An unlicensed salesperson agreed to pay over $22 Million in disgorgement, penalties, and interest to settle charges that he sold interests in a private fund without registering as a broker-dealer or becoming associated with a broker-dealer. The SEC asserts that the defendant “met with prospective investors in person, spoke with them on the telephone, or communicated via the internet” and that he “described the investment program to investors and recommended they purchase” interests. The SEC claims that the defendant raised over $97 Million and was paid over $18 Million in commissions. The SEC said that it is “committed to holding such unregistered salespeople accountable for their conduct.”
OUR TAKE: As part of its new initiative to examine private fund sponsors, the SEC has indicated that it will look at sales activities to determine whether a firm or a person should register or obtain a securities license. If a person earns his money as a percentage of assets raised and he/she speaks directly with potential investors, registration and/or licensing may be required. Notably, the complaint does not allege that any investors complained or lost money.