Replies to post #17242 on ScripsAmerica Inc. (SCRCQ)

[coolerheadsprevail]

SEC Section 17 refers to 'security based swaps'. That is the subject of Section 17. Security base swaps are subject to (b) which states 'it shall be unlawful....WITHOUT FULLY DISCLOSING THE RECEIPT'....'and the amount thereof.'

For grins, lets play lawyer, judge and jury, cast a wide net and say this SEC Section applies to all "Consultant Agreements" for anyone named in a publicly traded companies 10k. If a Consultant Agreement is disclosed in the 10k along with the amount, then letter of law has been satisfied.

Next witch hunt??

Here is the link to the text of the Securities Act of 1933. Section 17 can be found on page 56:

https://www.sec.gov/about/laws/sa33.pdf

You are referring to language contained in Section 17(a), which is distinct from Section 17(b). 17(a) is in the context of an individual/entity involved in the offer or sale of a security (including security-based swaps). 17(b) is in the context of promotion.

Even still, the refence to "security-based swaps" in 17(a) is in the form of a parenthetical, exactly as I phrased it in the sentence above. What this means is that it is clarifying/broadening the definition of "security" to also include security-based swaps -- and NOT to define "security" as being strictly a "security-based swap".

By way of background, the reason this parenthetical even exists is because all swaps have historically been under the jurisdiction of the CFTC (Commodity Futures Trading Commission). However, the Dodd-Frank Act mandated that one specific type of swap, the security-based swap, fall under the jurisdiction of the SEC. This is why the SEC included this parenthetical so that the market is clearly aware that this one type of swap is also governed by the Securities Act of 1933.

So, to get back to the issue at-hand re: Section 17(b), here is a link to one of the very first SEC enforcement actions of 17(b) that set the precedent for applying 17(b) to internet promotions:

http://www.sec.gov/litigation/admin/33-7885.htm

Here is an excerpt:

"On December 30, 1999, [Name redacted] started a subject area for SNLV on Raging Bull, an Internet bulletin board. Using a screen name other than his own, [Name redacted] posted the first message in the SNLV subject area. [Name redacted]'s message compared SNLV to two highly successful companies that sell electronic commerce software applications, Commerce Once, Inc. ("CMRC") and Ariba Technologies ("ARBA"). [Name redacted]'s message stated:

This is THE new CMRC and ARBA!!! Merger to be complete on Jan. 6. This baby is going to rock!!! I hear they are looking for $30.00 by Mar. 15!!! We will just have to wait and see!!! The sky is the limit!!!

[Name redacted] did not disclose his agreement with Fleming Financial, which entitled to him to receive 5,000 shares of SNLV as reimbursement for promoting SNLV."

All it took was this one tout on an internet MB for 5,000 lousy shares worth of compensation for the SEC to crucify the schmuck.

But doesn't it sound familar though? "SCRC is like a new mini-McKesson!!!" Hmmm, where have I heard that before???

If that is not enough for you, here is one of the more recent SEC enforcement actions re: Section 17(b):

http://www.sec.gov/litigation/litreleases/2014/lr22928.htm

Here is an excerpt:

"The Commission's complaint alleged that from 2009 through 2010, [Name redacted] recommended two stocks, Cascadia Investments, Inc. and Green Oasis, Inc., to a large group of followers who followed his trading recommendations and strategies. [Name redacted], who was known to his followers as "[Name redacted]," used his internet-based message board and other means, to encourage people to buy, hold, and accumulate Cascadia and Green Oasis stock. In particular, [Name redacted] told his followers that by buying up the outstanding shares, or float, of these companies, they could collectively trigger a "short squeeze" that would allow them to sell their stock to "market makers" that had shorted the stock. [Name redacted] falsely stated that he had previously used this "Float Lock Down" strategy successfully to make himself and his followers enormous profits. In fact, unknown to his followers, [Name redacted] had been hired by Cascadia and Green Oasis to promote their stock and had been compensated with millions of free and discounted shares of these stocks. [Name redacted] secretly sold millions of Cascadia and Green Oasis shares at the same time he was encouraging potential investors to buy, hold and accumulate these stocks."

Hmmm, "float lockdown" strategy... ...buy/hold/add but don't sell/trade... ...undisclosed compensation by the company... ...secretly selling while encouraging others to buy/hold/add... ...now where have I seen this story play out as well???


Think about it: If Section 17(b) only applied to "security-based swaps", why would countless LEGITIMATE penny stock promoters (both individuals and companies) be including specific disclosures on their websites, in their profiles, and within each and every one of their touts that is specifically written to satisfy Section 17(b) if the regs contained within 17(b) did not even apply to them?

Heck, even MoneyRunners, the infamous promoter who piled on to SCRC last summer after JOSEPH ZAMPETTI and his core promoters started the P&D, has a disclosure on their website. They even have their own board here on iHub that includes Section 17(b)-compliant disclosures.

I hope this helps clarify Section 17(b) for you and others here.