The Boys Who Cried IPO; SEC Halts Stock Scheme

The Securities Exchange Commission said it has secured a court-ordered freeze on the assets of two former brokers, namely Hugh Brennan III and Douglas Albert Dyer, who have been accused of fraud.

Modus Operandi

The fraudsters were charged with the crime of cheating 240 investors of more than $5 million since 2008 by selling them shares of eight similarly named companies, although the shares weren't registered. Instead, the two were found to have transferred funds into their personal accounts or those of their wives.

Additionally, the securities watchdog noted that Brennan and Dyer continue to solicit investors by flaunting their experience in the securities industry, but by hiding the fact that they had earlier been either banned or suspended from the brokerage industry and have had to face disciplinary proceedings.

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"We allege that Brennan and Dyer have been telling investors the same lies for several years without fulfilling any of the promises they've made, and the court's temporary restraining order stops them from soliciting any more investors and freezes their assets as we pursue litigation," said Walter Jospin, director of the SEC's Atlanta regional office.

Violations

Listing the violations, the SEC said Brennan, Dyer and their company Broad Street Ventures violated the following sections:

• Section 17(a) of the Securities Act of 1993
• Section 10(b) of the Securities Exchange Act of 1934
• Rule 10b-5

Punishment

The SEC has sought disgorgement of ill-gotten gain and additional interest and penalties as well as other permanent injunctions. The agency has also sought penny stock and officer-and-director bars against both Brennan and Dyer.

In a bid to recover the cheated money deposited in the accounts of the spouses of the two, the SEC has named the spouses as relief defendants.

Learning

The SEC also used this unpleasant development as an opening to remind investors that they would be better off checking the backgrounds of investment professionals on its investor.gov website. Citing this instance, the SEC said a quick search on the website would have revealed the dark past of the two, who have had run ins with the Financial Industry Regulatory Authority and state regulators in the past.

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