SEC Action Against Rogue Stock Transfer Agent
Recently the SEC initiated litigation against the principal of the a stock transfer agent for the misapropriation of company stock certificates which he used to fraudulently issue himself over 1 billion shares of a client company’s common stock which was later resold into the public market. Along the way he created numerous false documents attesting to the legitimacy of his share ownership. For his efforts, he found himself with violating sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and section 10(b) and 10b-5 of the Exchange Act of 1934. Ouch! But well deserved.
We view this sort of securities fraud as being extremely heinous, as it can easily destroy a public company causing investors to loose their investments and employees to loose their jobs. Additionally it typically causes an untold amount of harm to participants in the public markets. Stock transfer agents are effectively one of the key gatekeepers in preventing fraudulent players from committing their crimes. Stock transfer agents are one of the key points in the system where securities fraud can be spotted and actually stopped. It can be bad enough when a stock transfer agent is somewhat a sleep at the switch and lets things get by them. But it is especially worse when the stock transfer agent is where the fraud is ocurring. This is because the stock transfer agent is in a position that allows them to produce fraudulent documentation to thwart the efforts of a company or investigator in catching on to what has occurred.
It should be noted that either the SEC offered this fraudster a plea agreement or his attorney(s) were good enough to negotiate one on his behalf as we was able to consent to a final judgment without denying or admitting the allegations against him. Basically he avoided a trial he would have lost. He also consented to being barred from all aspects of the public markets and all entities associated with them. In other words, he can’t be an officer or director of a public company, can’t participate in any penny stock sales, and is barred from association with investment banks, investment advisers, broker/dealers, transfer agents, national statistical organizations. Futhermore he order to disgorge his illicit proceeds. This put him out of the business of running or working at a transfer agent.
It takes a highly individual who knows what to look for in order to identify this sort of fraud when committed by a transfer agent. However, once you know what to look for, it can be easily and quickly spotted. Coral Capital Partners has conducted several investigations in this area on behalf of our client. If you have any questions, concerns, or suspicions, please feel free to contact our offices. We will be more than happy to see how we can assist.
If you have any questions about the above blog post, please feel free to visit our web site, www.coralcapital.com and check out we have to offer. Feel free to contact us if you have any questions. We can be reached at 404-816-9220 and are always willing to speak with you.
About Coral Capital Partners
Coral Capital Partners is an independent consulting and advisory firm focused on companies and participants in the lower and middle markets. We partner with our clients to provide cost effective solutions to real world issues and situations. Our experienced team brings a diverse set of skills that allows us to service a wide variety of needs. Our area of services and expertise focuses on bringing services and solutions to our clients that are normally only available to much larger firms. Coral Capital Partners, Inc. provides services to Investment Banks, Private Equity Funds, investors, and both privately held and publicly traded companies, as well as various stakeholders in those organizations. This has included international public companies with operations on three (3) continents to smaller privately held domestic companies. Our experience in the areas of corporate advisory, due diligence reviews, and regulatory compliance allows for a cost effective and efficient solution to the issues at hand. Please feel free to contact our offices to see how we may be of assistance.
A copy of the SEC’s Litigation Release can be found at: http://www.sec.gov/litigation/litreleases/2012/lr22385.htm
A copy of the SEC’s complaint in this action can be viewed at: http://www.sec.gov/litigation/complaints/2012/comp22385.pdf
We do applaud the SEC ‘s efforts to police this type of activities.