Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, December 2, 2009

SEC Charges Transfer Agent with Improper Distribution of Restricted Securities

On November 30, 2009, the SEC filed a civil injunctive action in the U.S. District Court for the District of Utah against Standard Transfer & Trust, a registered transfer agent, and its president Whitney D. Lund, Sr. In its Complaint, the SEC charges Lund with improperly distributing restricted stock certificates of Mosaic Nutraceuticals Corp. after fraudulently issuing the certificates without the proper restrictive legends. He allgedly did this as part of a scheme to profit from the sale of Mosaic shares he owned and controlled, and, as a result of his actions, market participants were misled into treating these restricted securities as free trading. To cover his scheme and reap more than $700,000 in illicit profits, according to the Complaint, Lund falsified transfer agent records and obtained a materially false and misleading attorney opinion letter that was backdated at Lund’s direction in an effort to make his distribution of Mosaic stock appear legitimate. In addition, according to the Complaint, Lund testified falsely during the SEC’s investigation, claiming that he relied on this opinion letter when he made the distribution. The Complaint further charges Standard Transfer & Trust from violating multiple regulations governing the conduct of transfer agents and Lund with aiding and abetting those violations.

The Complaint requests that the court permanently enjoin the defendants from future violations of the federal securities laws, order the defendants to pay financial penalties, and order Lund to disgorge ill-gotten gains, plus prejudgment interest. The complaint also asks the court to bar Lund from participating in an offering of penny stock.

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