On September 30, 2022, the SEC announced charges against 8 CEOs and CFOs for fraudulently promoting Regulation A+ securities offerings. The companies named by the SEC include Elegance Brands Inc. (now Sway Energy Corp.), Emerald Health Pharmaceuticals Inc., Hightimes Holding Corp., and Cloudastructure Inc.
This is not a good day for those who flout the rules, but we are glad the SEC has taken decisive action. Reg A+ is gaining great momentum in the marketplace and this type of scrutiny by the SEC is necessary to keep it clean.
There are so many great companies and intermediaries working hard and being compliant. This only reminds us that we must continue to be diligent and keep our eyes open so that no further damage happens in the private markets.
It is not enough for the broker-dealers of record to simply do KYC ID verification; you also need to keep asking the hard questions.
If you are an IA firm, you are creating and delivering the branding, messaging, and content through stories, videos, blogs, webinars, etc. Each of these activities has far-reaching regulatory consequences. You can’t just simply do whatever they tell you to do; you too must be diligent in ensuring that you are telling the truth on their behalf.
We turn down clients daily because we don’t compromise our ethics, and we only operate with full compliance to all regulations..
There are only two ways to operate in this world:
- Compliantly, ethically, legally
- Non-Compliantly, unethically, illegally, and cutting corners
The choice is clear.
Capital-raising cannot be done by only the Issuer. This caution applies to all the following participants:
- Issuer (Management, Board Directors)
- FINRA Broker-Dealers
- Investor Acquisition Firms (Marketing Firms)
- Call Centers (Boiler Rooms)
- Transfer Agents
- Issuance Technology Providers
- Funding Platforms
- Research Providers
- Offering Aggregators
- Investor Relations
- Public Relations
If you see any kind of questionable behavior, exercise caution and if necessary, let the SEC know.
SEC News Release 30 September 2022
Stay tuned for more updates from the SEC.