More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
The SEC on Tuesday issued an updated investor alert concerning scams purporting to sell pre-IPO shares of companies, including such social media firms as Facebook and Twitter. In addition, it announced actions it has taken against, among others, a Florida man who was fraudulently selling securities of an investment vehicle he claimed held pre-IPO shares of Facebook.
There have been, said the SEC, numerous complaints and inquiries about such scams, which are commonly promoted through social media as well as by more conventional means such as mail, telephone, and personal conversations.
The SEC says that, while legitimate offerings of pre-IPO shares in a company can be found, unregistered offerings could violate federal securities laws unless they meet a registration exemption, such as the restriction of a private offering only to “accredited investors,” those who meet certain income or net worth requirements.
In the case of the Florida man, on April 4 an SEC action resulted in the U.S. District Court for the Southern District of Florida in Miami issuing an Order to Show Cause and Other Emergency Relief against Allen Weintraub, who was already the subject of a final judgment in January enjoining him to stop selling fraudulent shares.
Weintraub’s assets were frozen as a result of the order, as well as assets of shell companies through which he apparently operates. Despite the January court action, the SEC’s motion alleges that Weintraub, acting through an alias, William Lewis, and through entities named Private Stock Transfer Inc., PST Investments III Inc. (PST Investments) and World Financial Solutions, defrauded investors by selling them worthless shares in PST Investments.
The SEC alleges that Weintraub had falsely represented that he would sell the investors pre-IPO shares of Facebook, and that PST Investments had an ownership interest in Facebook stock. The motion also alleges that Weintraub was utilizing the website privatestocktransfer.com to carry out the scheme, and the order directed that this website be deactivated.