The Securities and Exchange Commission announced that 10 microcap companies have been charged with violations involving securities transactions.
The SEC found that between December 2019 and May 2022, the companies all obtained qualification from the commission to offer and sell securities using Regulation A. The regulation provides a limited exemption from registration under the Securities Act to allow companies to raise money from the public as long as they meet specific requirements.
But the 10 companies subsequently made one or more significant changes to their offerings without meeting the requirements of the exemption, according to the SEC’s orders. The changes included improperly increasing the number of shares offered, improperly increasing or decreasing the price of the shares, failing to file updated financial statements at least annually for ongoing offerings, engaging in prohibited at the market offerings, or engaging in prohibited delayed offerings.
“Companies that choose to benefit from Regulation A as a cost-effective way to raise capital must meet its requirements,” said Daniel R. Gregus, Director of the SEC’s Chicago Regional Office. “These actions stand as a reminder that companies which choose to circumvent Regulation A’s requirements by engaging in prohibited conduct or making fundamental changes to their offerings without qualification will face action by the SEC.”
Each of the 10 microcap companies agreed to cease and desist from violations of Section 5 of the Securities Act and to pay civil penalties ranging from $5,000 to $90.000. Four of the companies are based in Florida, three in Texas, one in California, one in New York and one in Georgia.
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