NEW YORK ( TheStreet) -- One of the key stock-transfer agents in the world of Chinese reverse mergers was censured by the Securities and Exchange Commission Thursday after it came to light that the 75-year-old father of the agent's founder and president had misappropriated $2.7 million from the firm.
Called the Securities Transfer Corporation and based near Dallas, the transfer agent is run by Kevin Halter Jr., the brother of Timothy Halter, whose investment house, Halter Financial, is one of the most prolific coordinators and financial backers of Chinese reverse mergers in the U.S.
Halter Financial often engages STC's services to hold funds in escrow as Chinese companies are brought public in the U.S. through the controversial method, also known as a reverse takeover, or RTO. Both Kevin Halter Sr. and Jr. also operated a firm called Halter Capital, which keeps an inventory of shell companies for use in reverse-merger transactions.
The SEC action Thursday against the Halter transfer agency doesn't appear to be related to a broader investigation into the Chinese reverse-merger phenomenon that the commission has undertaken. For more than a year, a wave of fraud revelations and allegations of financial wrongdoing -- mostly leveled by short sellers -- has roiled small-cap Chinese companies with stocks listed in the U.S., sparking the regulatory scrutiny.