A financial adviser was barred from the industry and ordered to pay over $400,000 in disgorgement and interest for failing to register as a broker-dealer while selling interests in a private fund. According to the SEC, the respondent identified investors, communicated with them (including in person), advised prospective investors on the merits of the investment, assisted handling funds, and collected transaction-based commissions. The adviser sold notes issued by a third party fund that ultimately defaulted. The SEC charges that the respondent’s activities violated Section 15(a)(1) of the Exchange Act, which requires registration as a broker-dealer to sell securities.
OUR TAKE: Over the last couple of years, the SEC has increased enforcement efforts to prosecute individuals and firms who sell private funds without registering as, or becoming affiliated with, a broker-dealer.