Markets
MKTS

Direct Markets Shareholder Pares Holdings

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Steven Newby, a significant shareholder in Direct Markets (MKTS), has cut his stake in the company by more than half, according to a filing with the Securities and Exchange Commission on Aug. 31. Newby, the founder of the Genomics Fund mutual fund in 2000 and its portfolio manager until 2003, held more than 3.7 million shares in New York-based Direct Markets in April, which represented 11.2% of the company, according to a proxy. But his latest disclosure indicates that he recently sold more than 2.1 million shares, leaving him with 4.9% of the company, which until recently was known as Rodman & Renshaw Capital Group. At its time of filing, the proxy indicated that Newby was the largest shareholder in Direct Markets behind company CEO Edward Rubin, who owned 40.5% of the stock.

Legal

SEC Cans Ad Ban on Private Placements

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It’s hard to imagine any one constituent group being overly enthused about the Securities and Exchange Commission’s effort to write rules that implement general solicitation in private offerings as mandated by the JOBS Act. Although the proposal was accepted on a vote of 4-1, lawmakers and some commissioners voiced displeasure that the SEC failed to meet the law’s proscribed 90-day deadline and that SEC Chairman Mary Schapiro late in the game elected to issue a proposal and take comments for 30 days instead releasing of an interim final rule. State regulators and other organizations predicting widespread fraud can’t be pleased that the proposal didn’t include their suggestions for strict, well-defined procedures for issuers to follow when verifying that a purchaser is an accredited investor. Parties that lobbied to keep the verification process the same as it is today – largely certification by buyers that they are accredited investors via questionnaires – may be uncomfortable with the proposed “facts and circumstances” test to establish a “reasonable belief” that a purchaser is in fact an accredited investor. And although allowing general solicitation has been a centerpiece of discussion among market participants over the last several months, practitioners may nevertheless have a tough time wrapping their minds around the change.

Legal

Shells Brandish the Emerging Growth Company Label

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In May 2007, New York-based blank check company Madison Ventures Capital Group registered with the Securities and Exchange Commission to sell 3.2 million shares. After filing amendments over the next few months, it dropped off the radar. Until recently. Madison Ventures resurfaced in April and withdrew its Form S-1. Ten days later the company, which is sponsored New York-based Mintz & Fraade Enterprises and Boca Raton, Fla.-based Sierra Grey Capital, registered as a Form 10 blank check.

Legal
Larry Goldfarb

Baystar’s Goldfarb Still Fighting Criminal Prosecution

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BayStar Capital founder Larry Goldfarb is continuing efforts to avoid criminal prosecution, while the Securities and Exchange Commission and criminal prosecutors insist that he violated a deferred prosecution agreement (DPA) by illegally transferring nearly $300,000 for “personal luxury items” in 2011 and 2012. The civil and criminal cases were both filed in the U.S. District Court in San Francisco. In settling with the SEC last year, Goldfarb did not dispute charges that he and BayStar diverted $12 million of investor capital into assets the investors had not intended to purchase, and that he had also improperly used investor funds for personal expenditures. Goldfarb formed BayStar Capital I in 1999 and BayStar Capital II in 2003, according to the company’s website, which says the two entities invested some $1.5 billion in private and public companies. LRG Capital Group was formed as general partner to BayStar Capital III in 2005.