Securities Law Prof Blog

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

Thursday, March 7, 2013

SEC Charges California Attorney with Selling Rule 144 Opinions for a Business

The SEC charged a California-based lawyer who, according to its complaint, has made a business out of selling rule 144 opinions to enable sales of unregistered securities through his website.  While SEC actions against  attorneys for writing fraudulent opinion letters are not, unfortunately, unusual, the allegations in this case, if true, are egregious.

The SEC alleges that Brian Reiss set up to promote his legal opinion letter business and advertise “volume discount” rates while noting “penny stocks not a problem.”  Reiss steered potential customers to his website by making bids on search terms through Google’s AdWords, and then relied on a computer-generated template to draft his opinion letters within minutes absent any true analysis of the facts behind each stock offering.  The letters from Reiss ultimately made false and misleading statements and facilitated the sale of securities in violation of the registration provisions of the federal securities laws.

According to the SEC’s complaint, Reiss began issuing the fraudulent legal opinion letters in 2008.  He advertised a $285 rate for each letter and a “volume discount” rate of $195 per letter.  The SEC alleges that the false and misleading statements that Reiss made in opinion letters induced transfer agents for several public companies to remove the restrictive legends from the stock certificates and permit the sale of free-trading shares to the public. 

The SEC seeks to bar Reiss from participating in the offering of any penny stock pursuant to Section 20(g) of the Securities Act.  The SEC also seeks permanent injunctions – including an injunction prohibiting Reiss from providing legal services in connection with an unregistered offer or sale of securities.

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