DD Support Board and Research Team

[janice shell]

It's actually an Initial Decision. If the Commission wanted, it could overrule the ALJ, but it's highly unlikely it'd consider doing so.

https://www.sec.gov/alj/aljdec/2019/id1389cff.pdf

Carol Fox Foelak, the judge, concluded that "No sanction is imposed since neither of the available sanctions – revocation or suspension of the registration of Digital Brand’s securities – is appropriate for the facts in this case."

That's only sort of true. The case was held up for a long while as everyone waited for the Supreme Court's decision in Lucia v SEC. Anyone interested can read all about Lucia here:

https://www.scotusblog.com/case-files/cases/lucia-v-securities-exchange-commission/

Since the decision didn't favor the SEC, old cases that were heard by ALJs had to be reevaluated. The long delay combined with the need for reevaluation gave DBMM time to protest to the SEC that its registration shouldn't be revoked because in the meanwhile, it'd caught up with all its delinquent filings.

Note, by the way, that the "suspension" referenced in Foelak's decision doesn't mean a trading suspension. It refers instead to a suspension of the company's registration for up to 12 months. That's a remedy that was occasionally used long ago, when issuers promised to catch up with their filings. The SEC would agree to that, and suspend registration rather than revoking it. But many companies never did file the missing periodic reports, and for practical purposes, the SEC stopped offering that as an option many years ago.

Other companies in DBMM's situation didn't try to fight. It did, and in the end was successful. But what was the point? It could just have accepted revocation of registrations, as the SEC advises issuers to do, and then have filed a new Form 10 once it had two years of financial reports ready to go. Instead, the company chose to pay a lawyer to argue its case for a pretty long time.

Seems like a waste of time and money to me.

I'll bet this would be fun and interesting to read:

Digital Brand’s business has been described as “somewhat esoteric, and appear[ing] to require interpersonal relationships with existing and prospective clients.” Asher Enters., Inc. v. Digital Brand Media Mktg. Grp., Inc., No. 0600717/2014, 2016 N.Y. Misc. LEXIS 5146, at *5 (N.Y Sup. Ct. entered Aug. 5, 2016).

The company appears to be more than a little dicey. I'll bet it won't be around a few years from now.