Legal
Virginia Sourlis

Attorney Sourlis Accepts Five-year Ban in Share Registration Fraud Case

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Reverse merger attorney Virginia Sourlis has agreed to a five year bar from practicing securities law in a settlement after the SEC found her liable for fraud for playing a key role Greenstone Holdings’ hawking of over 6 million unregistered shares. The SEC originally proposed to ban Sourlis in February after the agency claimed she had made false statements regarding the company’s issuance of promissory notes, its note holders, and conversations with investors that the agency’s investigators found to not exist. Sourlis was denied a hearing to appeal the decision, and in July settled for a five-year ban from the SEC with the right to re-apply after the five years had concluded. In the complaint filed in February of last year, the SEC accused Sourlis of writing a Jan. 11, 2006 opinion letter falsely claiming that 12.3 million Greenstone shares could be converted from convertible notes and issued without restriction.

Legal
SEC

Repeal of General Solicitation Ban Ushers in New Era for Private Offerings

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Last week’s long-anticipated repeal of the ban on public advertising of private securities offerings either ushers in a new era of transparent, information-rich, digitally-greased, and crowd-vetted capital markets, or it is a leap into the abyss that will pervert the most trusted capital markets in the world into a carnival midway of investment hustlers, crowd madness panderers and common thieves. That seems to be the consensus, or lack thereof, of regulators and growth capital professionals surveyed in the wake of the SEC’s action to implement the mandate set by Congress a year ago when it passed the JOBS Act. On July 10, the Securities and Exchange Commission held an open meeting regarding its nine-month old proposal to repeal the ban on the advertising and general solicitation of Regulation D securities offerings. Although the amendment, known as Rule 506(c), was ultimately adopted, concerns regarding investor protection were raised by two commissioners, Elisse Walter and Luis Aguilar. 

Walter’s concerns about the risks of fraud and the promotion of investments inappropriate to less sophisticated investors came short of persuading her to vote against the repeal. Aguilar was blunter in his criticism, decrying the Commission’s move to repeal the ban before approving additional mitigating rules aimed at keeping “bad actors” out of the market and strengthening disclosure requirements for private offerings.

Legal

FINRA Readies Crowdfunding Portal Rules for Comment

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FINRA’s executive board approved the publication for comment of proposed rules for regulating equity crowdfunding portals created under Title III of the JOBS Act at its regular meeting July 11. The proposed rules address among other things the membership application process for funding portals, fraud and manipulation, just and equitable principles of trade, communications with the public, supervision and anti-money laundering. FINRA expects to publish the Notice when the SEC releases its proposed rules pursuant to Title III of the JOBS Act for comment.  

Legal

Judge Limits Yuhe International Investor Suit against Underwriters

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The underwriters of a $40 million secondary offering in 2010 from chicken breeding company Yuhe International (YUII) are seeking the dismissal of a class action suit that claims they should have known about the company's alleged diversion of over $12 million. The court heard oral argument held last week, when counsel for underwriters including Rodman & Renshaw and Brean, Murray, Carret & Co. asked that the case against them be tossed out. A court ruling on July 10 whittled down the investors' claims to those involving five particular chicken farms Yuhe claimed to have under operation. The case against the underwriters was filed in a Los Angeles U.S. District Court, where the action by plaintiff aAd Partners LP was consolidated with the investor class action suit filed by Jeff Feyko.