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SEC Sanctions Non-U.S. Firm for Failing to Register as Broker-Dealer/Adviser

Posted in SEC Enforcement

The SEC charged a non-U.S. multi-national financial institution with a large U.S. presence with violating federal securities laws by providing brokerage and investment advisory services to U.S. clients without registering with the SEC.

The company agreed to pay $196 million to settle charges that it established as many as 8,500 accounts containing an average of $5.6 billion in assets since 2002 while failing to register as either a broker-dealer or investment adviser.  The SEC said that the company’s relationship managers used “jurisdictional means” to provide brokerage and advisory services to U.S. clients, including regular visits to the U.S. by its employees.

The SEC found that the company established compliance policies and procedures to prevent its employees from providing its services without proper registration. The company, however, failed to effectively implement or monitor those policies and procedures.

The SEC charged that the company violated Section 15(a) of the Securities Exchange Act of 1934 and Section 203(a) of the Investment Advisers Act of 1940 by failing to register as a broker-dealer or investment adviser. The company agreed to pay $82 million in disgorgement, $64 million in prejudgment interest, and a $50 million penalty.

The high-profile settlement appears designed to send a message that non-U.S. companies with U.S clients must comply with U.S. federal securities laws.