SEC Stops California Company With Misleading Registration Statement From Issuing Public Stock
The Securities and Exchange Commission today issued an order to stop an initial public offering (IPO) of a Los Angeles area company before its shares were sold to the public. In issuing its stop order against Counseling International, the Commission determined that the company’s registration statement contains false and misleading information.
According to the SEC’s stop order, Counseling International’s registration statement fails to disclose the identity of the company’s control persons and promoters as required under the securities laws. Among other deficiencies, the registration statement falsely describes the circumstances surrounding the departure of the former CEO.
Stop orders proactively prevent fraud by halting the securities registration process before a company’s stock is sold to the public based on a deficient or misleading registration statement. Counseling International first filed a registration statement in August 2012 for an initial public offering of 764,000 shares of common stock. The registration statement has been amended four times since that filing.
“A company’s registration statement is the bedrock on which its stock is offered to the general public, and Counseling International did not provide the accurate and complete information that investors would be entitled to when deciding whether it’s appropriate to invest in the company,” said Michele Layne, Director of the SEC’s Los Angeles Regional Office. “Rarely do we have the opportunity to prevent investor harm before shares are even sold, but this stop order ensures that Counseling International’s stock cannot be sold in the public markets under this misleading registration statement.”
Counseling International agreed to the issuance of the order instituting the stop order proceeding, and also agreed not to engage or participate in any unregistered offering of securities conducted in reliance on Rule 506 of Regulation D for a period of five years from the issuance of the order.
The SEC’s investigation, which is continuing, has been conducted by Roberto Tercero and Spencer Bendell in the Los Angeles office.