Legal
FSPI

First Surgical Sues over Ill-advised Reverse Merger

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First Surgical Partners (FSPI) says going public through a reverse merger was a costly mistake. The company is planning on going private, and it is suing the financial advisor that structured a going public transaction. Bellaire, Texas-based First Surgical, an operator of two surgery centers and a hospital in the Houston area, filed a lawsuit claiming that in 2010 Nobis Capital Advisors and its principals approached the company with what proved to be an unrealistic plan for going public. One of Nobis' principals, the suit alleges, is being sued by regulators for alleged market manipulation involving reverse mergers. First Surgical alleges that Nobis "abandoned" the company after receiving $3 million in fees and a substantial equity position in return for devising a deal that left First Surgical with an unexpected $4.5 million tax liability and major healthcare compliance issues that made expansion and recruiting impossible.

Legal

SEC Gives FINRA Ammunition for Adviser Role

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Amid the holiday bustle at the Securities and Exchange Commission – the resignation of its chairman, the pursuit of SAC Capital Advisors and the messy JOBS Act rulemaking (as well as some Dodd-Frank leftovers) – the agency recently released its annual report for the 2012 fiscal year ended Sept. 30. It's giving the investment adviser industry heartburn. The Financial Industry Regulatory Authority is guaranteed to latch onto the SEC's admission that it failed to meet its goal of examining 9% of investment advisers as further proof that the commission needs help regulating the industry. And wouldn't you know that FINRA has just the right self-regulatory organization in mind.

Legal
Virginia Sourlis

Reverse Merger Attorney Sourlis Convicted in SEC Securities Fraud Case

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A U.S. District Court found securities attorney Virginia Sourlis liable for fraud in the improper issuance of some six million shares of Greenstone Holdings stock. The court granted the part of a summary judgment motion containing the Securities and Exchange Commission's allegation that Sourlis wrote a false legend removal letter that included representations that she communicated with individuals who do not exist. The Manhattan  court's ruling found Sourlis liable for aiding and abetting securities fraud but denied an SEC liability claim and postponed a decision on another claim involving registration laws. The attorney has served as counsel to parties in numerous reverse merger transactions. Sourlis was not named when the suit was first filed in February 2010.

Legal
Skowron

Morgan Stanley Adds Chapter to FrontPoint Saga

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Joseph "Chip" Skowron is in prison for allegedly engaging in insider trading while he managed funds for Morgan Stanley's FrontPoint Partners, but Morgan still has plans for Skowron. Morgan paid $33 million last year to settle a Securities and Exchange Commission suit against Skowron, who also received a five year prison sentence for insider trading in shares of Human Genome Sciences (HGSI) in 2008. Morgan still wants to recover over $32 million from Skowron. Funds managed by FrontPoint invested in 19 PIPEs and 90 Rule 144A offerings that raised over $400 million according to PlacementTracker data. Morgan acquired FrontPoint in 2006 for $404 million according to reports in the media.