These are some of the compliance-related stories that recently caught my attention.
Crowd-funding, private-placement ads get special focus in the Bay State by Mark Schoeff Jr. in Investment News
Massachusetts’ top securities regulator today launched a special unit to monitor crowdfunding websites and to keep track of private-placement advertising, two new fundraising methods authorized by a federal law passed more than a year ago.
The SEC’s Top Cop Is Cashing In as a Wall Street Lawyer, and You Should Feel OK About It by Matthew Yglesias in Slate.com
And here’s where I think it’s important to step in with the realization that the news media has, for various professional and economic reasons, a tendency toward a systematic negativity bias. Imagine a scenario in which S.E.C. lawyers had a really hard time getting private sector jobs and almost invariably ended up needing to take a pay cut to obtain a position outside of the government. Then we’d get lots of stories about overpaid and incompetent federal bureaucrats, living high on posh government salaries (S.E.C. lawyers don’t earn much compared to top private sector attorneys, but they definitely earn more than the average American) despite a lack of viable skills or job prospects.
SEC Charges City of Miami, Budget Director with Fraud by Thomas O. Gorman in SEC Actions
The SEC brought another action centered on the municipal bond market. This case, against the City of Miami and its former Budget Director, not only accuses the defendants of fraud in connection with three bond offerings, but also of violating a prior consent decree which is a first for the agency. SEC v. City of Miami, Florida, Civil Action No. 1:13-cv-22600 (S.D. Fla. Filed July 19, 2013).
The SEC alleges that Trendon T. Shavers, who is the founder and operator of Bitcoin Savings and Trust (BTCST), offered and sold Bitcoin-denominated investments through the Internet using the monikers “Pirate” and “pirateat40.” Shavers raised at least 700,000 Bitcoin in BTCST investments, which amounted to more than $4.5 million based on the average price of Bitcoin in 2011 and 2012 when the investments were offered and sold. Today the value of 700,000 Bitcoin exceeds $60 million.
Advertising Securities As Safe – A “No, No” In California by Keith Paul Bishop in California Corporate & Securities Law
The Commissioner has adopted Rule 260.302 setting forth the general standard for advertisements. One of these standards addresses the temptation (which is particularly strong amongst fraudsters) to advertise securities as “safe”:
An advertisement should not contain any statement or inference that an investment in the security is safe, or that continuation of earnings or dividends is assured, or that failure, loss, or default is impossible or unlikely.
SEC Rules Will Clip the Wings of Angel Investors by David Verrill in the Wall Street Journal
No angel investor I know would show their finances to an entrepreneur or other issuer of a private security. Third-party verification also is costly, invasive and burdensome. This financial information in the hands of an issuer is subject to far more potential for fraud and abuse than could ever emerge from self-certification.