Punch TV, perhaps the first potential issuer to attempt to raise capital using updated rules under Reg A+, has had its offer suspended by the Securities and Exchange Commission (SEC). The administrative proceeding by the SEC follows an “Offer of Settlement” by Punch TV that the SEC has “determined to accept.”
Punch TV first hit the radar back in 2015 when the company issued a press release eight days before Reg A+ took effect, indicating its intent to sell securities using the JOBS Act exemption.
According to the SEC filing, Punch TV failed to comply with a litany of requirements necessary to sell securities using Reg A+.
The offer was actually qualified by the SEC’s Division of Corporate Finance on April 15, 2016. The approval was apparently made in error as claims to have provided audited financial statements by Punch TV were summarily deemed untrue.
According to the SEC;
“The financial statements included in Punch TV’s Offering Statement were not audited, a fact that was unknown to the Division of Corporation Finance staff when it issued the Notice of Qualification. In fact, on or about April 19, 2016, Punch TV’s chief executive officer received a cease and desist letter from the accountant, stating that he was not a CPA and requesting that Punch TV cease and desist using the accountant’s name in Commission filings.”
Punch TV then followed with a form 1-U indicating it had made an “administrative error” concerning the qualifications of the individual identified as an accountant. Punch TV then allegedly fired the accountant, and went on to hire several other accountants until the 4th one was able to provide restated financial statements that accounted for any discrepancies. The SEC said inevitably, Punch TVs assets were reduced by 51% in contrast to earlier filings.
The SEC stated that Punch TV provided false and misleading representations and failed to file timely periodic reports.
Interestingly, the Reg A+ offer raised over $3 million from 6,600 investors from April 2016 to June 2017 – an amount the SEC appears to be willing to allow the company to keep without a rescission order.
The SEC suspension is temporary and following Punch TV’s compliance with Reg A+ provisions, the company may continue the offer and sell securities under the exemption.
The Administrative Proceeding by the SEC against Punch TV is embedded below.
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