SEC Announces Settlement Connected to On-Line Campaign to Buy Beer Company

The Securities and Exchange Commission announced Wednesday a settlement with two advertising executives who used Facebook and Twitter to solicit investors to buy a beer company, without making necessary disclosures and registrations with security regulators.

Michael Migliozzi II and Brian William Flatow, who directed investors to their website,, in hopes of raising $300 million to purchase Pabst Brewing Company, have consented to a cease and desist order.

The SECs investigation found the two men had investors provide basic contact information and pledge amounts, promising to later collect the pledges and undertake the purchase of Pabst if the $300 million target was reached.

Under federal securities laws, the two men were required to register their offering before attempting to sell shares to the public. Registration includes information like company financials, vital in helping investors judge the quality of the investment.

All investors are entitled to know certain basic information about a company before being asked to invest, said Scott Friestad, Associate Director in the SECs Division of Enforcement.

Migliozzi and Flatow also used popular social media sites like Facebook and Twitter to advertise their offering, according to the order. Investors were promised certificates of ownership if pledges were made.

Just because would-be investors are being solicited online doesnt make them less deserving of the protections under our securities laws, said Friestad.

The order stated Migliozzi and Flatow reported they had received more than $200 million in pledges from over five million individuals in February 2010, and were searching for a firm to facilitate the acquisition.

The website, which the two launched in November 2009, continued to solicit pledges until it was taken down in April 2010.

The SECs order finds that Migliozzi and Flatow violated Section 5(c) of the Securities Act of 1933.

Migliozzi and Flatow consented to the issuance of the order without admitting or denying all findings except jurisdiction, which they admitted. The two never hit the $300 million in pledges they targeted, and never collected any money.

While federal laws require the registration of solicitations, some offerings are exempt, including offerings to a limited number of accredited investors or institutions, and offerings of limited size.