SEC Charges Attorney with Scheme to Hide Her Role in Preparing False Legal Opinions for Microcap Securities
Litigation Release No. 24421 / March 13, 2019
Securities and Exchange Commission v. Diane D. Dalmy, No. 19-civ-00745 (D. Colo. Mar. 13, 2019)
The Securities and Exchange Commission today charged an attorney with fraud for concealing from transfer agents and brokerage firms her involvement in preparing legal opinion letters concerning the sale of certain microcap securities.
The SEC alleges that the attorney, Diane D. Dalmy, had been placed on the prohibited attorneys list maintained by OTC Markets Group, Inc., which owns and operates the largest U.S. electronic quotation and trading system for microcap securities. To evade the consequences of this prohibition, Dalmy allegedly recruited a retired divorce lawyer, who signed legal opinion letters drafted by Dalmy without performing due diligence or conducting any legal analysis and then sent them on to the firms. The SEC alleges that legal opinion letters are a significant factor in transfer agents' and brokerage firms' decisions to deem certain securities eligible to be freely sold on the public market without SEC registration, and that transfer agents and brokerage firms often refuse to accept legal opinion letters from attorneys subject to OTC Markets prohibitions.
The SEC further alleges that, in 2016, Dalmy was permanently suspended from appearing and practicing before the SEC as an attorney, which prohibited her from representing clients in SEC matters, including investigations, litigation, or examinations, and from advising clients about SEC filing obligations or content. Despite this, the SEC alleges that Dalmy continued to prepare filings for publicly traded companies and directed the other attorney to file them with the SEC.
The SEC's complaint, filed in federal court in Denver, Colorado, charges Dalmy with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks permanent injunctions against violating these provisions, a conduct-based injunction prohibiting Dalmy from providing legal services pertaining to federal securities law exemptions from registration and requiring her to provide actual or potential clients seeking advice or representation in matters related to the federal securities laws with copies of the SEC's prior actions against her, disgorgement of ill-gotten gains plus interest, a penny stock bar, and an order pursuant to Section 21(e) of the Exchange Act requiring Dalmy to comply with the SEC's September 2016 order.
Dalmy has been charged multiple times by the SEC and by the criminal authorities. Investors can use the SALI feature to find information about certain people who have had judgments or orders issued against them in SEC court actions or administrative proceedings.
The SEC's case is being handled by J. Lauchlan Wash, Josh Grinspoon, Frank Huntington, and Amy Gwiazda of the SEC's Boston Regional Office. The SEC appreciates the assistance of the U.S. Attorney's Office for the District of Connecticut and the Federal Bureau of Investigation.