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Tagged Posts: The R. Shawn McBride Law Office’

Securities Law Update: SEC’s Broken Windows Enforcement

July 13, 2015

Broken Windows Policy – The Underlying Rationale

The term “broken windows” comes from an eponymous 1982 article in The Atlantic, which asserted that unaddressed disorder encourages more disorder, followed by more serious crimes.[1]  SEC Chairwoman Mary Jo White, who witnessed the transformation of New York City during the period of broken windows policing, took the lesson to heart.  On October 9, 2013, at the Securities Enforcement Forum, Ms. White said the same theory could be applied to the securities markets—minor violations that are overlooked or ignored can feed bigger ones, and, perhaps more importantly, can foster a culture where laws are increasingly treated as toothless guidelines.… Read the rest

Securities Law Update: SEC’s Broken Windows Enforcement

July 9, 2015

Introduction

In the 1990s, former New York City Mayor Rudolph Giuliani and Police Commissioner Bill Bratton adopted a policing strategy known as “broken windows” or “quality-of-life” to combat crimes.  The theory was that, when a window is broken and immediately fixed, it sends a signal that disorder will not be tolerated; similarly, when a broken window is not fixed, it suggests that no one cares and encourages more serious crimes.  Under the policy, the city pursued minor offenses like subway fare evasion and graffiti as vigorously as serious crimes like robberies, if not more so. … Read the rest

Raising Capital Through Exempt Offerings

July 7, 2015

Regulation A+, Modernizing 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 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

Texas Non-Competes

April 8, 2015

A great article on Texas Non-Competes:  http://www.melderlaw.com/what-you-need-to-know-about-noncompete-agreements-in-texas/… Read the rest

Have You Thought About an ESOP?

May 1, 2012

Today I published an article that I co-authored with Claude Martel and Darrell Lensch giving a general overview of ESOPs.  You can see the article here:… 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.