SEC Reminds MicroCap Issuers to be Compliance-Oriented When it Comes to Investor Relations


In early April, the SEC charged 27 firms and individuals with fraudulent promotion of stocks

Greg Kramer, Esq.says that “When we hear about stock promotion schemes, we tend to think about grey sheet stocks issued by companies with little real business activity and limited public information. However, this SEC enforcement sweep included three exchange listed companies.

Kramer continues, “the sweep underscores a tension that is very relevant: the need for microcap issuers to increase their profile in the marketplace and frequently raise capital while complying with numerous and complex securities laws and playing defense against an aggressive and talented plaintiffs’ bar.

In a post on the Haynes and Boone blog titled “Microcap Update: SEC Reminds Issuers to be Compliance-Oriented When it Comes to Investor Relations“, Kramer shares some key takeaways from the recent enforcement.

– Investor relations activity is needed by microcap issuers due to lack of analyst coverage and market visibility, but there needs to be attention to compliance issues.

– The SEC can apply a recklessness standard to companies with respect to their investor relations firms’ violations of securities laws, so issuers need to take steps to confirm that their investor relations firms are complying with the law.

– Microcap issuers frequently raise capital and, accordingly, investor relations activity should be coordinated with securities counsel to avoid unwittingly violating the Securities Act.

Learn more HERE


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