SEC Action Regarding False and Misleading Press Releases
The SEC recently initiated litigation against the controlling shareholder of two (2) public companies for causing those companies to issue false and misleading press releases. In its complaint against this individual, the SEC claims that over a several month period of time, he caused the companies to issue press releases and other public disclosures containing false and misleading information. The SEC charges that during this period of time there was a suspicious increase in the trading volume and share prices of the companies in question.
We view this sort of securities fraud to be very damaging to investors and the integrity of the markets. It has the potential to be used in by bad people to artificially inflate the price of a companies stock, and has the very real potential to cause investors to suffer significant losses on their investments. Basically, bad people use false and misleading press releases and other public disclosures as part of their efforts to perpetrate a “Pump & Dump” scheme, which always end with someone holding the bag and large numbers of investors being taking a total wipe out on their investments.
For his efforts, this individual found himself being charged with violating Section 10b of the Exchange Act of 1934, as well as Rule 10b-5 of the Exchange Act; and that he had controlling person liability under Section 20(a) of the Exchange Act. You will find a link to the SEC’s complaint filed in Federal Court below, which will detail all the particular press releases made by these two public companies. In this particular case the SEC is asking that this person is permanently barred from acting as an officer or director of any public company, a disgorgement of all ill-gotten gains, civil penalties, and a bar from all other aspects of the securities industry. OUCH! Also, well deserved! In this particular case, I had meet this particular individual about a decade ago. When I saw the litigation release, I thought the name looked familiar. When I checked my database, I found a note saying he had fled the United States to the Bahamas due to have a couple of warrants out for his arrest for securities fraud. We are going to keep our eyes open and see if anything further develops worth updating. I am curious to see if he gets extradited back to the United States.
We at Coral Capital Partners feel that this form of fraud is the type that should very easily be monitored and investigated by the SEC. We feel that it falls into the category of the “Low Hanging Fruit” that they like to go after.
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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/lr22463.htm
A copy of the SEC’s complaint in this action can be viewed at: http://www.sec.gov/litigation/complaints/2012/comp22463.pdf
We do applaud the SEC’s efforts to police this type of activity.