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Irwin Law
Irwin Law, Attorney
Category: Business Law
Satisfied Customers: 7312
Experience:  30+ yrs. representing small business, real estate, probate
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I purchased preferred stock from a small corporation based

Customer Question

I purchased preferred stock from a small corporation based on their offering document. Fifteen months later, I made an additional purchase and three months after that made another purchase. I later found out that in between the first and second purchases, the company lost 60% of their cash on hand, however did not advise me prior to my second and third purchases.
My question is "is what they did against SEC regulations and, if so, what is the exact regulation?
Submitted: 1 year ago.
Category: Business Law
Expert:  Damien Bosco replied 1 year ago.

It would be a duty to disclose all material information affecting an investor's decision to purchase securities. The fact that cash on hand decreased by 60% is, arguably, a material fact. This could lead to a violation by or complaint against the company. More information would be necessary to determine whom you would notify or file a complaint (possibly the state attorney general's office); or through the SEC. Or whether you would bring a private action brought by yourself. In any event, a decrease in cash by 60% without disclosing this fact, appears on its face a material fact that should have been disclosed.

Customer: replied 1 year ago.
Thank you, ***** ***** knew that. I asked for a specific SEC that covers this situation. Can you provide that??
Expert:  Irwin Law replied 1 year ago.

Good evening. another expert here. In order to determine whether or not an SEC violation occurred, you would have to know whether or not the corporation was itself subject to SEC jurisdiction. It sounds like you bought into a corporation that was not publicly traded in sufficient quantity of shares to be regulated by SEC. Please provide additional information including the name of the corporation, the state of its incorporation, and the exchange on which it was traded. The fact that the corporation might not be under SEC jurisdiction, does not mean that no law violation occurred in the stock sale to you.. It may well be a violation of state law, and not federal.

Customer: replied 1 year ago.
Thank you. The company was Residential Lending Services, Inc, 60 Park Place, Newark, NJ. I believe the initial offering was made in 2008, but not positive. Supposedly the company went out of business in 2013 or 2014. I am willing to pay for information as to the type of offering, under whose jurisdiction it falls and the status of the company. Please advise what the cost of that would be.
Thank you.
Expert:  Irwin Law replied 1 year ago.

I am not able to do that kind of research online. I can only suggest that you retain New Jersey corporation lawyer who can examine the corporation's actual offering documents.