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.

Markets
Penny Stock Printing Machine

TJ Management in Bogus Placements, SEC Says

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Yossef Kahlon and TJ Management Group secretly bought billions of deeply discounted shares from Pink Sheets companies and illegally sold them to a poorly informed public from 2008 to 2010, according to a Securities and Exchange Commission suit. Some of the issuers involved also sought equity or equity line financing in the PIPE market at one time or another. The suit was filed in the U.S. District Court in Texas’ Sherman Division. New York-based TJ Management allegedly reaped some $7 million in gains from fraudulent transactions involving large positions in companies such as Atlantis Internet Group Corp., RMD Entertainment Group, My Vintage Baby, Lecere Corp., Landstar Inc.(LSTR), Hard to Treat Diseases Inc., Good Life China Corp., VIPR Industries Inc., ChromoCure Inc., Biocentric Energy Holdings and Skybridge Technology Group. “TJM’s business model was predicated on acquiring large blocks of stock from small companies in multiple successive transactions at a price of at least 40% less than the prevailing market price and quickly reselling the stock into the public market without registration,” according to the SEC’s complaint.

Legal

Spirited Debate on General Solicitation

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With the Securities and Exchange Commission scheduled on Aug. 22 to roll out rules allowing general solicitation for Rule 506 offerings under Regulation D, the National Small Business Association (NSBA) made a late-inning plea to steer away from imposing a new and complex “regulatory regime” on issuers. The letter, submitted on Aug. 2 as part of the commission’s request for comments related to the JOBS Act provisions, attempts to rebut arguments calling for SEC to hold issuers to a high standard when verifying whether investors in such an offering are in fact accredited investors. Under Title II of the Act, Congress did away with the ban on general solicitation in Rule 506 offerings, provided issuers take “reasonable steps” – as determined by the commission – to verify that only accredited investors participate.