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A Q&A Conversation With Randy Katz

November 15, 2021

When Randy Katz began law school, he did so with the intention of not being a practicing attorney. Katz felt a law degree would suit him well for his career in the audio and music industry. However, after several early-on career path changes, he found himself practicing securities law, and has carved out a unique niche for his practice.

Katz divides his time between corporate finance and enforcement activities. He frequently counsels clients who deal with SEC and Financial Industry Regulatory Authority (FINRA) on regulatory matters. Using his self-described story-telling approach he interacts on behalf of clients to ensure they remain in compliance and help them grow.

Katz recently discussed his career arc and how he developed his counseling approach.

Q. You began your career in the audio and video industry. What part of the law did you think would be particularly advantageous to learn for that initial career path?

A. Business structuring. In the mid-to-late-‘70s, I had been operationally managing the five oldest high-end audio stores in Southern California. I expected to continue to grow the business, organically and by opening additional locations. Sustained growth would require a business law background, focused on finance, distribution, franchise, and real estate. My business partner was getting his MBA and, with that combination, we believed in a great future. However, by the early ‘80s, I was unable to conclude a leveraged buyout for the stores. So, I moved on.

Q. You quickly changed jobs and industries a couple of times after that. What got you hooked and has kept you interested in securities law?

A. There are a variety of issues that pop up in securities law. I’ve been fortunate to have a fair number of people come to me with issues that are not “garden-variety” matters.

Corporate finance and enforcement allow my creative side to find unique outcomes to non-standard issues. It’s a question of understanding a client’s story and the related business challenges and then dissecting and repositioning those pieces to craft a journey from the current to the hoped-for end-game.

Q. Before we get into your securities practice, can you briefly describe what the SEC and FINRA do?

A. Companies that aren’t listed on the New York Stock Exchange or NASDAQ are traded “over-the-counter” – sometimes referenced as “pink sheet” companies or “penny stocks.” The SEC regulates them. FINRA oversees, regulates, and investigates broker-dealers, but also regulates certain trading activities of OTC companies.

Q. How did you begin to help clients with SEC and FINRA issues?

A. It just developed as part of the practice. Twenty years ago more client services were for M&A transactions and less for securities matters. As time passed, the practice has shifted.

In the small-cap area, regulators come knocking more frequently, as they should. There are fraudsters in the penny stock world, maybe even more than with large caps. Some fraudsters are more “successful” than others, but, invariably, they attract the regulators’ attention. Not surprisingly, when the regulators cast an ever-wider net, they also “catch” rule-abiding fish. I tend to represent those fish, although they sometimes foot-fault.

Q. What sets apart your regulatory niche from other securities work?

A. The main difference is how I package the issues. Prompted by my questions, the client tells me its story. After investigation, I craft its nonfiction story – not a fictional novel. The story starts with “once upon a time” and concludes with “they lived happily ever after.” That makes it easier for the regulators to accept. Because of this non-adversarial approach, our interactions tend to go fairly successfully.

Q. How did you develop that storytelling ability?

A. There are a couple of aspects. Listen intently, whether it’s a client or a regulator. Don’t start the listening process with preconceived notions – certainly don’t verbalize them. The conversation should be open and authentic and show genuine interest. People then tend to say things that ordinarily they wouldn’t. That becomes helpful in forming, modifying, or conveying the story. When you “play it back,” the other party understands its part in the story and becomes drawn in.

Q. What seems to be a common theme of your recent client matters?

A. The first theme is investor relations guidance. Most small-cap companies require investor relations services; they need more “eyes” on their stock to increase investor interest. Penny stocks are too small for traditional research reports. Proper non-promotional investor relations services assist small-cap companies to attract investor attention. This is also where SEC and FINRA “hang out.”

The second is assisting small-cap companies in economic and public markets growth. We assist private companies to go public. We assist small-cap companies to list on national securities exchanges. We do so by teaming with private investment funds, reputable investment bankers, and high-quality advisory service providers.

Tying enforcement work with corporate finance is part of the ebb and flow of the securities practice. The corporate finance market for small-cap companies is doing well, which means that enforcement agencies become increasingly interested.  So, it’s a “twofer,” we provide corporate finance services for part of the client base and enforcement services for the balance.

Q. Wrapping up, are you still interested in the music/audio industry as a hobby today?

A. I don’t have much time available anymore, although my collection of audio equipment remains scattered about the house. My sons follow in my footsteps. Jason works in the auto industry in Texas and moonlights as an electric violinist and mandolinist in a classic rock band. Warren is a guitarist and a member of the Illinois bar.

Q. Is there anyone important to your career that you’d like to recognize?

A. Diana Penunuri. She and I have been on this path since the mid-’90s. Her title is “Legal Administrative Assistant,” but that’s far too limiting.  She manages and helps grow the practice and provides clients with corporate finance paralegal services, especially in the restricted stock arena. If it weren’t for her, I don’t know where I would be! She’s well beyond her title.

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