## Facts

- The SEC brought an enforcement action alleging unlawful distributions of stock from six microcap issuers transitioning into public trading: ATFT, ECGT, MEIC, VQPI, AUML, and CUPY.
- Defendants acquired large blocks of issuer shares (including through compensation arrangements and nominee entities) and sold substantial amounts into the public market shortly after trading began.
- No registration statement was filed or in effect for the challenged offers and sales.
- Phillip W. Offill, Jr., a Dallas attorney, was alleged to have helped structure and implement the distribution process, including facilitating transfers through legal documentation used to place shares into the market.
- Shane Mullholand and Ryan Reynolds (and related entities) participated in taking issuers public, received or purchased millions of shares, and sold them for substantial proceeds.
- Timothy Page and Page Properties, LP acquired millions of shares, received shares connected to offering-related work, and traded through brokerage accounts they controlled; Page also traded shares of other issuers through controlled companies.
- Other defendants (including promotional and trading entities) participated in marketing and distributing shares once trading began.
- The SEC moved for summary judgment on liability; several defendants filed a cross-motion for summary judgment.

## Issues

1. Whether defendants violated Securities Act § 5 by directly or indirectly offering or selling securities in interstate commerce when no registration statement was in effect and no exemption applied.
2. Whether certain defendants violated Exchange Act § 15(a)(1) by acting as unregistered brokers or dealers “engaged in the business” of effecting securities transactions.

## Decision

- The court granted the SEC’s motion for summary judgment on all liability issues.
- The court held all defendants liable for violating Securities Act § 5(a) and (c) based on unregistered offers and sales of the issuers’ securities.
- The court held Reynolds, Mullholand, RSMR, Dissemination, Page, and Page Properties liable for violating Exchange Act § 15(a)(1) by acting as unregistered brokers or dealers.
- The court denied defendants’ cross-motion for summary judgment.
- The court deferred remedies to a later proceeding.

## Legal Principles

- A prima facie Securities Act § 5 violation requires proof that (1) no registration statement was in effect, (2) the defendant directly or indirectly offered or sold securities, and (3) interstate means or the mails were used.
- The party claiming a registration exemption bears the burden to prove the exemption applies.
- A resale exemption is unavailable where the seller is an “underwriter,” including a person who acquires from an issuer with a view to distribution; coordinated, rapid market distributions of large blocks can support underwriter status.
- Section 5 liability may extend to indirect participants who are necessary participants and substantial factors in the unregistered distribution.
- Exchange Act § 15(a)(1) requires broker-dealer registration for persons engaged in the business of effecting securities transactions; repeated, systematic trading activity and transaction-related conduct can establish “engaged in the business,” even if framed as personal investing.

## Conclusion

The court entered summary judgment for the SEC, finding a coordinated unregistered distribution of microcap shares in violation of Securities Act § 5 and concluding that key participants’ repeated trading and transaction activities constituted unregistered broker-dealer conduct under Exchange Act § 15(a)(1).


Sec. & Exch. Comm’n v. Offill, No. 3:07-CV-1643-D, 2012 U.S. Dist. LEXIS 9369 (N.D. Tex. Jan. 26, 2012)