Securities Law Prof Blog

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

Thursday, October 16, 2008

Alexander & Wade Sanctioned for Section 5 Violations

Alexander & Wade, Inc. (AWI), has been ordered to cease and desist from violations of the registration provisions of the securities laws and to disgorge $2,866,375 of ill-gotten gains. From 2002 to 2005, AWI advised and guided several microcap issuers in raising millions of dollars by selling their common stock to the public in violation of the registration requirements of the federal securities laws and thereby caused violations of Sections 5(a) and 5(c) of the Securities Act of 1933. From mid-2002 through mid-2005, AWI introduced at least fourteen clients (the Issuers) to so-called employee stock option programs, under which the Issuers sold billions of shares of common stock in unregistered offerings. Under the programs, the Issuers improperly registered the shares underlying the stock options on Form S-8 registration statements and then received the bulk of the sales proceeds as payment for the options’ exercise price. The programs functioned as public offerings in which the Issuers’ employees were used as conduits to the market so that the Issuers could raise capital without complying with the registration requirements of the Securities Act. AWI introduced the programs to the Issuers, helped implement the programs, and provided advice on how to administer the programs, even though it knew, or should have known, that its conduct was contributing to the Issuers’ registration violations.  The sanctions were ordered in an administrative proceeding before an administrative law judge.

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