The Securities and Exchange Commission announced enforcement actions against two leaders at a Las Vegas-based transfer agent firm who were responsible for disclosure failures in registration forms filed with the SEC.
Empire Stock Transfer Inc. and the two individuals agreed to settle the SEC’s charges.
Publicly traded companies typically use transfer agents to keep track of individuals and entities that own their stocks and bonds. Transfer agents generally act as an intermediary for the company, issue and cancel certificates upon changes in ownership, and handle certificates that are lost, destroyed, or stolen. Transfer agents must file registration forms with the SEC and include information about the individuals who control or finance the firm. The forms must be amended whenever any information becomes inaccurate or incomplete.
An SEC examination and subsequent investigation found that Empire’s sole owner according to its registration forms – Patrick R. Mokros – failed to disclose that he relied on another individual to finance the purchase of the firm. Also not disclosed in Empire’s forms is the fact that Mokros allowed his financier to play a significant role in the firm’s operations and receive a substantial portion of the profits.
The SEC also found that Empire’s registration forms failed to disclose the role of another leader at the firm – Matthew J. Blevins – who was hired in January 2007 to run Empire’s day-to-day operations and oversee the firm’s finances. Empire didn’t update its registration forms to disclose the additional control person until last month as the SEC’s investigation was winding down.
“Transfer agents ensure the orderly transfer of securities, and it’s critical for such gatekeepers to accurately disclose who is financing and controlling their operations,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office. “Empire’s filings told a different story than what was actually happening behind the scenes.”
The SEC’s order instituting settled administrative proceedings finds that Empire, Mokros, and Blevins committed or caused violations of Sections 17(a)(3) and 17A(c)(2) of the Securities Exchange Act of 1934, and Rules 17Ac2-1(a) and (c). Empire and Mokros agreed to pay a $50,000 penalty and Blevins agreed to pay a $25,000 penalty to settle the SEC’s charges. Without admitting or denying the SEC’s findings, Empire, Mokros and Blevins agreed to a censure and must cease and desist from committing or causing further violations. Empire must retain an independent compliance consultant.
The SEC’s investigation was conducted by Ronnie Lasky, Kelly Bowers, and Diana Tani of the Los Angeles Regional Office. The examination that led to the investigation was conducted by Cindy Wong, Erik Barker, and Ed Brady of the Los Angeles office.