Sunday, January 30, 2011

SEC Charges Attorney With Misconduct in Connection with Client Exam

The SEC instituted administrative proceedings against a Greenberg Traurig partner for engaging in improper professional conduct during an SEC examination. The SEC alleges that the attorney, in the course of an SEC examination of his client NewPoint Securities LLC in April and May 2009 — altered private placement memoranda (PPMs) purportedly used in the offer and sale of securities issued by NewPoint Financial Services. The original PPMs purportedly provided to investors stated that the funds raised in the offerings would be used primarily for real estate related investments. According to the SEC, the vast majority of money raised in the offerings was misappropriated by NewPoint’s principal John Farahi.

The SEC alleges that the attorney added language to the PPMs to make it appear that it was disclosed to investors that much of the money raised by NewPoint would be loaned to Farahi. The PPMs were then produced to the SEC’s examination and enforcement staff. According to the Office of the General Counsel, Tamman knew that the language he added to the documents was not included in the PPMs actually provided to investors.

My thoughts, in two simple sentences. This is simply an accusation, and we all know that the SEC doesn't always have it's facts straight. It is certainly possible that the SEC is wrong, but assuming the allegations are true,  what loon would alter an existing document on behalf of a client and then provide it to the SEC? And, if you were such a loon, given the fact that the PPM has been distributed to third parties during the course of the offering, did you really think that it would go unnoticed by the Staff?

And one more thought. He changed the language in the existing PPM to reflect that the money raised was going to be loaned to the issuer's principal? Really? Imagine what that PPM looked like after it was altered. Dozens of pages describing the company and its business and at the end of the use of proceeds section..."loan to officer."



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