Page 13 - To Register or Not to Register: A Definitive Guide to Understanding the Broker Registration Requirement

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. The SEC found that Credit Suisse’s internal compliance audit processes were ine ective. Credit Suisse only began remediation of Section 15(a) violations in 2008, in the wake of a case against another Swiss bank. The bank was similarly conducting unregistered brokerage and advisory services in the U.S. Still, Credit Suisse took until 2013 to wind down its illegal practices.
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 a er 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.
In June 2015, thirty-seven-year-old Joshua Yudell operated as an unregistered broker through six “investment companies” of which he was the sole owner. Through his entities, Yudell sold securities, generally microcap common stocks, on behalf of the previous owners of the stock in a service he called a “Private Shareholder Secondary O ering.” If a sale was successful, Yudell’s company would wire the net proceeds to his customers, less a fee of 10-35%. The SEC sanctioned Yudell and his companies more than $4.4 million.
International Capital Group (ICG) was a company that provided stock loans using equities as collateral. It sold more than nine billion shares of microcap securities. In most cases, ICG funded the loans a er it sold the collateral. The SEC charged three ICG executives with aiding and abetting Section 15(a) violations. Collectively, the sanctions totaled more than $4.3 million.
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