Cases
SEC v. Spartan Securities Group
CASE SUMMARY
SEC accused market-maker Spartan Securities Group and transfer agent Island Capital Management of involvement in filing Form 211 applications with the Financial Industry Regulatory Authority to publicly list 19 issuers’ common stock to be traded and available to investors. SEC eventually discovered the issuers had been involved in fraud, subsequently faulting Spartan and Island for failing to discover the misconduct. The agency also claimed the companies failed to investigate certain SEC “red flags” FINRA raised. However, SEC has repeatedly emphasized the limited nature of the obligation of market-makers and rejected any view that they have a special due diligence requirement to look beyond the statements made to them by issuers of securities.
Neither Spartan, Island, nor any of their employees were involved in creating or operating the issuers named in the complaint. They amply complied with statutory obligations, gathered all required information, and compiled reams of documents supporting the applications above and beyond the lawful requirements. NCLA argued SEC was attempting to hold the defendants liable under an arbitrary expansion of the requirements of applicable rules set out by Congress and the Commission itself. SEC’s Division of Enforcement would have held the market-makers responsible, despite both FINRA regulators and SEC examiners analyzing the same information and declaring it valid and genuine.
In July 2021, federal jurors in the Middle District of Florida delivered a favorable verdict in the case, fully exonerating NCLA clients David Lopez, former Chief Compliance Officer for Spartan and Island. The jury also ruled in favor of NCLA’s other clients, Spartan and Carl Dilley (on 12 out of 13 charges), and Micah Eldred and Island Stock Transfer (on 11 counts out of 12), rejecting multiple allegations of fraud, aiding and abetting, as well as regulatory violations of the 1933 Securities Act and the 1934 Securities Exchange Act.
RELEVANT MATERIALS
NCLA FILINGS
Rule 28(j) Letter in U.S. Securities and Exchange Commission v. Spartan Securities Group, Ltd., et al. (No. 22-13129)
July 3, 2024 | Read More
Re: Rule 28(j) Letter U.S. Securities and Exchange Commission v. Spartan Securities Group, Ltd., et al. (No. 22-13129): Regarding Erlinginger v. United States
June 26, 2024 | Read More
Re: Rule 28(j) Letter - U.S. Securities and Exchange Commission v. Spartan Securities Group, Ltd., et al. (No. 22-13129): Regarding Starbucks v. McKinney
June 26, 2024 | Read More
Defendants-Appellants' Supplemental Brief
May 14, 2024 | Read More
Rule 28(j) Letter
November 2, 2023 | Read More
PRESS RELEASES
NCLA Calls on 11th Cir. to Vacate District Court’s Judgment in Case SEC Never Should Have Brought
January 17, 2023 | Read More
Judge Enters Reduced Penalty for NCLA Clients Exonerated from Excessive SEC Charges
August 10, 2022 | Read More
NCLA Celebrates Jury Verdict Exonerating Our Clients from a Dozen Inaccurate SEC Charges
July 30, 2021 | Read More
Jury Trial Begins in Case Challenging SEC’s Arbitrary Expansion of Rules for Securities Companies
July 13, 2021 | Read More
NCLA Files for Summary Judgment in Case Where SEC Is Seeking to Enforce Guidance Instead of Law
August 21, 2020
IN THE MEDIA
SEC Loses Jury Trial Against Spartan In Shell Factory Case
Law360
February 7, 2023
Week Ahead in Securities
Reuters
February 7, 2023
SEC Fights To Call Spartan Shell Factory At Trial
Law360
February 7, 2023
Broker-Dealer Says SEC Overstepping In Sham Cos. Suit
Law360
February 7, 2023
CASE HIGHLIGHTS
Filing
August 10, 2022
Opinion of the U.S. District Court Middle District of Florida, Tampa Division
Media Mention
February 7, 2023
Broker-Dealer Says SEC Overstepping In Sham Cos. Suit
Source: Law360
Press Release
January 17, 2023
NCLA Calls on 11th Cir. to Vacate District Court’s Judgment in Case SEC Never Should Have Brought