SEC probe WMI for possible securities violations
Back in August of this year, Wealth Masters International announced their future plans to initiate ‘some major corporate initiatives’. These initiatives would culminate in the eventual public floating of the company via an Initial Public Offering (IPO).
Whilst Wealth Masters didn’t give a set timeline or specify exactly what ‘corporate initiatives’ they would be implementing in the lead up to the IPO, it seems as if this announcement didn’t go unnoticed by the US Securities and Exchange Commission (SEC).
Underlying concerns the SEC have about WMI wanting to float the company, the SEC have since launched a full-blown investigation of their own into Wealth Masters’ business activities.
For those of you living outside of the US or unfamiliar with their purpose, the SEC
was established by the United States Congress in 1934 to regulate the stock market and prevent corporate abuses relating to the offering and sale of securities and corporate reporting.
The enforcement authority given by Congress allows the SEC to bring civil enforcement actions against individuals or companies alleged to have committed accounting fraud, provided false information, or engaged in insider trading or other violations of the securities law.
The SEC also works with criminal law enforcement agencies to prosecute individuals and companies alike for offenses which include a criminal violation.
Note something to be taken lightly and in regards to WMI, begs the obvious question of why, upon announcing they were going ahead with plans to launch an IPO, the SEC would launch an investigation into Wealth Masters.
In correspondence sent out to WMI management under case number ‘MFW-03629’, the SEC has requested that staff ‘preserve’ all documents regarding WMI in their possession be maintained and available for future reference.
Additionally the SEC has also requested the surrendering of either originals or copies of any
- complaints or disagreement by any member or employee of WMI
- documents provided to members at any wealth conferences hosted by WMI, WMI member meetings or telephone calls and any investment letters, including the Vertical Research Advisory
- notes taken by staff during any WMI meeting or telephone call
- documents relating to any security or other investment recommended by WMI to its members
- documents relating to ‘Falcon Oil & Gas’
- documents showing WMI’s formation, ownership structure and percentages owned
- any communications with WMI senior management, including but not limited to Kip Herriage or Karl Bessey
- any other documents relating to WMI
In a nutshell, ‘give us everything you have on Wealth Masters’. In the correspondence sent out to an anonymous WMI employee or member, the SEC has given a deadline of October 19th, 2011 for the documents and correspondence requested to be surrendered.
Presumably, the recipient of the letter complied.
Unfortunately the specific nature of the investigation, or what violations specifically the SEC are looking for remain unknown at this stage.
It is noted that the SEC stress that
the Commission has not determined that the matters under enquiry involve violations of federal securities laws.
But obviously there’s suspicion enough for the SEC to essentially demand ‘any all documentation’ held by members or staff in relation to WMI be surrendered to them.
If I was to to take an educated guess, the specific inclusion and naming of ‘Falcon Oil and Gas’ appears to be somewhat of an irregularity in the SEC’s document request. WMI deal with a lot of companies and businesses in their day to day operations so it seems strange that the SEC have singled out and named this particular business.
According to the company itself,
Falcon Oil & Gas Ltd. is an international oil and gas exploration and production company, headquartered in Denver, Colorado, incorporated in British Columbia, Canada.
The company specializes in the business of unconventional and conventional oil and gas exploration and production and holds interests in prospective properties in Australia, Hungary, and South Africa.
The company is focused on discovering, acquiring, and maturing a globally diversified portfolio of drilling opportunities with a goal of maximizing shareholder value through strategic relationships.
Naturally, some of these ‘strategic relationships’ involve people or companies investing in Falcon Gas and Oil.
Not surprisingly, Falcon Oil and Gas has a developed a strong business relationship with Wealth Masters International and I believe are currently one of WMI’s ‘Alliance Partners’.
In March 2010 former CEO of Falcon Gas and Oil, Marc Bruner, went on tour with Wealth Masters’ CEO Kip Herriage to promote Wealth Masters in Canada.
Later that same month, Bruner took the stage at WMI’s m2 wealth conference held at Boca Raton, in Florida.
In November 2010, Bruner resigned as CEO of Falcon Oil and Gas. The company did not provide a specific reason for Bruner’s resignation.
Nonetheless, the relationship between Falcon Gas and Oil and Wealth Masters has remained intact with WMI announcing just over a week ago that current CEO of Falcon Gas and Oil, Rob McCaulay would be giving a keynote presentation at the company’s upcoming m2 conference titled ‘Is this really the energy story of the century?‘
As an alliance partner of WMI, no doubt McCaulay will be attending the m2 conference, to be held in December at Maui, to drum up potential investors from within the WMI memberbase.
The SEC suspect something is not quite right with the investment relationship (either directly or via encouraging the WMI memberbase to invest in Falcon) between WMI and Falcon Gas and Oil and have decided to formally investigate the two companies.
Again, this is only speculation but the inclusion of Falcon Gas and Oil and demands for documents regarding WMI’s investment recommendations by the SEC in their letter sticks out like a sore thumb.
WMI founders Kip Herriage and Karl Bessey claimed back in August that they ‘would never do anything simply because there was money to be made by doing it, and we would never violate our commitment to integrity’…
Evidently, pending the outcome of the SEC’s investigation into Wealth Masters, this might not be the case.
You can view the full letter sent out by the SEC below (click to enlarge);