Advanced Equities Fined Over Failure to Disclose Material Information Concerning Fisker Automotive Private Placements (Part II)

shutterstock_26269225As we recently posted, our firm has covered the failures concerning the sale and recommendation of Advanced Equities private placement since the SEC brought charges against the firm. We also represent numerous clients who have unfortunately invested in these products that were alleged to have been sold as “late-stage private equities” by First Allied Securities brokers among others.

Recently, FINRA fined Advanced Equities $250,000 concerning allegations that between approximately November 1, and December 1, 2011, AEI, failed to identify material information and correct omissions of material facts made by the issuer in connection with a private placement offering.

As a background, Fisker Auto was an American automobile maker that manufactured hybrid electric vehicles. Shares in the company were sold through limited liability companies to accredited investors. In or around September 2009, Fisker Auto obtained a “loan facility” in the approximate amount of $529 million, which was overseen by the United States Department of Energy (DOE). Under the terms of the loan facility agreement, Fisker Auto could seek reimbursement costs associated with the production of two cars if the company was in compliance with certain financial covenants and project milestones. Those covenants generally included milestones requiring that Fisker Auto to achieve a certain level of earnings, sell a particular number of automobiles, and complete certification requirements related to safety and environmental matters.

According to FINRA, the private placement offering documents used with the offerings (Series A-1, B-1, C-1 and D-1) disclosed that Fisker Auto was receiving financial assistance from the DOE, pursuant to the loan facility agreement. In or around 2011, AEI assisted Fisker Auto in raising approximately $500 million with regard to the Series A-I, Series B-1 and Series C-1 offerings. The Series D-1 offering began on or about August 15, 2011, and extended through early 2012, raised in excess of$150 million.

FINRA found that an investment banker at AEI referred to as the “Lead Banker” had overall responsibility at AEI offering. According to FINRA, his duties included obtaining information about the offering from Fisker Auto, conveying that information to AEI’s brokers and participating in presentations made to potential investors. During early 2011, and prior to issuing the Series D-1 offering, FINRA alleged that the Lead Banker became aware that FA was unlikely to meet certain revenue and production volume covenants contained in the loan facility agreement by the December 31, 2011 deadline. Further, in or around October 2011, FINRA found that the Lead Banker became aware that Fisker Auto had decided not to access the loan facility with the DOE.

Despite this knowledge, FINRA found that the Lead Banker failed to inform any future investor of such material information while AEI continued to offer the product for sale. In fact, FINRA determined that potential investors interested in the Series D- 1 offering were not informed about Fisker Auto’s decision not to access DOE’s loan facility until on or about December 14, 2011.

According to FINRA, between approximately November 1 and December 1, 2011, approximately 90 accredited individuals and/or entities invested approximately $9 million in the Series D-1 offering.

Advanced Equities sold dozens of “technology” companies that were allegedly advertised as likely to have an initial public offering (IPO) within 12-36 months. In fact, it has been alleged that these companies were developing speculative and unproven technologies that could not reasonably be considered “late stage” private equities. The Advanced Equities investments include, Bloom Energy. Amyris Biotechnologies, EdenIQ, Luxtera, Motricity, Presto, Range Fuels, Suniva, Teneros, Xsigo, Agami Systems, Alien Technology, eAsic Corporation, Fisker Automotive, Foveon, Metricstream, NetXen, Peregrine Semiconductor Corp, and RMI Semiconductor.

The attorneys at Gana LLP are experienced in representing investors concerning Advanced Equities private placements. Our consultations are free of charge and the firm is only compensated if you recover.