Tag: Securities Act Section 5

SEC charges attorney rendering legal opinions with violations of Section 5

Attorneys who may think they can give short shrift to those pesky legal opinions to transfer agents might think twice after reading this complaint, SEC v. Frederick Bauman, filed on September 8, 2021, in the federal district court in Nevada.   As described in the SEC’s litigation release, the SEC charged Bauman “with playing a critical role as an attorney who facilitated the unregistered sale of millions of shares of securities by two groups engaged in securities fraud.” According to the SEC’s complaint, between 2016 and August 2019, Bauman issued at least a dozen legal opinions to transfer agents advising that certain shares of four public companies were unrestricted and freely tradeable and that the holders of the shares were not affiliates of the public company issuers. However, the SEC alleged, the shareholders were actually part of groups that controlled those issuers, which made them affiliates under the securities laws. In “each instance where Bauman’s opinion letters violated Section 5,” the SEC alleged, “he lacked a reasonable basis for representing that the shareholders were not affiliates.” The complaint charged that the sales by these control groups were unregistered and violated Section 5 of the Securities Act and that Bauman violated Sections 5(a) and 5(c) of the Securities Act.

Corp Fin OKs technical modification of process for offers and sales in IPOs

by Cydney Posner In a new no-action letter to Morgan Stanley, Corp Fin agreed that, as outlined in the request letter, the firm’s proposed procedures for offering and selling securities in IPOs would not involve a pre-effective sale for purposes of Section 5(a) of the Securities Act. Essentially, the modified […]

New CDI regarding investments through a self-directed “brokerage window” under a 401(k)

by Cydney Posner Today, Corp Fin posted a new CDI under both Securities Act Section 5 and Form S-8.   The CDI involves the issue of whether a company-sponsored 401(k) plan that does not offer an employer securities fund as an investment alternative might still be deemed to be offering employer […]