Commission Settles Ten Unregistered Sale of Securities Actions
Regulation A created a limited exemption from the registration requirements of Section 5, Securities Act for those who comply with the dictates of the Regulation. Generally it requires that certain information be furnished to investors and that other requirements be met. Those seeking to use the exemption must comply with its dictates.
A good example of how the regulation works is In the Mater of Hemp Naturals, Inc., Adm. Proc. File No. 3-21430 (May 16, 2023). There the firm initially complied with the dictates of the regulation for a specific number of shares priced within a range. Ultimately, however, the issuer failed to comply with Regulation. It improperly changed the offering price and did not update its financial information as required. The firm’s offering of shares was thus found to be in violation of Section 5 of the Securities Act. The company resolved the case by consenting to the entry of a cease-and-desist order based on Section 5 and paying a penalty of $50,000.
Earlier this week the Commission concluded that nine other issuers had run afoul of one or more of the requirements for utilizing the Regulation in a fashion similar to the firm in the Hemp Naturals proceeding. Stated differently, each issuer was thus not entitled to an exemption from registration. Yet each issuer sold its shares to investors. Each issuer thereby violated Section 5 of the Securities Act.
Those named in the proceedings, in addition to Hemp Naturals, are: CW Petroleum Corporation; DNA Brands Inc.; Graystone Company, Inc., Green Stream Holdings Inc.; LiveWire Ergogonenics, Inc; Principal Solar Inc.; SFL Maven Corporation; The Marquie Group Inc.; and Verde Be Holdings Inc.
To resolve the charges each issuer consented to the entry of a cease-and-desist order based on Section 5. In addition, each issuer agreed to pay a penalty in an amount ranging from a high of $90,000 to a low of $5,000.