NSC listed as defendant after misinformation allegedly harms investors
A class action lawsuit filed in October 2014 seeks to right the wrongs done to investors when an Australian energy company went public last June. The suit also names National Securities Corporation (NSC), as one of the defendants listed in the suit, which served as the book-writing manager and underwriter of CBD Energy’s public offering.
To set the scene, it is important to have an understanding of the parties involved. CBD Energy (CBDE), a Sydney-based corporation, provides “clean, renewable and cost-effective sources of energy,” according to the suit. CBD Energy went public in June 2014 with 1.81 million shares valued at $4 per share, for a total sum of $7.24 million. This public offering was based primarily on the work done by NSC by preparing the corporation to go public.
On October 24, CBD Energy announced that the initial findings disseminated to the public leading up to the offering were fraught with errors and revisions that needed to be made. According to a press release, CBD Energy consulted with its accounting firm and determined that the audited financial statements from the company’s 2012 and 2013 fiscal years were unreliable and would have to be revised. By the time the market closed that day, the price of a share was down to $1.25.
The suit claims that the Securities Act of 1933, which is supposed to protect investors, was violated in this situation. It claims that NSC violated Section 12 (a) (2) of the act, which holds NSC responsible for damages because of its involvement in compiling and disseminating the misinformation leading to the alleged damages.
The plaintiff alleges that investors who bought into the offering in response to CBD Energy’s registration statement and prospectus as registered with the SEC were misled and financially affected because of NSC’s alleged lack of “exercise of reasonable care,” according to the complaint.
NSC prepared and distributed the majority of the information upon which the initial public offering was based, so this class action suit is holding the company accountable to the investors who bought into the company based on false information.
As the underwriter to the offering, NSC may be the biggest piece of the puzzle in determining how this happened. According to the suit, NSC owed investors “a reasonable and diligent investigation…to ensure that such statements were true…and that there was no omission of material facts” that could mislead potential stockholders to partake in the offering. The plaintiff argues that if NSC did its due diligence, it would be aware of the legitimacy — or lack thereof — of all the materials disseminated to the public.
The plaintiff has demanded a trial by jury and seeks damages for all parties involved in bringing the suit forward.