Securities Industry Commentator by Bill Singer Esq

District Court Enters Permanent Injunction Shutting Down Technical-Support Fraud Scheme (DOJ Release)

SEC Charges Long Island City Man with Trading and Tipping Others as Part of Insider Trading Scheme (SEC Release)

Public Petitions for Rulemaking: Request to adopt amendments to rules applicable to SPAC IPOs to permit SPACs to conduct public offerings on a best-efforts basis (SEC Release)

Moving the Goal Line In a FINRA Expungement Arbitration (BrokeAndBroker.com Blog)

worked with co-conspirators in India from at least 2011 to 2020 to operate a technical-support fraud scheme.  The scheme allegedly contacted U.S. consumers via internet pop-up messages that falsely appeared to be security alerts from Microsoft or another well-known company.  The pop-up messages fraudulently claimed that the consumer's computer was infected by a virus, purported to run a scan of the consumer's computer, falsely confirmed the presence of a virus and malware, and then provided a toll-free number to call for assistance.  When victims called the toll-free number, they were connected to India-based call centers participating in the fraud scheme.  Call center workers asked victims to give them remote access to their computers and told victims that they detected viruses or other malware on their computers.  Eventually, the call center workers would falsely diagnose non-existent problems and ask victims to pay hundreds of dollars for unnecessary services and software. 

The complaint asserted that Cotter worked with co-conspirators in India to operate the scheme, including registering website domains, setting up shell companies, and entering into relationships with banks and payment processors to facilitate the collection of funds from victims of the scheme.  Individual victims payed hundreds to thousands of dollars to the scheme for unwanted and unnecessary technical-support services.

[P]eltz used inside information to trade Ferro securities before a March 15, 2016 news media article that Ferro had received a takeover approach from a prominent private equity firm. The complaint alleges that Peltz placed his trades using accounts held in the names of others, including the account of a British Virgin Islands company. Peltz further leveraged the inside information by tipping several associates who all traded Ferro within days of Peltz.

We are a law firm regularly engaged by issuers or underwriters in connection with initial public offerings ("IPO") by a type of blank check company referred to as "a 'special purpose acquisition company,' or SPAC, for short." In this capacity, we are requesting the Commission to adopt amendments to rules applicable to SPAC IPOs to permit SPACs to conduct public offerings on a best-efforts basis.

We believe that the SPAC IPOs are very different from the blank-check offerings with which the Commission's 1993 release was concerned. SPAC offerings have become a recognized, legitimate form of financing, in which smaller to the largest investment banks engage. Market participants are very familiar with SPAC structures and economics, which have become essentially standardized, and, with the guidance of Commission staff, uniformly contain robust investor protections. In addition, since 1993, FINRA has clarified the significant due diligence obligations of broker-dealers (See, e.g., FINRA Regulatory Notice 10-22, https://www.finra.org/rules-guidance/notices/10-22), and placement agents in best-efforts offerings are compelled to conduct the same level of due diligence as underwriters in firm commitment offerings. 

Consequently, the SPAC market has matured. SPACs generally list on The New York Stock Exchange or Nasdaq upon completion of their IPOs. According to SPACInsider data, https://spacinsider.com/stats/, between 2009 and 2020, to date, more than $83 billion has been raised in 317 SPAC IPOs. In 2019, 59 IPOs, with average proceeds of $230.5 million, raised a total of $13.6 billion, and, to date, in 2020, $36.2 billion has been raised in offerings averaging $397.5 million. Given the size of the transactions and reputations of SPAC market participants, we believe that the SPAC market is not susceptible to the fraud and manipulation that required adoption of Rule 419 and related rules. 

• Securities Industry Commentator
• Bill Singer