SEC Says Broker/Dealer Advanced Equities, Founders Misled Investors
The Securities and Exchange Commission (SEC) has charged Advanced Equities Inc. and its founders – Dwight Badger and Keith Daubenspeck – of misleading investors in connection to a pair of private placement offerings in 2009 and 2010.
According to the SEC, Badger led the sales effort for the offerings and made “misstatements” about the energy company’s finances. Daubenspeck did not correct the misstatements, the SEC says, and therefore was charged with failing to reasonably supervise Badger.
Daubenspeck co-founded Advanced Equities with Badger and is the former chief executive of its parent company. Daubenspeck is the chairman of the parent company’s board.
As reported Sept. 24 by Fortune, the issuer of the offerings in question – unidentified in SEC documents – was fuel cell company Bloom Energy. In 2009, Bloom hired Advanced Equities to lead a $150 million Series F offering at a $1.45 billion pre-money valuation ($18.52 per share). Only investors contributing more than $2 million would be able to communicate directly with Bloom, while those under that threshold would be reliant on Advanced Equities for information about the deal.
The SEC says Badger stated in the 2009 offering that the energy company had more than $2 billion of order backlogs when in actuality the backlog never exceeded $42 million. He also said it had a $1 billion order from a national grocery store chain even though the store only had placed a $2 million order and signed a non-binding letter of intent for future purchases.
Badger further allegedly said that the company had been granted a U.S. Department of Energy loan exceeding $250 million when it had applied for a $96.8 million loan, and he again misstated the information about the loan application during the follow-up offering in 2010.
Advanced Equities agreed to pay a $1 million penalty, to be censured and to cease and desist from committing or causing any future violations of the securities laws it was found to have violated in the future. The firm also agreed to hire an independent consultant to review its sales policies and procedures.
Badger agreed to pay a $100,000 penalty and will be barred for one year from association with any broker, dealer, investment adviser, municipal securities dealer or transfer agent. Daubenspeck agreed to pay a $50,000 penalty and a one-year supervisory suspension.
Advanced Equities, Badger, and Daubenspeck consented to the entry of the cease-and-desist order without admitting or denying the SEC’s charges.