LexisNexis Corporate & Securities Law Community 2011 Top 50 Blogs

Bon mots

"You can observe a lot just by watching." Yogi Berra

"We do not distain to borrow wit or wisdom from any man who is capable of lending us either." Henry Fielding, Tom Jones

"In our complex society the accountant's certificate and the lawyer's opinion can be instruments for inflicting pecuniary loss more potent than the chisel or the crowbar." United States v. Benjamin, 328 F.2d 854, 862 (2d Cir. 1964)

Corporate Officers, Registered Reps And Supervisor Sanctioned

Time between appeal and opinion - 2 years, 5 months, 26 days.
Time between final brief and opinion - 2 years, 1 month, 3 days.
Time between oral argument and opinion - 11 months, 24 days.

Pages - 51.

I supervised this matter when I was still at the Commission so I will not provide editorial comment or extensive discussion.  However, please note that the dates listed above are not typographical errors.  A brief summary of the case follows.

This matter involved a complex unregistered public distribution of stock by officers of a public company assisted by two registered representatives at a broker-dealer.  It involves very complex issues under the registration provisions of Section 5 of the Securities Act and also the supervisory duties of a broker-dealer.  

Anyone interested in a comprehensive discussion of Securities Act registration would be advised to consider the Commission's discussion of these sometimes difficult issues.  The opinion reiterates that broker-dealers must be vigilant to red flags that may alert them that they are participating in an unregistered distribution of stock by corporate insiders.

Cease and desist orders were entered against all respondents charged with violations (failure to supervise is not a violation).  One registered representative was barred, another was barred with a right to reapply after five years and the supervisor was barred from acting in a supervisory capacity.

The two corporate officers were ordered to disgorge a total of $4 million between them and ordered to pay prejudgment interest totaling $2 million.  Each of the registered representatives was ordered to disgorge $873,000 and pay prejudgment interest of $454,000. Each representative was also ordered to pay a civil penalty of $110,000 and the supervisor was ordered to pay a $55,000 penalty.