Adam Torres and Jacob Frenkel discuss the Microcap Conference.
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Show Notes:
Listen to the Microcap Conference coverage. In this episode, Adam Torres interviews Jacob Frenkel, Member at Dickinson Wright, PLLC., explore Dickinson Wright, PLLC. and the Microcap Conference.
About Jacob Frenkel
Clients hire Jacob because he gets superior results in securities enforcement (SEC, FINRA, PCAOB and state), white-collar criminal defense, FCPA, international anti-corruption, and internal and government investigations. Jacob brings his experience and outstanding reputation, including for creative strategies and solutions, to the defense of investigations, litigation strategy and governance counseling. In securities litigation and the defense of criminal cases, Jacob is well-known for his aggressive, tenacious, creative and proactive strategies that often put the other side on its heels. Jacob’s clients view him as a trusted advisor who understands the needs of their business. His 14 years with the Government means he knows and understands the Government side of cases. Jacob has conducted investigations for the SEC’s Division of Enforcement, was a US federal criminal prosecutor of corruption and financial crimes and worked as a street crimes prosecutor in the New Orleans District Attorney’s Office. He also conducts internal investigations for public and non-public companies. Jacob has practiced in the private sector for the past 17 years and is currently the Chairman of Dickinson Wright’s Government Investigations and Securities Enforcement Practice. He understands the tactics of prosecutors, enforcers and regulators and uses his aggressive, creative and proactive strategies to gain successful results in investigations and litigation.
Dickinson Wright, PLLC.
Dickinson Wright is a growing, full-service firm of experienced, creative, diverse and dedicated legal professionals. Our attorneys are respected by their peers, honored by industry endorsements and recognized through significant appointments to bar associations and the judiciary system. But, the most important thing to us is the respect we’ve earned from our clients. For more than 145 years, we’ve put our clients first. Across our 40 practice areas, our team of over 500 lawyers has an unwavering focus on providing unmatched client service and the highest quality legal advice. We are proactive and accessible. We offer clear and concise solutions. And always, we are mindful that we must deliver the absolute best value on every client engagement, whether it’s large or small. From Fortune 500 companies to small and emerging businesses to governmental entities, nonprofits and individuals, every client is important to us. Every client benefits from the depth of our experience, the breadth of our expertise and our focus on providing personalized service. Dickinson Wright serves our clients from offices in Detroit, Troy, Grand Rapids, Ann Arbor, Lansing, and Saginaw, Michigan; Austin and El Paso, Texas; Columbus, Ohio; Denver, Colorado; Ft. Lauderdale, Florida; Las Vegas and Reno, Nevada; Lexington, Kentucky; Nashville, Tennessee; Phoenix, Arizona; Washington, D.C.; Silicon Valley, California; Chicago, Illinois; and Toronto and Windsor, Ontario. And, our affiliations with leading law firms throughout the world provide us with global reach.
Watch Full Interview:
Full Unedited Transcript
Hey, I’d like to welcome you to another episode of Mission Matters. My name is Adam Torres, and if you’d like to apply to be a guest on the show, just head on over to missionmatters. com and click on Be Our Guest to Apply. All right, so today I am in Atlantic City, New Jersey, and let me tell you, I’m at the MicroCap Conference and having all kinds of fun.
First time I’ve been to this conference in person. We’ve been covering it for years, and today I was able to Snag a reoccurring guest, maybe next co host. I don’t know, Jacob, man. Welcome back to the show, Adam. Great to be back with you and welcome to Atlantic city for the conference. Yes. Good to see you.
Good to see you. So yes, there you go. I know last year you were a speaker. I think you’re doing some things this year as well and didn’t make it. to it in person last year, but I know we did a virtual interview. So that’s what, that’s what Jacob means when he says in person. So we’ve worked together and we’ll put some links to our previous interview in this too, so you can check it out if you just go to the website.
But man, how have you been doing? Well, doing well and good to be here. And actually great to meet you in person. You having a successful conference? Well, you were on my mind. We got an administra This sounds like a song. There we go. Administration change. I mean, you have a lot of history for your time and tenure at the SEC.
A lot of conversation at this conference and just in general about, like, is regulation going to be Lightning, maybe some of these mid cap companies or micro cap companies as this conference and just the overall landscape, what could you comment on that? It’s a great question because there’s a lot of anticipation not only because we’ve seen so many executive orders coming out of the White House literally with the change of administration, but the expectations around the new chairman of the S.
E. C. What people are, people are speculating that the administration is really going to influence the chair. But I think the best thing to do is look at What were this, this incoming chairman’s views when he was an SEC commissioner? And I think he is going to prioritize investor protection. And I mean, obviously the SEC has three fundamental missions, but for him, investor protection is critical.
And there are a lot of people saying, well, cryptocurrency. There aren’t going to be cryptocurrency cases anymore. Not true. Fraud is still going to be a focus. Investor protection in the eyes of the SEC institutionally, when it comes to the small cap, micro cap, mid cap space, it’s still a mindset that it’s the Wild West.
So I don’t think there’s going to be any lightning of enforcement activity. When it comes to the small cap, micro cap, mid cap market, and particularly when you start taking lawyers, staff away from working on the investigations that are focused on trying to create law through enforcement, which we call regulation by enforcement, which incoming chairman Atkins is completely opposed to.
You’re going to have available career staff. looking to do still looking to conduct investigations. So I do think the enforcement environment is still going to be active and robust for this space. Adam, your question also included regulation. I don’t think we’re going to see any regulatory changes that any we are going to particularly help this market.
And I think, you know, there are some new rules that have come out of the NASDAQ. I think there are some new rules out of the New York Stock Exchange. They’re actually going to make it more difficult for, you know, for the small cap companies. So I really don’t, don’t see any help coming, but, and I think we’re going to see at least on the enforcement side, a continued focus on what I would call the traditional court cases out of the regulatory enforcers, meaning fraud, anything that smacks of fraud.
As well as traditional books and records, internal controls, the integrity of the disclosures that a company is making. And you would expect that, right? It’s not like all of a sudden, I mean, just logically, it’s not like all of a sudden we have a new president, we have new things. So now we’re not gonna investigate fraud.
Like, we’re gonna let that happen. Like, I don’t know. Well, I think, I think people want to make that assumption because of what they hear out of the White House and what they expect, particularly, you When it comes to the crypto current, you know, the, the, the crypto digital asset market. But even there, as I was saying, I expect the sec still to be bringing fraud cases involving digital, digital issuers, cryptocurrencies, because again, protecting the individual investor is core fraud.
So those, those anchors of the enforcement program, I shouldn’t obit insider trading, but again, you’re talking about, you know, fraud. Insider trading, disclosure issues. Those are fundamental to the program regardless of whether we’re talking about a Democrat or Republican administration. We see these changes periodically, maybe every four years, eight years.
And those programmatic Fundamentals will still very much be in place. Talk to me about, let’s say we’re here today, micro cap conference. So from the standpoint of the CEO or the company, the publicly traded company, like what should they be thinking about when they’re thinking about managing or monitoring, let’s say the regulators expectations?
Like how do they meet those? The fundamental answer is compliance, compliance, integrity, take ownership. And what I often find. Often when people are coming to me because they’re now in the investigation world or even firms that are looking for what I call best practices when it comes to governance and compliance, understand the regulatory regime that you’re in because there is no greater risk to a company than to become the subject of investigation and ultimately be named in investigation.
It is very difficult. to unwind that effect because there’s a stigma that attaches. So I would say compliance, attention to detail, quality, professional providers, advisors, and understanding your obligations, your responsibilities and play to the highest standard, not look for a, what can I do to get by because that’s really where, where the problem is going to be.
And also If the issue arises, attack it early, don’t wait for it to mushroom and become a true problem because the cost of litigation, the cost of after the fact remediation is disproportionate. Imposing best practices up front. Yeah. Shifting focus here slightly some news on your end. Let’s start with this one.
I know, I know I got a couple here, but you recently beat a 10 day trading suspension. Tell me a little bit about that. Well, interestingly, that actually does tie directly to this, to this conference in the sense that, you know, in the sense that the sec uses its statutory authority to impose 10 day trading suspensions, if it believes.
That there is purely false and misleading information or possibly manipulative activity involving a small cap issuer that 10 day trading suspension has a They’re fatal and typically fatal effect on a company. In the early days of COVID, when the SEC obtained, if I remember correctly, the number was like 40 or 50 trading suspensions.
Yeah, I was retained by a company that was in that 10 day window, and that’s the key. In other words, to fight a 10 day trading suspension, that process needs to start within the 10 days. Don’t be a deer in headlights. Attack it early on. That company, and I can say it because it’s all public, Nanomagic retained me, retained my firm.
We were very aggressive and literally for four and a half years pursued the fight with the SEC this past fall, the SEC for the first time in its history. Wow. Truly in its history, set aside the trading suspension as if it had never been put in place in the first place. It was really interesting. So it’s wiped, it’s wiped clean.
It’s wiped clean. And now we’re actually, I’ll use the word suing. We have filed a statutory proceeding. To now to try to recover attorney’s fees, so is it completely done? No. But in terms of the merits, yes, the company has been completely, I mean, ultimately, and the black market. And the other thing about the black market is once that hits at the SEC level that will then.
trickle down to the OTC markets when they put a skull and cross skull and crossbones on a company. So it really does have a significant effect impacts a company’s ability to raise money. Yeah man, for most companies, the ability even to survive. So I give that company a lot of credit. For having not only the foresight, but the tenacity to see this all the way through.
And we knew what we were up against. The commission had never done this before. Yeah, especially. Set it aside. And we were very fortunate in that regard. You must have been pretty confident when you even took that on that, that this was a possibility or was it like, I’m just trying to get into your head on this, but like what you can say like, well, I, I, I mean there’s, there’s not much that I can’t say because, because I know it is, because it’s all because it’s all public.
I think, I think part of it is really standing the inside SEC baseball. And how this works. When I was at the SEC in the Enforcement Division, excuse me, when I was at the, in the Enforcement Division, I obtained a 10 day trading suspension. So I knew how it worked from the other side. I knew what the issues were.
I knew where, if they did something procedurally along the way that was problematic, how to attack it. And I did that at every possible juncture. My approach even to challenging a training suspension in the first place was not a passive. Oh, we want to fight it and get it on file. It was with a real aggressive.
Not only are we attacking, you know, the mirrors of the trading suspension, we want this whole thing resolved within 10 days. Yeah. And whenever the SEC pushed back, I pushed back harder. So speaking of, first off, I don’t know if I, am I allowed to say congrats? I don’t know if I said that. Well, is that appropriate?
But when you do something for a first time period, like that’s, you know what I mean? That sets a precedent. It is precedent setting. Yeah. And actually. One of the arguments I’ve made is, aside from the fact, from a merits perspective, I truly believe this was the right result. Of course. Now let’s have it set aside.
But at the same time, one of my arguments was, this actually, that wasn’t the right result, but it was a good result for the SEC. Because since you’ve never done this before, Yeah. This case now becomes an example that you can hold up and say, We have previously, Yeah. Now. Set aside a trading suspension so there is precedent for doing so.
Unfortunately, they didn’t really give all the reasons for it. If you read everything that I filed, I think it’s pretty obvious, you know, as to what were the persuasive arguments. But I think it was a combination of truly understanding the process. believing in the company, the company working with me to give me the ammunition that I needed to be able to make the arguments.
And while I appreciate the congratulations to me, it’s also, and I acknowledge this, the company’s press release. Congratulations to the company. And I say that, I say that because A lot of companies are unwilling to commit the resources and they’ll basically just step aside. They’ll, you know, they’ll take it without really thinking about the long term consequences where essentially the company is saying we’re finished.
That’s it. That says a lot on their part, though, because they’re there to step out and do that, understanding what they were up against that hadn’t been done before. Right. And as you can, as you can imagine, as part of that. You know, as, as we were going into year one, year two, year three, year four, it’s like, you know, how much longer should we do this?
Because it wears you down, but they were very receptive to my confidence in the merits of their argument. And it’s not just the sec. At one point I went to the. United States Court of Appeals to order the court of appeals to order the sec to act. So, but again, that was all part of this four and a half year story of the training suspension.
And you also, I’m going to make sure my notes are right here. You also successfully sued the P. C. A. L. B. Recently correct. We had a very successful year this past year in terms of our regulatory defense practice. And what that was about was the P. C. A. O. B. As part of one of its investigation, PCFB is, you know, and you know, your viewers likely know, are the regulators of public company accountants.
So if a CPA firm is registered to be able to do the accounting work for new audits for, you know, for an issuer, they’re regulated by the PCFB, which has its own enforcement arm. And what happened in that case, very briefly, was they had conducted an investigation. I challenged their basis in the confidential process, their basis for bringing a case.
We did not reach a settlement. As a result, they said, we’ll see you in the litigation forum instead of going to the litigation forum. The next thing they did was issue a new subpoena or their equivalent of a subpoena. Yeah. At which point I sued them claiming that their entire. Investigate a process was constitutionally defective, and we had a jurisdictional battle where we filed it in Texas because the John Doe Corporation, because it never became public, we still refer to it as John Doe Corporation that was the domicile of that corporation, and we ended up, the case moved to D.
C., we got it moved back to D. C. You know, to Texas, I went up to the court of appeals, not once, but twice, you know, rarely does a court of appeal issue what’s called a written mandamus, what orders a court where it orders another court to do something. We got it. We were successful on a written mandamus. I went up a second time on another written mandamus, at which point the trial court judge said that more, not necessarily more.
Yeah. I’m going to take this case. And then in the coming weeks, the. PCAOB closed the investigation without action. So it was a complete win for the client who was, who was thrilled. And that was also first time anyone’s beat the PCAOB. in in court litigation, man. It’s good. It’s good. It’s good. Good to catch up with you today and good to get these updates.
I appreciate it. One other thing I want to bring up to you. Micro cap conference. Those that aren’t here this year. Those that don’t know what it is. Why should publicly traded companies a ton? Why should even the service providers that support these publicly traded companies? Why should they come? Why would they be here?
They’re here for multiple reasons. Summer here. To raise capital. Some are here to get a feel for what is the market. Some are here to benefit from the educational programs that are run by, that are part, very much part of the program. And others are here to build their network for the future. So I mean, really, and that, and that’s on both sides, both the companies and those who are raising capital, they’re looking for exciting new companies throughout the room, which in which we’re sitting right now.
And for the service providers, you know, you know, there, there are a number of quality service providers here, and they’re, they’re here to make their, their services available to, you know, the companies and others who are here. Awesome. Jacob, last thing I want you to do, look into the camera. If people want to follow up, if they want to learn more about your practice and your work, how do they do that?
Well, like I always connect with me on LinkedIn because I try to post our good results on LinkedIn, but beyond that, the law firm is Dickinson Wright, D I C K. I N S O N W R I G H T, where my email is jfrankel, F R E N K E L, at DickinsonWright. com, and my office telephone is 202 466 5953, and I’m certainly most appreciative of the opportunity not just to meet you in person and speak with you again, but to have the opportunity to talk to you.
You know, you’re, you know, tremendous following. Absolutely. Thank you. And to the audience, just so you know, we’ll definitely put the links in the show notes, so you can just click it on my head out and check out Jacob’s profile and also the website. And speaking of the audience, if this is your first time with mission matters and you haven’t done it yet, hit that subscribe or follow button.
This is a daily show. Each and every day we’re bringing you new content, new stories, new ideas, and hopefully new inspiration to help you along the way in your journey as well. So again, hit that subscribe or follow button and Jacob, man. Thanks again. Appreciate it. Adam, real pleasure. Thank you.