SEC Charges 10 Microcap Companies with Securities Offering Registration Violations
The Securities and Exchange Commission today announced charges against 10 microcap companies for offering and selling securities in unregistered offerings that failed to comply with Regulation A, which provides a limited exemption from registration under the Securities Act to allow companies to raise money from the public as long as they meet specific requirements.
According to the SEC’s orders, between December 2019 and May 2022, each of the 10 microcap companies obtained qualification from the SEC for their securities offerings using Regulation A, but they subsequently made one or more significant changes to their offerings without meeting the requirements of the exemption. The SEC’s orders found that such changes included improperly increasing the number of shares offered, improperly increasing or decreasing the price of shares offered, failing to file updated financial statements at least annually for ongoing offerings, engaging in prohibited at the market offerings, or engaging in prohibited delayed offerings. As a result, each of the microcap companies offered and sold securities in violation of the offering registration provisions.
“Companies that choose to benefit from Regulation A as a cost-effective way to raise capital must meet its requirements,” said Daniel R. Gregus, Director of the SEC’s Chicago Regional Office. “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 10 microcap companies agreed to cease and desist from violations of Section 5 of the Securities Act and to pay the following civil penalties:
- 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.
The SEC’s investigations were conducted by Som P. Dalal, Jen Peltz, and Anne C. McKinley of the Chicago Regional Office and M. Lance Jasper, Ansu N. Banerjee, and Ana D. Petrovic of the Los Angeles Regional Office. Staff in the SEC’s Division of Examinations and Division of Corporation Finance assisted in the investigations.