Attorneys sued by SEC for issuing allegedly fraudulent Rule 144 opinion letters
Last week the Securities and Exchange Commission sued two California attorneys for issuing allegedly fraudulent legal opinions which allowed the holders of restricted Rule 144 stock in a communications company to sell their holdings prematurely (news release here). As set forth in the SEC's press release, attorneys Albert J. Rasch, Jr. and Kathleen R. Novinger violated the antifraud and registration provisions of the provisions of the 33' and 34' Acts, as well as Rule 10b-5, by falsely opining that the restricted stock of Mobile Ready Entertainment Corp. met the conditions necessary to enable its sale by insiders. In July 2008, the SEC had sued both Mobile Ready and its co-CEO's with having engaged in a pump and dump scheme using the restricted stock (news release here).
The SEC emphasized that it will hold securities lawyers to their functions as "gatekeepers" in the market, auguring further enforcement actions against attorneys whose conduct falls short of the SEC's standards. However, no concurrent criminal prosecution of the attorneys was announced.
