Legal

SEC Posts General Solicitation Proposal

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The Securities and Exchange Commission on Wednesday voted 4 to 1 to propose rules to eliminate the ban on general solicitation in Rule 506 offerings under Regulation D and to provide issuers with guidance when advertising such deals. The JOBS Act called for end to the ban on general solicitation and directed the SEC to craft rules reflecting the change. The commission posted the proposal this afternoon. See our full coverage and analysis of the commission's JOBS Act policy implementation in next week's issue of Growth Capital Investor.

Legal
Cowardly Lion

SEC Sues E-Lionheart for Dumping Billions of Shares

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E-Lionheart Associates and its principal Edward Bronson sold billions of shares of stock illegally through specious recourse to the Rule 504 exemption and state blue sky laws, according to a suit filed by the Securities and Exchange Commission. The suit was filed Aug. 22 in Manhattan’s U.S. District Court. Bronson and E-Lionheart (also known as Fairhills Capital) approached numerous small companies to arrange below-market price purchases of shares and then dump them for enormous profits, according to the SEC’s complaint. “In the aggregate,” the complaint alleges, “Defendants have entered into hundreds of transactions, involving the sale of billions of shares to the investing public, without a registration statement being filed or in effect and with no valid exemption from registration available for Defendants' sales of securities.”

Ossining, New York resident Bronson’s operation raked in more than $10 million in ill-gotten gains, the commission says.

Legal

Rodman Sanctioned for Selling Analyst “Love”

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FINRA sanctioned investment bank Rodman & Renshaw for failing to separate research and banking roles in several situations, including one where the company placed a $10 million registered direct offering for a Chinese issuer. Suspect communications were concealed in code that referred to deal terms as "soda" and "popcorn," FINRA alleges. The functions of research and banking arms of broker dealers are generally kept separate to avoid conflicts of interest and eliminate opportunities for improper insider trading. FINRA said in a release that is important for firms like Rodman to maintain this separation, “given concerns that research analysts could be pressured to tailor their coverage to the interests of a firm's current or prospective investment banking clients.”

Rodman had supervisory deficiencies relating to interaction between banking and research functions from 2008 through March of this year, FINRA alleges, as well as inadequacies in its analyst compensation procedures, restricted list procedures and disclosure of market making status in research materials. The firm, which has no other disciplinary history with FINRA, agreed to a $315,000 fine.

Legal

SEC Sues Mining Shell Sweatshop

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The Securities and Exchange Commission is suing a husband and wife shell making team for fraudulently selling mining company entities that were never intended to have actual mining operations. Several of the 15 shells have changed hands and taken on new lives in reverse mergers, while others are defunct. The suit was filed on Aug. 13 in the U.S.District Court, Eastern District of Texas in Sherman, Tex.  The defendants have not yet responded to the SEC's allegations. The pair allegedly engaged in fraudulent shell formation from 2006 to 2011, according to commission allegations that Mr. Coldicutt previously had his license suspended by the Vancouver Stock Exchange in 1985.