can avoid participation in these proceedings.
The Author
Laura Anthony, Esq.
Founding Partner
Legal & Compliance, LLC
Corporate, Securities and Going Public Attorneys
LAnthony@LegalAndCompliance.com
Securities attorney Laura Anthony and her experienced legal team provides ongoing corporate counsel to small and mid-size private companies, OTC and exchange traded issuers as well as private companies going public on the NASDAQ, NYSE MKT or over-the-counter market, such as the OTCQB and OTCQX. For nearly two decades Legal & Compliance, LLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions as well as registration statements on Forms S-1, S-8 and S-4; compliance with the reporting requirements of the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; Regulation A/A+ offerings; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers, ; applications to and compliance with the corporate governance requirements of securities exchanges including NASDAQ and NYSE MKT; crowdfunding; corporate; and general contract and business transactions. Moreover, Ms. Anthony and her firm represents both target and acquiring companies in reverse mergers and forward mergers, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. Ms. Anthony’s legal team prepares the necessary documentation and assists in completing the requirements of federal and state securities laws and SROs such as FINRA and DTC for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the OTC Market’s top source for industry news, and the producer and host of LawCast.com, the securities law network. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Las Vegas, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Contact Legal & Compliance LLC. Technical inquiries are always encouraged.
Follow me on Facebook, LinkedIn, YouTube, Google+, Pinterest and Twitter.
Download our mobile app at iTunes.
Legal & Compliance, LLC makes this general information available for educational purposes only. The information is general in nature and does not constitute legal advice. Furthermore, the use of this information, and the sending or receipt of this information, does not create or constitute an attorney-client relationship between us. Therefore, your communication with us via this information in any form will not be considered as privileged or confidential.
This information is not intended to be advertising, and Legal & Compliance, LLC does not desire to represent anyone desiring representation based upon viewing this information in a jurisdiction where this information fails to comply with all laws and ethical rules of that jurisdiction. This information may only be reproduced in its entirety (without modification) for the individual reader’s personal and/or educational use and must include this notice.
© Legal & Compliance, LLC 2016
« SEC Issues Proposed Regulation S-K and S-X Amendments Smaller Reporting Companies vs. Emerging Growth Companies »
SEC Issues Proposed Regulation S-K and S-X Amendments
On July 13, 2016, the SEC issued a 318-page proposed rule change on Regulation S-K and Regulation S-X to amend disclosures that are redundant, duplicative, overlapping, outdated or superseded (S-K and S-X Amendments). The proposed rule changes follow the 341-page concept release and request for public comment on sweeping changes to certain business and financial disclosure requirements issued on April 15, 2016. See my two-part blog on the S-K Concept Release HERE and HERE.
The proposed S-K and S-X Amendments are intended to facilitate the disclosure of information to investors while simplifying compliance efforts by companies. The proposed S-K and S-X Amendments come as a result of the Division of Corporation Finance’s Disclosure Effectiveness Initiative and as required by Section 72002 of the FAST Act. Prior to the issuance of these S-K and S-X Amendments, on June 27, 2016, as part of the same initiative, the SEC issued proposed amendments to the definition of “Small Reporting Company” (see my blog HERE). The S-K and S-X Amendments also seek comment on certain disclosure requirements that overlap with U.S. GAAP and possible recommendations to FASB, the regulatory body that drafts and implements GAAP, for conforming changes.
Background
The topic of disclosure requirements under Regulations S-K and S-X as pertains to financial statements and disclosures made in reports and registration statements filed under the Exchange Act of 1934 (“Exchange Act”) and Securities Act of 1933 (“Securities Act”) has come to the forefront over the past couple of years. Regulation S-K, as amended over the years, was adopted as part of a uniform disclosure initiative to provide a single regulatory source related to non-financial statement disclosures and information required to be included in registration statements and reports filed under the Exchange Act and the Securities Act. Regulation S-X contains specific financial statement preparation and disclosure requirements.
In addition to affecting companies filing registration statements (including on Form 1-A in a Regulation A/A+ offering) and those filing reports with the SEC, the proposed S-K Amendments will affect acquired entities, acquirees, investment advisers, investment companies, broker-dealers and nationally recognized statistical rating organizations.
The underlying basis of the disclosures required by Regulations S-K and S-X is to keep shareholders and the markets informed on a regular basis in a transparent manner. Reports and registration statements filed with the SEC can be viewed by the public on the SEC EDGAR website. A reporting company also has record-keeping requirements, must implement internal accounting controls and is subject to the Sarbanes-Oxley Act of 2002, including the CEO/CFO certification requirements. Under the CEO/CFO certification requirement, the CEO and CFO must personally certify the content of the reports filed with the SEC and the procedures established by the issuer to report disclosures and prepare financial statements. For more information on that topic, see my blog HERE.
The proposed S-K and S-X Amendments cover:
Duplicative requirements, including duplications between financial footnote requirements and disclosures in the body of a registration statement or report;
Overlapping requirements which may not be completely duplicative. The S-K Amendments consider whether to delete certain disclosure requirements that are covered in GAAP or other financial reporting or integrate such disclosures into a single rule source;
Outdated requirements which have become obsolete due to the passage of time or changes regulations, business or technology; and
Superseded requirements which are inconsistent with recent legislation or updated rules and regulations.
Redundant or Duplicative Reporting Requirements
The proposed S-K and S-X Amendments seek to eliminate a laundry list of 26 redundant and duplicative disclosures. Most of these proposed changes are technical and nuanced related to particular Regulation S-X GAAP and other financial statement disclosures—for example, foreign currency; financial statement consolidation, income tax disclosures, contingencies and interim accounting adjustments. As the proposed rule eliminations are duplicative, they will not change the financial reporting or disclosure requirements.
Overlapping Requirements
Similar to redundant and duplicative disclosures, the SEC has identified numerous disclosure requirements that are related to, but not exactly the same as, GAAP, IFRS and other SEC disclosure obligations. The Regulation S-K and S-X Amendments propose to delete, scale back or integrate the overlapping disclosures to eliminate the overlap.
The SEC category of overlapping disclosures, and related Regulation S-K and S-X Amendments, have added broad considerations for which the SEC is seeking public comment. In particular, some of the proposed changes would result in the relocation of disclosures in the filings. This raises considerations related to the prominence of information in a particular report and moving information from outside to inside financial statements.
When information is in a different location in a report, it may receive more or less attention and be thought of as more or less prominent. Moreover, information inside of financial statements is subjected to audit and interim review, internal control over financial reporting and XBRL tagging. In addition, information inside of financial statements is not subject to the safe harbor protections of the Private Securities Litigation Reform Act of 1995 related to forward-looking statements.
A complete detail of all the proposed Regulation S-K and S-X Amendment changes related to overlapping disclosures is beyond the scope of this blog; however, a few items deserve discussion.
In general, many of the changes proposed by the SEC relate to interim financial reporting. In some cases where items are fully required to be reported in a Form 8-K, annual report or management discussion and analysis (MD&A), the SEC proposes eliminating the same or similar requirement from interim financial statements.
For example, the SEC proposes eliminating significant business combination pro forma financial statement requirements from interim financial statements for smaller reporting companies and Regulation A filers. The pro forma financial statements are already sufficiently required by Item 9.01 of Form 8-K. Likewise, the SEC makes the same proposed elimination of financial reporting in interim reports for a significant business disposition or discontinued operation.
As another example, currently Regulation S-X requires disclosure of certain subsequent events in the footnotes to interim financial statements and Item 303 of Regulation S-K related to management discussion and analysis (MD&A) requires substantially the same disclosure. The SEC proposes to delete the Regulation S-X requirement and only require disclosure of these subsequent events in the MD&A. Likewise, the SEC proposes eliminating segment financial information from the footnotes and leaving it only in MD&A.
In other cases, the SEC supports elimination of a disclosure in the body of a document in favor of a financial statement disclosure. For example, the SEC proposes eliminating a discussion of warrants, rights and convertible instruments from the body of a Form 10 or S-1, noting that a complete disclosure including dilution is required in financial statements.
Outdated Requirements
The SEC has identified disclosure requirement that have become obsolete as a result of time, regulatory, business or technological changes. The Regulation S-K and S-X Amendments propose to amend and sometimes add, but not delete, disclosure as a result of outdated requirements.
Again, most of the outdated requirements are technical (for example, income tax disclosures) in nature and beyond the scope of this blog. Some are common sense; for example, a reference to information being available in the SEC public reference room would be amended to include only a reference to the SEC Internet address for EDGAR filings.
Another common-sense change is the proposal to eliminate the requirement to post the high and low bid or trading prices for each quarter for the prior two fiscal years in an annual 10-K. The SEC reasons that the daily market and trading prices of a security are readily available on a number of websites. Moreover, these websites allow for the download and collation of trading prices over periods of time and provide much more robust information than currently contained in a 10-K.
Superseded Requirements
The constant change in accounting and disclosure requirements and regulations have created inconsistencies in Regulation S-K and S-X. The SEC has gone through and proposed amendments to eliminate such inconsistencies. For example, certain provisions in Regulation S-X still refer to development-stage companies, a concept that was eliminated by FASB in June 2014.
The SEC also took this opportunity to clean up some nonexistent or incorrect references that resulted from regulatory changes over time.
Further Background
Prior to the S-K Concept Release and current Regulation S-K and S-X proposed amendments, in September 2015 the SEC Advisory Committee on Small and Emerging Companies met and finalized its recommendation to the SEC regarding changes to the disclosure requirements for smaller publicly traded companies. For more information on that topic and for a discussion of the Reporting Requirements in general, see my blog HERE.
In March 2015 the American Bar Association submitted its second comment letter to the SEC making recommendations for changes to Regulation S-K. For more information on that topic, see my blog HERE.
In early December 2015 the FAST Act was passed into law. The FAST Act requires the SEC to adopt or amend rules to: (i) allow issuers to include a summary page to Form 10-K; and (ii) scale or eliminate duplicative, antiquated or unnecessary requirements for emerging-growth companies, accelerated filers, smaller reporting companies and other smaller issuers in Regulation S-K. The current Regulation S-K and S-X Amendments are part of this initiative. In addition, the SEC is required to conduct a study within one year on all Regulation S-K disclosure requirements to determine how best to amend and modernize the rules to reduce costs and burdens while still providing all material information. See my blog HERE.
The Author
Laura Anthony, Esq.
Founding Partner
Legal & Compliance, LLC
Corporate, Securities and Going Public Attorneys
LAnthony@LegalAndCompliance.com
Securities attorney Laura Anthony and her experienced legal team provides ongoing corporate counsel to small and mid-size private companies, OTC and exchange traded issuers as well as private companies going public on the NASDAQ, NYSE MKT or over-the-counter market, such as the OTCQB and OTCQX. For nearly two decades Legal & Compliance, LLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions as well as registration statements on Forms S-1, S-8 and S-4; compliance with the reporting requirements of the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; Regulation A/A+ offerings; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers, ; applications to and compliance with the corporate governance requirements of securities exchanges including NASDAQ and NYSE MKT; crowdfunding; corporate; and general contract and business transactions. Moreover, Ms. Anthony and her firm represents both target and acquiring companies in reverse mergers and forward mergers, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. Ms. Anthony’s legal team prepares the necessary documentation and assists in completing the requirements of federal and state securities laws and SROs such as FINRA and DTC for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the OTC Market’s top source for industry news, and the producer and host of LawCast.com, the securities law network. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Las Vegas, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Contact Legal & Compliance LLC. Technical inquiries are always encouraged.
Follow me on Facebook, LinkedIn, YouTube, Google+, Pinterest and Twitter.
Download our mobile app at iTunes.
Legal & Compliance, LLC makes this general information available for educational purposes only. The information is general in nature and does not constitute legal advice. Furthermore, the use of this information, and the sending or receipt of this information, does not create or constitute an attorney-client relationship between us. Therefore, your communication with us via this information in any form will not be considered as privileged or confidential.
This information is not intended to be advertising, and Legal & Compliance, LLC does not desire to represent anyone desiring representation based upon viewing this information in a jurisdiction where this information fails to comply with all laws and ethical rules of that jurisdiction. This information may only be reproduced in its entirety (without modification) for the individual reader’s personal and/or educational use and must include this notice.
© Legal & Compliance, LLC 2016
« SEC Advisory Committee On Small And Emerging Companies Issues Further Recommendations On Accredited Investor Definition SEC Continues Efforts To Prevent Microcap Fraud »
SEC Advisory Committee On Small And Emerging Companies Issues Further Recommendations On Accredited Investor Definition
On July 19, 2016, the SEC Advisory Committee on Small and Emerging Companies (the “Advisory Committee”) met and drafted its recommendations and response to the SEC report on the definition of accredited investor. The subject of changes to the definition of accredited investor has been debated in a series of reports, recommendations, proposals and comment letters since early 2015.
On December 18, 2015, the SEC issued a 118-page report on the definition of “accredited investor” (the “report”). The report follows the March 2015 SEC Advisory Committee recommendations related to the definition. The SEC is reviewing the definition of “accredited investor” as directed by the Dodd-Frank Act, which requires that the SEC review the definition as relates to “natural persons” every four years to determine if it should be modified or adjusted. See my blog HERE on the report and additional background on the subject.
At the July 19 meeting, the Advisory Committee finalized a draft of a letter to the SEC outlining its recommendations on changes to the definition of accredited investor. The Advisory Committee had previously submitted a letter to the SEC on March 9, 2015, on the same subject; see my blog HERE for details.
The Advisory Committee made five recommendations related to the definition of “accredited investor,” each of which I support fully. In particular:
The core of prior recommendations remain the same, with the added statement that “the overarching goal of any changes the Commission might consider should be to ‘do no harm’ to the private offering ecosystem”;
The SEC should not change the current financial thresholds in the definition except to adjust for inflation on a going-forward basis
The definition should be expanded to take into account measure of non-financial sophistication, regardless of income or net worth, thereby expanding rather than contracting the pool of accredited investors;
“Simplicity and certainty are vital to the utility of any expanded definition of accredited investor. Accordingly, any non-financial criteria should be able to be ascertained with certainty”; and
The SEC should continue to gather data on this subject and, in particular, what “attributes best encompass those persons whose financial sophistication and ability to sustain the risk of loss of investment or ability to fend for themselves render the protections of the Securities Act’s registration process unnecessary.”
Advisory Committee Considerations in Support of its Recommendations
The Advisory Committee Letter lists practical facts and realities related to small business and emerging company capital formation in support of its recommendations. In particular:
Emerging companies play a significant role as drivers in the U.S. economy, including supporting innovation and job creation. The ability of these emerging companies to raise capital in unregistered offerings is critical to the economic well-being of the U.S.
The exemptions under Regulation D are the most widely used transactional exemptions, resulting in $1.35 trillion of raised capital in 2015, which amount is comparable to capital raised in registered offerings;
The accredited investor definition is the centerpiece of Regulation D and is intended to “encompass those persons whose financial sophistication and ability to sustain the risk of loss of investment or ability to fend for themselves render the protections of the Securities Act’s registration process unnecessary.”
Currently a natural person is an accredited investor if they have (i) earned income in excess of $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year; or (ii) a net worth in excess of $1 million excluding the value of their primary residence.
If the individual and net worth thresholds are raised significantly, it would considerably decrease the number of households that qualify as accredited investors. This decrease would disproportionately affect areas with a lower cost of living, which areas already coincide with regions of lower venture capital activity. Moreover, a decrease in the accredited investor pool would have a disproportionate effect on women and minority entrepreneurs.
The Advisory Committee notes that it is “unaware of any evidence suggesting that fraud in the private markets is driven or affected by the levels at which the accredited investor definition is set.”
Refresher on Current Accredited Investor Definition
An “accredited investor” is defined as any person who comes within any of the following categories:Any bank as defined in section 3(a)(2) of the Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Act, whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; any insurance company as defined in section 2(a)(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;
Any bank as defined in section 3(a)(2) of the Act, or any savings and loan association or other institution as defined in section 3(a)(5) of the Act, whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; any insurance company as defined in section 2(a)(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;
Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940;
Any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;
Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer;
Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his or her purchase exceeds $1,000,000, not including their principal residence;
Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;
Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii); and
Any entity in which all of the equity owners are accredited investors.
The Author
Laura Anthony, Esq.
Founding Partner
Legal & Compliance, LLC
Corporate, Securities and Going Public Attorneys
LAnthony@LegalAndCompliance.com
Securities attorney Laura Anthony and her experienced legal team provides ongoing corporate counsel to small and mid-size private companies, OTC and exchange traded issuers as well as private companies going public on the NASDAQ, NYSE MKT or over-the-counter market, such as the OTCQB and OTCQX. For nearly two decades Legal & Compliance, LLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions as well as registration statements on Forms S-1, S-8 and S-4; compliance with the reporting requirements of the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; Regulation A/A+ offerings; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers, ; applications to and compliance with the corporate governance requirements of securities exchanges including NASDAQ and NYSE MKT; crowdfunding; corporate; and general contract and business transactions. Moreover, Ms. Anthony and her firm represents both target and acquiring companies in reverse mergers and forward mergers, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. Ms. Anthony’s legal team prepares the necessary documentation and assists in completing the requirements of federal and state securities laws and SROs such as FINRA and DTC for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the OTC Market’s top source for industry news, and the producer and host ofLawCast.com, the securities law network. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Las Vegas, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Contact Legal & Compliance LLC. Technical inquiries are always encouraged.
Follow me on Facebook, LinkedIn, YouTube, Google+, Pinterest and Twitter.
Download our mobile app at iTunes.
Legal & Compliance, LLC makes this general information available for educational purposes only. The information is general in nature and does not constitute legal advice. Furthermore, the use of this information, and the sending or receipt of this information, does not create or constitute an attorney-client relationship between us. Therefore, your communication with us via this information in any form will not be considered as privileged or confidential.
This information is not intended to be advertising, and Legal & Compliance, LLC does not desire to represent anyone desiring representation based upon viewing this information in a jurisdiction where this information fails to comply with all laws and ethical rules of that jurisdiction. This information may only be reproduced in its entirety (without modification) for the individual reader’s personal and/or educational use and must include this notice.
© Legal & Compliance, LLC 2016
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