Legal
Peter Siris

PIPE, Reverse Merger Cases Featured in SEC Whistleblower Eligibility List

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PIPE issuers and reverse merger companies are among parties named in a list of Securities and Exchange Commission enforcement actions that could earn cash rewards for whistleblowers. The list also includes an action against parties who allegedly reaped millions of dollars of illegal profits through improper sales of shares in a micro-cap company with negligible prospects. The Securities and Exchange Commission's Office of the Whistleblower published the list, which tracks enforcements where monetary sanctions exceed $1 million. "Subject to the Final Rules, individuals who voluntarily provided the Commission with original information after July 21, 2010 that led to the successful enforcement of a covered action listed below are eligible to apply for a whistleblower award," the commission's website says. It remains to be seen whether individuals will come forward to seek rewards.

Markets
OTCQX

Richardson & Patel Approved as DAD/PAL for OTCQX Companies

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Small cap issuer counsel Richardson & Patel LLP has been approved by OTC Markets to join its list of Designated Advisor for Disclosure (“DAD”) and Principal American Liaison (“PAL”) advisors for OTCQX companies. Companies supported by DAD/PALs are small, unlisted companies that are looking to gain investors and visibility in the market. OTC Markets Group President and CEO Cromwell Coulson said, “DADs and PALs play a critical role in the success and distinction of the OTCQX marketplace, our best marketplace, by providing a professional review of a company’s disclosure and management team and ongoing guidance on securities law and effective investor relations practices. We are pleased to add Richardson & Patel, one of the most reputable securities law firms in the nation, to our list of approved attorney DAD/PALs and look forward to working with them as we continue to grow the OTCQX marketplace”. Richardson & Patel joins seventeen other FINRA member firms, including the founding member Merriman Capital, which provide professional guidance for investor management, publish regular financial reports, and serve as issuer liaisons to the U.S. market.

Markets

Small Company Shelf Expansion Fuels Warrant Grab

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Warrants have become a fixture in registered direct growth equity private placements more than five years after the Securities and Exchange Commission loosened rules to allow some of the smallest companies to conduct registered direct offerings off of Form S-3. The trend counters early predictions that the SEC’s move would eventually provide issuers with better private placement deal terms. Because investors would receive free trading stock instead of restricted shares, the thinking went, they would temper their demand for such kickers – or at the least they would lose some leverage when negotiating for them. Yet warrants are now part of roughly half of all registered direct growth equity private placements (GEPPs), and according to a review of the deals by Growth Capital Investor, their inclusion hinges largely on share price and market capitalization. GCI analyzed the deals using data provided by PlacementTracker, a service of Sagient Research. (GEPPs are offerings of a least $1 million of stock or equity-linked debt that feature fixed purchase, conversion and warrant exercise price terms, and that are sold by companies that have market capitalizations from $10 million to $1 billion as well as a share price of at least $1 at closing.)

The growth of warrants in registered direct deals marks a substantial change from the typical terms of deals employing the once-infrequently used structure leading up to 2008.

Markets
Cromwell Coulson

OTC Markets’ Coulson Testifies to House Capital Markets Committee

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R. Cromwell Coulson, CEO and president of OTC Markets Group (formerly the Pink Sheets), addressed the financial needs of small public companies in a June 12 presentation to the U.S. House of Representatives Capital Markets and Government Sponsored Enterprises subcommittee. The hearing was entitled, "Reducing Barriers to Capital Formation." Coulson began by outlining his primary concerns. "We want more openness so our public markets are more inclusive, we want better transparency so our public markets are better informed, and we want more connectivity so our public markets are more efficient," Coulson said. "Finally," Coulson continued, "we want to remove unneeded regulatory burdens in order to reduce the cost and complexity imposed on smaller public companies."