South Florida Arbitration & Litigation Lawyer Blog
Securities and Exchange Commission v. The Investors Registry, LLC, and Michael J. Southworth, Civil Action No. [2:12-cv-02214-MEA] (D. Ariz., filed October 16, 2012).
SEC Charges Arizona Man With Acting As An Unregistered Broker and Unlawful Touting
The Securities and Exchange Commission recently announced that it filed a civil action in the United States District Court for the District of Arizona against Michael J. Southworth, a resident of Mesa, Arizona, and his entity, The Investors Registry, LLC (TIR), alleging that both defendants violated the broker-dealer registration provisions, and that Southworth violated the anti-touting provisions of the federal securities laws.
In its Complaint, the Commission alleges that since 2007, Southworth sold hundreds of memberships in TIR, which he marketed as an “exclusive investment community” in which members would have the opportunity to invest in “pre-IPO” issuers. Through TIR, Southworth profiled microcap issuers by sending emails to TIR members and by posting information to a members-only website. From 2007 to 2011, Southworth, through TIR, acted as an unregistered broker with respect to the profiling of five issuers by soliciting TIR members to invest in the issuers, advising TIR members as to the merits of investing in the issuers, and negotiating with the issuers regarding certain terms of their offerings to TIR members. Southworth also touted the same five issuers without adequate disclosure of the consideration that he received from them.
Southworth and TIR agreed to settle the SEC’s charges without admitting or denying the allegations in the Complaint. This settlement is subject to approval by the court. Southworth and TIR agreed to be permanently enjoined from violations of Section 15(a) of the Securities Exchange Act of 1934, and barring Southworth and TIR from participating in the offering or sale of a penny stock for three years. Southworth further agreed to be permanently enjoined from violations of Section 17(b) of the Securities Act of 1933, and to pay disgorgement of $217,755 plus prejudgment interest, with the waiver of payment of all but $100,000, and not imposing civil penalties based on Southworth’s Sworn Statement of Financial Condition.
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