The Securities and Exchange Commission (SEC) has filed charges against ten firms that raised money using the Reg A+ (Regulation A) securities exemptions. Each firm has agreed to pay a civil penalty ranging from $5000 to $90,000.
Under the JOBS Act of 2012, Regulation A received an update as the exemption was infrequently utilized. The new rules allowed issuers to raise up to $50 million (at that time) by selling securities to both accredited and non-accredited investors. Offering documents needed to be qualified, and firms needed to adhere to certain rules, including ongoing disclosure. The SEC claims that from December 2019 to May 2022, the ten companies obtained qualification from the SEC for their securities offerings, but subsequent changes were made “without meeting the requirements of the exemption.”
The SEC states that issuers raised the number of shares offered, increased or decreased the share price of the offering, failed to file annual financial statements, engaged in prohibited “at the market offerings,” and pursued “prohibited delayed offerings.”
The ten firms are as follows:
- CW Petroleum Corp., a Wyoming corporation based in Katy, Texas, agreed to pay a $5,000 civil penalty;
- DNA Brands Inc., a Colorado corporation based in Alpharetta, Georgia, agreed to pay a $10,000 civil penalty;
- Graystone Company Inc., a Colorado corporation based in Fort Lauderdale, Florida, agreed to pay a $25,000 civil penalty;
- Green Stream Holdings Inc., a Wyoming corporation based in New York, New York, agreed to pay a $75,000 civil penalty;
- Hemp Naturals Inc., a Delaware corporation based in Sunny Isles Beach, Florida, agreed to pay a $50,000 civil penalty;
- LiveWire Ergogenics Inc., a Nevada corporation based in Anaheim, California, agreed to pay a $50,000 civil penalty;
- Principal Solar Inc., a Delaware corporation based in Dallas, Texas, agreed to pay a $40,000 civil penalty;
- SFLMaven Corp., a Wyoming corporation based in Fort Lauderdale, Florida, agreed to pay a $25,000 civil penalty;
- The Marquie Group Inc., a Florida corporation based in St. Petersburg, Florida, agreed to pay a $10,000 civil penalty; and
- Verde Bio Holdings Inc., a Nevada corporation based in Frisco, Texas, agreed to pay a $90,000 civil penalty.
Daniel Gregus, Director of the SEC’s Chicago Regional Office, said that Reg A is a cost-effective way to raise capital, but issuers must still adhere to the rules.
“These actions stand as a reminder that companies which choose to circumvent Regulation A’s requirements by engaging in prohibited conduct or making fundamental changes to their offerings without qualification will face action by the SEC.”
Each of the ten microcap companies agreed to cease and desist from violations of Section 5 of the Securities Act and to pay the following civil penalties:
