Tag Archives: SEC

“Aged Debt” Not Exchangeable for Unrestricted Securities

“Aged Debt” Not Exchangeable for Unrestricted Securities

This came from our friends over at Sonfield & Sonfield:

We are informed that some folks believe so-called “aged debt” is exchangeable for common stock or other securities that endure a holding period beginning on the date of creation of the debt.  The folks who unfortunately believe this untruth rely on Section 3(a)(9) that exempts transactions: “[E]xcept with respect to a security exchanged in a case under title 11 of the United States Code, any security exchanged by the issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange.

Rule 144(d)(3)(ii) provides that if securities are acquired from an issuer solely in exchange for other securities of the same issuer, the newly acquired securities may tack onto the holding period and shall be deemed to have been acquired at the same time as the securities surrendered for conversion, even if the securities surrendered were not convertible or exchangeable by their terms.  Rule 144 also authorizes the issuer and investor to agree to conversion terms and still benefit from tacking the holding period of a promissory note, or other security that does not have a conversion feature as originally written.

The exemption from registration makes no mention of “debt.”  The exemption applies to exchanges only of securities.

However, the Securities Act provides an exemption from the registration requirements for the offer and sale of securities by issuers in exchange for debt, if:  “The terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court, or by any official or agency of the United States, or by any State or Territorial banking or insurance commission or other governmental authority expressly authorized by law to grant such approval.”

SEC Staff Bulletin 3 provides that the resale of securities issued in Section 3(a)(10) transactions may be had without regard to Rule 144 if the seller is not an affiliate of the issuer either before or after the Section 3(a)(10) transaction. That is, if the seller is not an affiliate of the issuer, securities issued in a 3(a)(10) transaction are unrestricted and may be immediately sold in the public markets.

© 2018 by Sonfield & Sonfield, all rights reserved.

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Posted by on January 17, 2018 in Business, Public markets


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Oppressive regulation of small companies by FINRA

We at Rhodes Holdings LLC feel very strongly about the U.S. financial system, and its ability to provide capital formation for companies in growth mode.  The build up of regulations have strangled our economy and our financial markets.

We agree wholeheartedly with Mr. Sonfield – please read his letter to Senator Cruz (2018-01-04 Letter to Ted Cruz from Robert Sonfield):

2018-01-04 Letter to Ted Cruz from Robert Sonfield

Please join us in working to open up our markets and supporting Mr. Cruz in this endeavor.

© 2018 by Mr. Robert L. Sonfield, Jr. esq. of Sonfield & Sonfield and portions by Rhodes Holdings LLC, all rights reserved.  Please feel free to copy the PDF or image and replicate for purposes of supporting this and communicating with Mr. Cruz.

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Posted by on January 6, 2018 in BLOG, Public markets


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Just when you thought John O’Quinn couldn’t get any more interesting…

…even when he died in 2009, his legacy continues to live on.  John O’Quinn is remembered for his large litigation win against tobacco and is thought to have won over $1.5 billion for his law firm over his career (Wikipedia’s biography).

In the news this week, a former client of John O’Quinn sued O’Quinn’s law firm.  You’re hearing about it here as the client, Eagletech Communications, Inc., was in litigation to stop “naked short selling”, which is a huge institutionalized problem that we are still dealing with today.  Here are the stories that came out this week:

To get more information on the Eagletech Communications, Inc. case and the issues involved, take a look at this movie, The Wall Street Conspiracy:

More information available:



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SEC halts trading in a number of micro-cap companies yesterday

Yesterday, the United States Securities & Exchange Commission (“SEC”) halted trading in 255 securities, mostly micro-cap dormant shell companies.  Per Laura Anthony, Founding Partner and Attorney at Legal & Compliance, LLC (

On February 3, 2014, the Securities and Exchange Commission (SEC) suspended the trading in 255 dormant shell companies.  The trading suspensions are part of an SEC initiative tabbed Operation Shell-Expel by the SEC’s Microcap Fraud Working Group.  In May 2012, the SEC suspended the trading on 379 shell companies and in June 2013, it suspended 61 shell companies as part of the initiative.  Each of the companies was a dormant shell that was not current in its public disclosures.  Each of the companies failed to have adequate current public information available either through the news service on OTC Markets or filed with the SEC via EDGAR.

Check out her BLOG and post concerning this important happening at

Here is the SEC’s announcement at

© 2014 by Rhodes Holdings LLC, all rights reserved. Quote from Laura Anthony’s BLOG as referenced above.

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Posted by on February 4, 2014 in BLOG, Business, Public markets


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Public company website disclosure

This is an article that we created for our clients as a guide to creating website webpages that conform to the requirements setup by the U.S. SEC.  If there omissions or inaccuracies, please tell us as we would like to get this right for our clients.  Here is a 1934 Act Disclosure (MS Word format) and 1934 Act Disclosure (PDF version) as well.

Background Discussion

First, there are two different types of publicly traded companies – those that are regulated by the U.S. Securities Act of 1933[1] (“1933 Act”), which are not required to disclose financial activities through the U.S. Securities and Exchange Commission (“S.E.C.”) prescribed methods, and those that are regulated by the U.S. Securities Act of 1934 (“1934 Act”), which requires regulated companies to periodically report information through prescribed forms.

We believe that the disclosure that we refer to within this document is equally important for each type of publicly traded company, but only 1934 Act companies will have SEC mandated periodic financial reports, i.e. 10K, 10Q, 8K, Form 3, Form 4, etc.

[In 2000,] the SEC adopted Regulation FD to address the selective disclosure of information by publicly traded companies and other issuers.  Regulation FD provides that when an issuer discloses material nonpublic information to certain individuals or entities—generally, securities market professionals, such as stock analysts, or holders of the issuer’s securities who may well trade on the basis of the information—the issuer must make public disclosure of that information. In this way, the new rule aims to promote the full and fair disclosure.” — SEC website description.

Investor Webpage

There are slight nuances between 1933 Act public companies and 1934 Act public company (requiring SEC filings and disclosure).  Here is an example of BenchMark Energy Corporation’s investor web page on September 6th, 2013.

As you can see, we haven’t used any RSS feeds at all, just hard coded information.  This is simple and doesn’t require a fee. does provide Level II quotes as part of its package for Pink Sheets current information companies.  See their website for more information; also, this requires their fee, which currently is $5,200 per year.

Menu Items

There are no set items that are required, except a list of the SEC filings containing all of the SEC disclosure filings that the company has made.  The easiest thing to do, rather than embed those items, is to reference another website (in this case, the website) so that the other site is liable for any misstatements of fact.  Due to linking to other sites, we normally add this disclaimer:

Disclaimer for Non-affiliated Websites

PUBLIC COMPANY NAME (SYMBOL, hereafter referred to as “XXXX”) provides a number of links (within the menu structure) that are not affiliated with PUBLIC COMPANY NAME, nor do we endorse these websites or the content.  PUBLIC COMPANY NAME and its officers do not post comments nor reply to posts on investor message boards, nor do we sponsor or promote a specific message board over another.  This lists Internet websites that provide community for our shareholders / investors.

Here is what our menu structure would normally look like:

  • Investors Page
    • SEC Filings  where ‘XXXXXXXXXXXXXX’ is the proper name of the company.  Make sure that it goes to the correct company disclosure webpage on the SEC’s site.
    • Management & Board
      This should be a webpage on your website.  If not, just include the management and board on the investor webpage.
    • Board Committees
      This should be a webpage on your website.  If not, just include the management and board on the investor webpage.
    • Ethics Statements

This should be a webpage on your website.  If not, just include the management and board on the investor webpage.

  • Quotes
    You can create a single webpage on your website that lists out a number of locations for quotes, but I normally just include links – less risk that something goes wrong with the RSS embedding.

[1] The complete act is available at

[2] You must look up this message board number yourself, if it exists.  If it doesn’t exist, you will need to request a board be created by the website administrator.

© 2013 by Rhodes Holdings LLC, all rights reserved except excepts from the website.


Posted by on September 8, 2013 in BLOG, Business, Public markets


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What were they thinking…

First, I must apologize for the dearth of information on the public markets and financing techniques therein over the last four months coming from our BLOG.  Our associated group of organizations (Rhodes Holdings LLC, ReCap Marketing & Consulting LP, and American Equity Fund LLC) have been involved in a number of actions to protect shareholder value as well as having been asked to put together a number of “go public” projects for clients.  With that said, expect a new focus on providing a look into what is going in the public markets…

OTC Markets

Since the Jumpstart Our Business Startups Act (“J.O.B.S.“) Act was signed into law on April 5, 2012, there has been a “promise” in the air that it would help get capital formation for the micro-cap market started again.  This really hasn’t happened since the Congress and President can’t seem to get their acts together (pun intended), and the Securities & Exchange Commission (“SEC“) hasn’t released the details on how it will enforce the J.O.B.S. Act provisions, like changes to internet marketing of stocks (general solicitation).

OTC Markets Group Inc. had hoped that this Act would help drive their business, but alas FINRA is all about limiting the markets that OTC Markets Group Inc. serves by making it impossible to deposit shares in Pink Sheet companies as well as OTC:BB companies.  The crux of the problem that those of us working in the

Seal of the U.S. Securities and Exchange Commi...

Seal of the U.S. Securities and Exchange Commission. (Photo credit: Wikipedia)

micro-cap arena are facing is that even if you follow all the rules (register your shares, pay cash for stock, etc.), the broker dealers and their compliance departments are running scared of the SEC and FINRA’s rules, so stock just doesn’t get sold.  If no stock gets sold, that capital doesn’t get re-invested into other micro-cap stocks – thus, the velocity of money associated with micro-caps has ground to a halt.  Read what OTC Markets Group Inc. has to say:

In a few cases, it has eased regulation and shown that at least some of those in Congress listened.  The J.O.B.S. Act did make it so that issuers did not have start filing SEC mandated disclosure statements (10Q, 10K, 8K, etc.) until they reach 2,000 shareholders – previously it was 500 shareholders triggered filing requirements.  Read CFO magazine‘s article on banks de-registering:

All in all, the J.O.B.S. Act has not helped us reach its stated goal – helping jump start capital formation.  It may still help, but those of you who thought that crowd funding was going to take over capital formation, it hasn’t delivered the goods.

Accredited Investors

The J.O.B.S. Act did make some changes to the accredited investor definition, which would be very helpful.  The original 1933 Act definition is as follows for Rule 501 definitions.  Here is what the General Counsel of Second Markets had to say about the proposed implementation in his letter to the SEC.  In general, we at Rhodes Holdings LLC are keeping track of what is happening in the marketplace that will make it easier for our clients to access the capital they need.  Here are some websites associated:


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Raising money – entrepenuers log book…

For the entrepreneur, everything starts with a business plan that lays out what they will be doing.  Once the plan is in place, now you have to finance your new start-up, or ongoing business that has a new “use of proceeds” for a new line of business.  This is where most entrepreneurs fail – finding money and putting it to work is an art form.  Find the wrong money, and it kills you (like factoring when your clients take too long to pay).  Find the right money at the wrong time, and you never get to use it again (commercial lines of credit when your bank uses cash flow and you are building assets).

Therefore, entrepreneurs need to be adept at securing equity, but there are so many laws surrounding this area that most entrepreneurs as well as seasoned professionals run afoul of the laws, both federal and state securities laws.  For instance, as a merchant banking organization, Rhodes Holdings LLC does not raise money – we restructure organizations, working with them to re-write their business plans with strategies that allow them to secure financing.  I, Robert Rhodes, accepted the position of Managing Member of American Equity Fund LLC (“AEF”), so that public companies that were reorganized could be offered a financing facility that was legal, and did not run afoul of these laws – specifically because AEF works with clients to file registration statements with the US Securities and Exchange Commission (S.E.C.) for the equity investment.  We would like to help entrepreneurs understand the process though; here are few articles that you should read:

© 2012 by Rhodes Holdings LLC, all rights reserved.


Finance (Photo credit: Tax Credits)



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