Compliance

Compliance Corner: SEC

Editorial Staff, 27 September 2021

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The latest compliance news: regulatory developments, punishments, guidance, permissions and new product and service offerings.

Securities and Exchange Commission
The Securities and Exchange Commission has charged Thomas Powell and Stefan Toth, and their entities, Resolute Capital Partners LTD LLC and Homebound Resources LLC, with making material misrepresentations and omissions in connection with more than a dozen unregistered oil and gas securities offerings. 

Powell and Toth were also charged with acting as unregistered brokers. All respondents have agreed to settle the SEC action, the US regulator said in a statement September 24.

According to the SEC's order, between 2016 and 2019, the respondents and salespeople acting on their behalf sold debt and equity securities to retail investors in unregistered offerings based on working interests in oil and gas wells. 

The SEC said the respondents made “material misstatements and omitted material facts in both debt and equity offerings.”

"Today's settlements provide important protections for investors, including prohibiting the respondents from participating in any oil and gas offerings for two years and requiring an independent compliance consultant to review policies, procedures, and offering materials for any further offerings for three years," Carolyn M Welshhans, enforcement division associate director, said.

The SEC's order found that the respondents violated the antifraud provisions and the registration provisions of the Securities Act of 1933, and further that Powell and Toth acted as unregistered brokers. 

Without admitting or denying the SEC's findings, the respondents agreed to a cease and desist order and to undertakings that, among other requirements, prohibit them from participating in any unregistered oil and gas related offerings for two years, require them to post a referenced link to the SEC's order on all of their websites for three years, and require an independent compliance consultant for a period of three years. 

Powell and Toth also consented to collateral and penny stock bars and investment company prohibitions, with a right to apply for re-entry after two years. Finally, Resolute Capital and Homebound Resources each agreed to pay a civil penalty of $225,000, and Powell and Toth each agreed to pay a civil penalty of $75,000.

SEC
The SEC has paid out $36 million to a whistleblower whose information and assistance significantly contributed to the success of an enforcement action as well as actions by another federal agency.

“The whistleblower provided crucial information on an illegal scheme to the SEC's and the other agency's staffs, which included multiple meetings and the identification of key documents and witnesses. Under the SEC's whistleblower program, individuals who provide critical information to other agencies may be eligible for a related action award if they are also eligible for an award in the underlying SEC action,” the regulator said in a statement late last week. 

So far, the regulator has awarded around $1.1 billion to 214 individuals since issuing its first award in 2012. The identities of such persons are not disclosed.

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