Securities Industry Commentator by Bill Singer Esq

January 22, 2021

Allison Herren Lee Named Acting Chair of the SEC (SEC Release)

Statement on Designation of Commissioner Lee as Acting Chairman by SEC Commissioners Hester M. Peirce, Elad L. Roisman, and Caroline A. Crenshaw

CFTC Names Rostin Behnam Acting Chairman (CFTC Release)

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Pliny the Elder tells the story of a shoemaker who complained to the ancient painter Apelles about his rendition of a crepida (a shoe). Being the ever polite guy, Apelles altered his painting to suit the shoemaker. Emboldened by his apparent success, the shoemaker then proceeded to point out more alleged defects in the painting. Having reached the limits of his patience, Apelles purportedly upbraided the critic: "Ne supra crepidam sutor iudicaret" ("a shoemaker should not judge beyond the shoe"). Today, that entire story has been reduced to the wonderful word "ultracrepidarian." All of which seems to have prompted a lovely tirade -- some may say a thought-piece -- from our guest blogger Aegis Frumento.
Jan. 21, 2021

President Biden designated SEC Commissioner Allison Herren Lee as Acting Chair of the agency. Chair Lee has served with distinction since July 2019 after previous service, in part, as counsel to Commissioner Kara Stein and as Senior Counsel in the Division of Enforcement's Complex Financial Instruments Unit. While awaiting the confirmation of Gary Gensler as the next Chair, the SEC will be in very capable hands under Chair Lee. In response to Lee's appointment, her colleagues stated:

Sincere congratulations to Commissioner Lee, who will serve as Acting Chair of the Securities and Exchange Commission. We look forward to continuing our work together to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.

Bill Singer's Comment: Admittedly, I have a very warped sense of humor. How nice that Lee's fellow Commissioners and former Acting Chair Roisman signed off on a joint statement of congratulations. All of which reminds me of that old joke about the Chairman of the Board of a company who was rushed to the hospital for emergency surgery and received a message that the Board wished him a speedy recovery by a vote of 11 to 8 with two abstentions.
President Bide designated CFTC Commissioner Rostin Behnam as Acting Chair. Behnam succeeds departing Chair Heath P. Tarbert, who remains a Commissioner per his term expiring on April 13, 2024.
In a Complaint filed in the United States District Court for the Western District of Texas, the SEC charged William Andrew Sack with violations of the antifraud and registration provisions of Sections 5(a), 5(c), and 17(a) of the Securities Act, and Section 10(b) of the Securities Exchange Act and Rule 10b-5(b) thereunder; and further charged Stack with aiding and abetting the same violations by Preston Corp. a/k/a Preston Royalty Corp. As alleged in part in the SEC Release:

[D]uring the relevant period, Preston Corp. (a/k/a Preston Royalty Corp.), a now-defunct microcap issuer, purported to be a financial services provider specializing in royalty financing for mining operations, but in reality had no actual operations. The complaint alleges that the defendant, William Andrew Stack, Esq., a licensed lawyer who had no experience in the mining industry, served as Preston Corp.'s nominal CEO at the behest of the company's undisclosed control person, William S. Marshall, who had previously been charged by the SEC in another, similar fraud. According to the complaint, Stack admitted his figurehead CEO status in an email to Marshall, saying that unless he was paid more money, he would no longer take on the legal risks of acting as Preston's CEO in name only.

The SEC's complaint alleges that while serving as the company's figurehead CEO, Stack issued four press releases that materially misled investors, falsely claiming, among other things, that Preston Corp. had entered into a royalty agreement with a third party, and that it had entered into a "gold mine agreement" with a third party. Preston Corp. allegedly publicized these press releases while Preston Corp. and Stack conducted an unregistered distribution of its common stock to retail investors. Stack allegedly misappropriated the proceeds of the offering, diverting the money largely to himself and to Marshall.

SEC Obtains Final Judgment Against Recidivist (SEC Release)
Without admitting or denying the allegations in an SEC Complaint filed in the United States District Court for the Northern District of Illinois, Geoffry Thompson agreed to be permanently enjoined from directly or indirectly, including through any entity he owns or controls, participating in the issuance, purchase, offer, or sale of any security (provided, however, that he shall not be prevented from purchasing or selling securities for his own personal account); and, further, he agreed to pay disgorgement of $481,328, prejudgment interest of $51,615, and a penalty of $9,639. As alleged in part in the SEC Release:

[T]hompson and his company, Covalent Collective, Inc., raised more than $19 million from approximately 500 investors through unregistered securities offerings for which no exemption from registration applied. As alleged in the complaint, Thompson used numerous mechanisms to solicit investors, including providing investors video and audio recordings in which Thompson encouraged investors to spread the word about the company's securities to friends and family.