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Archive for for June, 2015

Raising Capital Through Exempt Offerings

June 30, 2015

Regulation A, Testing the Waters

Regulation A is an exemption for public offerings not exceeding $5 million in any 12-month period.[1]  It is the SEC “test the waters” exemption that allows small company offerings to be conducted in compliance with state laws to determine market interest before going through the expense of filing with the SEC.  The offering circular must be pre-filed in every state in which a test-the-waters offer will be made, giving the states the opportunity to comment on the disclosure proposed or the merits of the offer or the issuer, and when finally approved, the offer can be advertised in each state where it has been approved, if state law so allows.… Read the rest

Sethi Petroleum, LLC and Tips for Avoiding Investment Scams

June 29, 2015

What You Can Do To Avoid Investment Scams

As briefly mentioned in our previous posts, Sethi is no stranger to securities enforcement action.  In 2010, Sethi and his company Sethi Oil & Gas, Inc. were permanently enjoined from offering or selling any unregistered securities or investments in the State of Colorado.[1]  According to the complaint filed by the Securities Commissioner for the State of Colorado, Sethi engaged in a “persistent pattern of fraudulently offering to sell unregistered securities to Colorado investors,” even after receiving a cease and desist order.… Read the rest

Sethi Petroleum, LLC and Tips for Avoiding Investment Scams

June 25, 2015

The Court Grants Relief Requested by the SEC

In SEC v. Sethi Petroleum, LLC, the court granted the relief requested by the agency, including preliminarily injunction, asset freeze, and appointment of a receiver, among other things, pending final judgement.[1]  The court said that the SEC has made a proper prima facie showing that: (i) the defendants directly or indirectly engaged in the violations alleged by the SEC; (ii) there is a reasonable likelihood that those violations will be repeated; (iii) unless restrained, the defendants may dissipate, conceal, or transfer assets that could be subject to an order of disgorgement or an order to pay a civil monetary penalty in this action; and (iv) entry of a preliminary injunction, asset freeze, and order for other equitable relief as set forth below is necessary and appropriate.… Read the rest

Raising Capital Through Exempt Offerings

June 23, 2015

Regulation D, Rule 506(c), Elimination of Prohibition Against General Solicitation

Title II of the JOBS Act created a new exemption for Rule 506 offerings to allow an issuer to engage in general solicitation and advertising, so long as all purchasers of the securities are accredited investors.[1]  The goal of this new exemption is to make it easier for early stage and small companies to raise capital by allowing them to solicit investments from a larger pool of investors.  In July 2013, the SEC adopted final rules adding the new Rule 506(c),[2] so this exemption is currently available. … Read the rest

Sethi Petroleum, LLC and Tips for Avoiding Investment Scams

June 22, 2015

Sethi’s Alleged Securities Law Violations

The specific false and misleading statements, omissions, and acts that the SEC alleges to form the basis of the enforcement action against Sethi and his company are numerous.  For example:

  • The offering documents represented that 70% of the investment funds would be used to acquire, drill, and complete 20 oil and gas wells, when in fact, the defendants used only 23.5% of the money raised for that purpose;
  • The offering documents represented that Sethi Petroleum, LLC would take 25% of the funds for administration and management of the joint venture, when in reality, it spent more than 76.4%, the majority of which were undisclosed or unapproved expenditures, including $577,000 paid directly to Sethi; and
  • The offering documents also falsely stated that the program would be a “10 million dollar fund that will .
Read the rest

Reg A+

June 19, 2015

Regulation A+ Becomes Effective

 In our previous blog series on exempt offerings (available here http://www.mcbrideattorneys.com/revisiting-reg-a/), we looked at Title IV of the JOBS Act, popularly known as Regulation A+, authorizing the SEC to modernize and expand the existing Regulation A.  Regulation A+ is expected to facilitate small company capital formation by exempting offerings of up to $50 million within a 12-month period from the federal registration requirements and by allowing companies to “test the waters” either before or after the filing of the offering statement.… Read the rest

Revisiting Reg A+

June 19, 2015

Securities Law Update:

Review of Regulation A+

Title IV of the Jumpstart Our Business Startups Act (“JOBS Act”), popularly known as Regulation A+, authorized the SEC to modernize and expand the existing Regulation A for offerings of up to $50 million.  On March 25, 2015, the SEC adopted final rules to implement the mandate, which will become effective 60 days after publication in the Federal Register.[1]

The final rules establish two tiers of offerings:

  • Tier 1: Annual offering limit of $20 million, including no more than $6 million on behalf of selling security holders that are affiliates of the issuer; and
  • Tier 2: Annual offering limit of $50 million, including no more than $15 million on behalf of selling security holders that are affiliates of the issuer.
Read the rest

Sethi Petroleum, LLC and Tips for Avoiding Investment Scams

June 18, 2015

What Happened?

On May 14, 2015, the Securities and Exchange Commission (“SEC”) filed an emergency civil action against Sethi Petroleum, LLC and its president and sole managing member, Sameer Praveen Sethi, for offering fraudulent oil and gas investments.[1]  The SEC alleged that the defendants carried on a fraudulent scheme and made materially false and misleading statements and omissions to potential and actual investors in order to offer and sell securities in a joint venture, raising more than $4 million from approximately 90 investors located in 28 states.… Read the rest

All postings are intended to be planning tools to familiarize readers with some of the high-level issues discussed therein. No posting is intended to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.