Digital Brand Media and Marketing Group Inc (DBMM)

[Renee]

In the SEC's Petition for Review to Carol Fox Foelak: Administrative Law Judge, the SEC cites precedents established by her in the Absolute Potential Inc.'s revocation of its registration with the SEC.

https://www.sec.gov/litigation/apdocuments/3-17990-event-116.pdf

For reference, the Initial Decision on DBMM by Carol Fox Foelak:

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

Carol Fox Foelak: Administrative Law Judge wrote the ruling on Absolute Potential Inc. and established an incontrovertible precedent that has been used in many contested registration revocations or registration revocations by default since that Ruling. Yet she contradicted her own precedent Ruling by her Initial Decision to dismiss the SEC's O.I.P. against Digital Brand Media and Marketing Group Inc.

Excerpts from the Absolute Potential Inc. Ruling by Carol Fox Foelak, A.L.J.:

***BLACK and RED HILITES are mine

Absolute Potential: https://www.sec.gov/alj/aljdec/2012/id453cff.pdf

Conclusion of Law:

Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder require public corporations to file annual and quarterly reports with the Commission. Compliance with those requirements is mandatory and may not be subject to conditions from the registrant.

It is undisputed that Absolute Potential failed to timely file its required periodic reports for any period after the quarter ended June 30, 2006 (late-filed on September 19, 2008), and remained delinquent until it started filing past-due reports in December 2011.

Accordingly, Absolute Potential violated Exchange Act Section 13(a) and Exchange Act Rules 13a-1 and 13a-13.

Sanction:

The only remedies available in this proceeding, pursuant to Section 12(j) of the Exchange Act, to address the company’s reporting violations are revocation or suspension of registration of its securities.

The Commission consider[s], among other things, the seriousness of the issuer’s violations, the isolated or recurrent nature of the violations, the degree of culpability involved, the extent of the issuer’s efforts to remedy its past violations and ensure future compliance, and the credibility of its assurances, if any, against further violations.

The violations were serious in that failure to file periodic reports violates a crucial provision of the Exchange Act. The purpose of the periodic reporting requirements is to publicly disclose current, accurate financial information about an issuer so that investors may make informed decisions.

The reporting requirements of the Securities Exchange Act of 1934 is the primary tool which Congress has fashioned for the protection of investors from negligent, careless, and deliberate misrepresentations in the sale of stock and securities.

Absolute Potential’s violations are recurrent in that it has repeatedly failed to file periodic reports and did not attempt to return to compliance until it was charged in this proceeding. Absolute Potential failed to notify the Commission and its investors of its inability to timely file Forms 10-K and 10-Q on Forms 12b-25, in violation of 17 C.F.R. § 240.12b-25. A mitigating factor is that Absolute Potential has now filed all past-due reports and has a present intention to remain current.

Concerning culpability, the record shows that Absolute Potential knew of its reporting obligations but failed to comply with them.

Absolute Potential urges that the potential for any harm to investors was lacking because there was no public market for its stock during its years of delinquency. However, Congress has mandated a different test, without any qualification: “the prompt provision to investors of current, periodic, audited financial statements.”

In sum, neither dismissal of the proceeding, as requested by Absolute Potential, nor a suspension of registration for a period of twelve months or less is an appropriate disposition because Absolute Potential’s assurances against further violations are not credible in light of its history and its utter lack of resources with which to pay for compiling and auditing or reviewing its financial statements. Further, dismissal or a lesser sanction would reward issuers who fail to file required periodic reports over an extended period and become current only after enforcement proceedings are brought against them, essentially providing an automatic lengthy postponement of the prescribed filing dates for such issuers to the detriment of the public interest and investors. Rather, revocation of the registration of Absolute Potential’s registered securities will serve the public interest and the protection of investors, pursuant to Section 12(j) of the Exchange Act. Of course, at any time following the revocation, Absolute Potential may re-register its securities under Exchange Act Section 12(g) by filing a Form 10 with the Commission, using the audited financial statements.

Postscript: Absolute Potential contends that refiling after revocation means that the funds it expended on compiling and auditing its past-due reports will be wasted. However, in filing a new Form 10 registration statement, Absolute Potential could use the financial statements that it recently had audited, requiring little, if any, additional expense.

Signed:
Carol Fox Foelak
Administrative Law Judge