Du you think that the common share holders and/or the CO.
has a law suite against Cowen and/or Gross for executing an
iligal trades...........?????
Before proceeding, I should note that I'm not a securities attorney and if the answer is important to you, you ought to consult one. Everything below other than facts and quotations from other sources reflects my opinions only.
I assume your question actually is can there be a successful suit against the actual party filing the form 144 (Idealab) or their broker Cowen?
At the outset, note that the question assumes a fact not in evidence, namely that Idealab has sold the shares. It is, of course, possible that Idealab filed the form 144 (which merely signifies an intent to sell the shares), sought to have the restrictive legends removed from the shares and was rebuffed in that attempt (for the shares in excess of the limit) and hence did not proceed with their sale.
Notwithstanding that possibility, often the order of events is different - namely the sale takes place and then the requisite legal opinion is provided to the TA who removes the restrictive legend. Here is how one organization (BancBoston Robertson Stephens) describes that process:
144 FORM FAQs
...
3- When will the proceeds from the sale be available to me?
This can vary from a couple of days to 2 weeks or longer. When stock is sold that bears a restriction it is not deliverable to the buyer. It requires an opinion of counsel to instruct the transfer agent to remove the restrictive legend. While we have excellent relationships with both the legal counsels and transfer agents it is still a matter of both parties doing their job on a timely basis.
rsco.com
Suppose the sale took place and the TA, on advice of counsel, refused to remove the restrictive legends (so delivery could not be made to the purchaser). In that event, I believe it is theoretically possible that the sale could be rescinded. Rule 10a-2 promulgated under the exchange act, though embedded in a section related to short sales, appears to allow for non delivery of shares if an inadvertent short sale occurred through a mistake made in good faith and undue hardship would result from covering through an open market purchase. (I suppose it goes without saying that if the IBUY price at the time is less than that received by Idealab at the time the shares were sold, they could simply cover by purchasing shares on the open market.) Rollback of the sales would, I believe, require the consent of NASD prior to the actual failure to deliver.
law.uc.edu
Sales rollbacks are quite rare. I've never experienced one and I suspect the odds are you haven't either. Nonetheless, they do take place - I know of a thread where two such rollbacks are described - though they had nothing to do with rule 144 sales and probably had nothing to do with the cited rule.
Would the company sue its second largest (at least prior to any dilution from the floorless debentures) shareholder? You'd have to ask IBUY about that.
As far as bringing suit against the broker, brokers usually protect themselves from such suits by appropriate language. If you have Adobe Acrobat reader installed, you might want to look at the form 144 seller's letter at rsco.com.
A couple other observations: The rule 144 (e) opinion at the SEC site may or may not have some case law to back it up. Conceivably it has not been tested in the courts and, if so, might not survive a challenge. In addition, the opinion was posted in July, 1997. It is conceivable that the circumstances that led SEC to state that the OTCBB was not an automated quotation system (particularly if they related to insufficient system capabilities to record/document volume) might have changed since then.
One other thing: if a suit results which actually goes to trial, don't expect a quick decision. |
