The SEC Enforcement Division alleged last week that the registration statements of four public companies contained material misstatements concerning the management and control of the companies. In each case, the SEC alleged that the persons identified in the registration statement as officers and directors did not in fact control the company, and claimed in each instance that an undisclosed person controlled or promoted each firm. Two of the registration statements are currently effective, while two have not yet been declared effective.
The SEC sued all four companies under two rarely-used provisions, Securities Act §§8(d) and (e). These sections authorize the Commission to examine registration statements and to issue orders stopping the effectiveness of any such filings that include untrue statements of material fact or omissions of any material fact necessary to make the issuer’s statements not misleading. Under §8(e), a lack of cooperation or interference with an examination provides proper grounds for the issuance of a stop order.
All four companies named in the orders failed to answer the agency’s subpoenas. The SEC scheduled hearings for the four companies to be held before an administrative law judge on Nov. 22, 2016. The ALJ will determine if the companies violated §8, and if so, what remedial actions may be appropriate under the statute. Requested remedies may include, but are not limited to, the issuance of stop orders prohibiting or suspending the effectiveness of the registration statements in question.
Subscribers can stay current with all administrative law judge decisions by using Bloomberg Law’s ALJ Enforcement Tracker.
In the Matter of the Registration Statement of Flaster Corp., SEC Release No. 33-10245 (Nov. 4, 2016); In the Matter of the Registration Statement of iLoan Inc., SEC Release No. 33-10246 (Nov. 4, 2016); In the Matter of the Registration Statement of Zubra, Inc., SEC Release No. 33-10247 (Nov. 4, 2016); In the Matter of the Registration Statement of Instride, Inc., SEC Release No. 33-10248 (Nov. 4, 2016).
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