DD by way of Brad/Micro/Iggy/Clark - CWRN and others involved in this freeze were victimized by Oppenheimer Inc. NYC (yes, that Oppenheimer) who messed up and released restricted shares into the market place.
I identified a KI Investments in SanDiego, but it's unclear if they're the "Customer KI" cited on pp. 19/20 of the linked document. Just a swag, perhaps a dead end. The opening Oppenheimer component is on p. 2. Interesting doc/read.
FINRA Disciplinary Proceeding No. 2009018668801
Department of Enforcement v. Oppenheimer & Co., Inc. BD No. 249
http://disciplinaryactions.finra.org/viewdocu...ocNB=33961
Quote:
Between August 19,2008, and September 20,2010 (the "Relevant Period"), Oppenheimer & Co., Inc. ("Oppenheimer" or the "Firm"), through seven brokers working out of five branch offices located across the country, sold a total of over one billion shares of twenty penny stocks without registration or an applicable exemption, in violation of Section 5 of the Securities Act of 1933 ("Section 5"). Failures in the Firm's supervisory system and Anti-Money Laundering ("AML") program led to these widespread sales of unregistered securities.
Quote:
Customer KI
101. Oppenheimer opened a corporate account for Customer KI in its Boca Raton office on approximately March 17, 2009.
102. On June 4, 2009, Customer KI's account received 2,100,000 shares of Cotton & Western Mining (CWRN), a Pink Sheets issuer purportedly involved in iron ore mining, and sold those 2,100,000 shares between June 8 and 15, 2009.
103. As of the dates that Customer KI sold CWRN, these securities were not registered with the SEC .
104. The sales of CWRN between June 8 and 15 coincided with an increase in investor demand for the stock that peaked on June 16.
105. Customer KI exhibited a pattern of wiring out the proceeds of stock sales within the same month the sales were realized.
A summary from Micro follows clarifying the rules, etc.
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from SEC website, companies are allowed to sell 1 to 5 million DOLLARS of non-registered securities IF IF they meet the conditions of the exemptions-
e.g., the buyer is not allowed to sell such exempted securities for 1 year in case of a non-SEC reporting company like CWRN without registering them - (or 6 months in case of an OTCBB SEC reporting co)
the receiver of the stock did not wait the requisite 1 year or file a statement w the SEC- either 1 of which would have made the transaction legal
so lesson to be learned -dont trust the recipients of exempted stock to follow the rules- either file for them or register the stock in the 1st place -the issuer under the following 2 exemptions is suppose to file but how is the issuer to do that if the seller does not inform CWRN they are selling at that time?
ridiculous to lock 4.361 B O/S now because a recipient in 2009 didnt follow the rules on 2.1 million shares in 2009 worth maybe $8400 - this punishing of innocent 3rd party purchasers who had nothing to do with the transaction-and several years after the fact! is not allowed in the real world
from SEC website:
Rule 504. Rule 504 , sometimes referred to as the “seed capital” exemption , provides an exemption for the offer and sale of up to $1,000,000 of securities in a 12-month period . Your company may use this exemption so long as it is not a blank check company and is not subject to Exchange Act reporting requirements. In general, you may not use general solicitation or advertising to market the securities, and purchasers generally receive “ restricted securities .” Purchasers of restricted securities may not sell them without SEC registration or using another exemption, which is further explained below under the heading “ Resales of restricted securities .” Investors should be informed that they may not be able to sell securities of a non-reporting company for at least a year without the issuer registering the transaction with the SEC.
Your company may, however, use the Rule 504 exemption for a public offering of its securities with general solicitation and advertising, and investors will receive non-restricted securities, under one of the following circumstances:
- It sells in accordance with a state law that requires the public filing and delivery to investors of a substantive disclosure document; or
- It sells in accordance with a state law that requires registration and disclosure document delivery and also sells in a state without those requirements, so long as your company delivers to all purchasers the disclosure documents mandated by a state in which it registered; or
- It sells exclusively according to state law exemptions that permit general solicitation and advertising, so long as sales are made only to "accredited investors" (we describe the term “accredited investor” in more detail below in connection with our description of Rule 506 offerings).
Rule 505. Rule 505 provides an exemption for offers and sales of securities totaling up to $5 million in any 12-month period . Under this exemption, your company may sell to an unlimited number of “ accredited investors ” and up to 35 persons that are not accredited investors. Purchasers must buy for investment purposes only, and not for the purpose of reselling the securities. The issued securities are “ restricted securities ,” meaning purchasers may not resell them without registration or an applicable exemption, as explained below under the heading “ Resales of restricted securities .” If your company is not an SEC reporting company, investors should be informed that they may not be able to sell securities for at least a year without the company registering the transaction with the SEC. Your company may not use general solicitation or advertising to sell the securities.
