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The Broker Registration Requirement and its Enforcement

Post on: September 29, 2016 | Tim Boykin | 0


The JOBS Act and related regulations have undoubtedly led to new developments in the private equity arena. One effect has been increased transparency and access for investors and intermediaries to private capital markets. Relatedly, there has been increased scrutiny from regulators and industry participants involving the broker registration requirement under Section 15(a)(1) of the Securities Exchange Act of 1934.

The illegal brokering of private securities is not a new problem. Rather, it is a problem that legal developments–and subsequent market activity, new business models, and novel deal structures–have illuminated across the entire private capital ecosystem.

The following provides excerpts of several cases highlighted in our recent whitepaper, The Broker Registration Requirement and its Enforcement.

High Profile Violators

In August 2016, the SEC charged former NFL player Merrill Robertson, Jr., his business partner, and the investment company the two men operated with defrauding investors. Here, the defendants misled investors about their financial acumen and misrepresented the companies’ investment portfolio. After the company became effectively insolvent, Robertson and his partner used investor funds to bankroll their lavish lifestyle. In one instance, they elicited $2 million from a previous client by forging documents. The case is still ongoing in federal court.

International Banks

In February 2014, the Swiss bank Credit Suisse agreed to pay a total of $196 million–$82 million in disgorgement, $64 million in prejudgment interest, and a civil penalty of $50 million–for conducting cross-border brokerage and advisory business from 2002 to 2013 without the proper registration.

Creative Business Models

In March 2015, the SEC brought an action against Global Fixed Income, LLC (“GFI”) and its owner. GFI purchased corporate bonds and sold them after a few days’ holding period for a profit. In the same action, the SEC sanctioned nine additional companies and twelve other individuals that acted as unregistered brokers for the corporate bonds on GFI’s behalf, earning a total of nearly $9.7 million in transaction-based compensation from GFI. Interestingly, the SEC charged GFI with “aiding and abetting” violations of Section 15(a) for its lead role in the bond transaction business. The SEC collectively fined GFI and the other companies nearly $5 million in profit disgorgement plus $1 million in penalties.

Private Equity Firms

In March 2013, the SEC issued sanctions against private equity firm Ranieri Partners and its senior executive, Donald Phillips. The SEC also sanctioned William Stephens, the unregistered broker Ranieri Partners hired. Stephens’ job was limited to contacting investors to arrange meetings with Ranieri Partners and expressly excluded the distribution of PPMs to potential investors. Still, Stephens solicited institutional investors into the two Ranieri funds, sometimes by directly contacting investors and distributing PPMs. Ranieri paid Stephens transaction-based compensation. The facts showed Phillips assisted Stephens and knew he was engaging in activities prohibited under his contract. The SEC ordered Stephens to pay more than $2.8 million in disgorgement and prejudgment interest and barred him from the industry. Ranieri Partners paid $375,000 for “causing” Stephens’ violations, and Phillips paid $75,000 for aiding and abetting Stephens and was barred from the industry for 9 months.


Are you following the registration requirement?

Read more about these cases and key takeaways around the Section 15(a) requirement
in the full whitepaper:



Disclaimer: WealthForge provides this information to our clients and other friends for educational purposes only. It should not be construed or relied upon as legal advice.

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About author

Tim Boykin

Tim focuses on strategic, firm-wide risk management, including cybersecurity and regulatory matters. His goal is to provide excellent customer service, while appropriately limiting liability, for WealthForge’s internal and external clients and stakeholders. Tim earned a bachelor’s degree from the College of William and Mary and received a JD and MBA from the University of Richmond. He holds the CIPP/US certification.
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