by Justin Tollefsen | Apr 5, 2016 | Administrative US, Administrative WA, Attorneys, Blog, Business Law, Corporate Law DL, Entrepreneurship, Regulatory Compliance, SEC, Securities Law WA, Securities US, Tollefsen Law
At some point, nearly every regulatory client has asked me, in a tone of incredulity, why “such a little thing” mattered to a regulating agency. Often the client also asks why a government regulator focuses on the “little guy” when big business appears to skate through regulatory compliance with no issues. The second answer is far simpler but answering it first leads us to part of the answer for the first question. How Big Businesses Treat Regulatory Compliance Big businesses appear to skate through regulatory matters without issues, in a sense, because they are big. Being big, they hire regulatory compliance experts to eliminate issues and quickly correct any problems that do come up. They have support personnel to do the actual work. The proactively address most problems before they get to the point of administrative sanctions or lawsuits. This is not to say big businesses don’t have regulatory problems: many do. Some businesses simply don’t bother to comply and have problems as a result. But most big businesses place an emphasis on regulatory compliance. They recognize that compliance failure can be a business-ending proposition. They place a priority on regulatory compliance. Simply making regulatory errors can put a company under heightened scrutiny, causing more frequent examinations and other disruptive and costly consequences. A series of errors, or repeated errors, may also raise questions that lead to more serious investigations or prosecutions. Each situation drags at a company’s bottom line and pulls focus from the company’s mission and vision. As a result, most big businesses solve their regulatory issues quickly. They hire staff to address compliance. They include it...
by John J. Tollefsen | Dec 12, 2015 | Blog, Civil Litigation WA, Consumer Protection WA, Contracts WA, Employment Law WA, Fraud WA, Securities Law WA
SANDRA C. THORNELL, on behalf of herself and an others similarly situated, Plaintiff, v SEATTLE SERVICE BUREAU, INC. d/b/a) NATIONAL SERVICE BUREAU, INC., and STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,) Defendants. copy of decision: 151210 Thornell v Seattle Service Bureau “This case involves two certified questions from the United States District Court for the Western District of Washington. First, we are asked to determine whether the Washington Consumer Protection Act (CPA), chapter 19.86 RCW allows a cause of action for a plaintiff residing outside Washington to sue a Washington corporate defendant for allegedly deceptive acts. Second, we are asked to determine whether the CPA supports a cause of action for an out-of-state plaintiff to sue an out-of-state defendant for the allegedly deceptive acts of its instate agent. The United States District Court noted an absence of Washington case law providing guidance on these issues. We answer both certified questions in the affirmative.” “We first focus on the definition of “commerce” – “any commerce directly or indirectly affecting the people of the state of Washington.” RCW 19.86.010(2) (emphasis added). The definition of “commerce” does not describe who may sue under the CPA but rather the scope of the acts and practices the CPA is designed to prevent. Defendants argue that the definition of “commerce” should not be understood to allow a claim for an unfair or deceptive practice on behalf of people not “of the state of Washington.” Such a reading, however, would require us to give no effect to the words “indirectly affecting.” In order to give effect to the phrase “indirectly affecting,” claims are not limited to those only having...
by Justin Tollefsen | Sep 30, 2013 | Blog, Business Law, Entrepreneurship, Federal Law, Securities Law WA, Securities US
As readers of this and other startup-focused blogs will be aware, exactly one week ago today general solicitation of securities offerings to accredited investors became legal for the first time in 80 years. Prior to the 23rd of September, coverage of this upcoming shift was divided with some predicting major alterations to the landscape, others predicting hardly any change at all, and yet others delaying judgment, at least until some additional proposed rules are finalized. Reading the Tea Leaves What can we learn from the first week’s tea leaves regarding the initial reaction to general solicitation? Some notable actors were off to the races, with folks like AngelList and WeFunder immediately jumping in and offering solutions that take advantage of the broad exposure offered by general solicitation (while recognizing the need to still comply with accredited investor requirements). Leading the charge were Second Market and WeFunder. The latter has taken perhaps the most proactive stance on general solicitation, even offering to do some securities work on behalf of companies (using generic forms). These companies seem to be betting that the current window between the enactment of the rules adopted in July allowing for general solicitation and the pending adoption of any of the proposed rules will give them a significant head start on their competitors. They are also betting that any new rules won’t change things significantly (the best case for them), or at least won’t be applied retroactively. On the opposite end, FundersClub has taken a cautious “wait-and-see” approach. CEO Alex Mittal has made it clear that the VCs, angel investors, law firms and others that he has...
by Justin Tollefsen | Sep 23, 2013 | Blog, Business Law, Entrepreneurship, Federal Law, Securities Law WA, Securities US
As has been continuously reported in the media, and on fine law blogs, today marks the end of the 80 year ban on general solicitation (public advertisement) for securities sales. This means that for the first time since the Securities Act of 1933 was enacted, companies will be able to go out and solicit groups of accredited investors to invest in their startups, provided that they: Check a box on their form D indicating that they have generally solicited; Take additional steps to verify that their investors are in fact accredited (one page questionnaire no longer good enough); and Ensure that they do not accept any funds from non-accredited investors. #1 is self explanatory. #2 requires a bit of attention, because in the past is was sufficient to have an investor fill out a basic questionnaire verifying that they comply with the definition of “accredited”, as defined in Rule 501 of Regulation D. Now, however, those generally soliciting investments must take “reasonable steps” to ensure that the investors are indeed accredited, and must keep proof of having done so. This means that you will need to ask for personal financial documentation, such as copies of form W-2 or 1040, bank statements from past three months, and brokerage statements from your potential seed or Angel investors. Many will scoff at this intrusive requirement. #3 is also important. While a “regular” Rule 506 offering still allows for up to 35 non-accredited investors, if you check the box indicating that you’ve generally solicited, you may not sell ANY shares to non-accredited investors. In addition, the SEC took the confusing step of issuing...
by Justin Tollefsen | Dec 25, 2011 | Blog, Fraud, Securities Law WA
Richard Finger Fraud – Victims plot strategy Fraud victims plot legal strategies for recovery Puget Sound Business Journal by Kelly Gilblom, Staff Writer Date: Friday, December 16, 2011, 3:00am PST In the wake of a $7 million financial fraud discovered in Kirkland this September, victims of securities broker Richard Finger have hired attorneys and are turning to arbitration and insurance to recover some of their lost investments. These defrauded investors include not just mom-and-pop outfits but a wealthy Kirkland family with numerous businesses — a family that has hired a prominent attorney. Their strategy to recover lost funds could lay out a possible path for other victims of financial crimes as they struggle to overcome major obstacles to recouping their losses. The majority of the $7 million in assets lost belonged to Finger’s mother-in-law and father-in-law, Brenda and Elling Halvorson, according to lawyers and information in Finger’s charging documents. Their investment with Finger represented only a fraction of their net worth. The Halvorsons own a number of businesses, according to information from the Washington Secretary of State. One of the most well-known of their entities is Papillon Helicopters, a company that offers helicopter, airplane and bus tours of the Grand Canyon and Las Vegas. Papillon, established in 1965, has more than 600 employees and a fleet of 48 helicopters and six airplanes, according to information on its website. The Finger story is familiar: At least 10 victims — family and friends — lost sums of money ranging from less than $100,000 to more than $1 million, according to a criminal indictment against Finger. He lost client money through risky...
by Justin Tollefsen | Oct 25, 2011 | Blog, Fraud, Securities Law WA
Smith v. Finger Stockbroker pleads guilty to taking millions from investors. FINRA arbitration filed. Regulators may have missed securities fraud by Kirkland firm Puget Sound Business Journal by Kelly Gilblom, Staff Writer Date: Friday, October 21, 2011, 3:00am PDT – Last Modified: Thursday, October 20, 2011, 6:51pm PDT On Aug. 18,Jon-Michael Smith called the Kirkland Police Department to report an unusual theft. Smith, a distraught investor, had been trying to reach his broker for several days because his July statement hadn’t arrived. Finally, Smith phoned a company that handles trading for his account. What he heard made him sick. Instead of the $1.56 million he was supposed to have, the clearing broker said Smith’s balance was just $27,000. The account statements Smith had received were false, part of a fraud allegedly conducted by Kirkland broker Richard Finger Jr. to conceal the fact that he had lost nearly $7 million that his 25 clients had trusted him to manage, according to police reports and court documents. By the end of that week, Smith had given statements to the FBI, the Justice Department and the Securities and Exchange Commission. On Sept. 8, the federal entities went to court to arrest Finger and freeze the assets of his firms, Black Diamond Securities and Black Diamond Capital. What makes the story unusual is that just three weeks before Smith called the police, regulators had audited Black Diamond Securities and did not report finding any fraud. Finger, 32, quickly admitted his misdeeds. In a statement issued two weeks after Smith went to the police, he “acknowledged deceiving some of his customers” and said he...
