Unregistered Broker-Dealer SEC Whistleblower Lawyers

Lawyers Representing SEC Whistleblowers

Under the SEC Whistleblower Program, whistleblowers may receive a reward if they provide the SEC with original information about violations of securities laws, including engaging in brokerage activity and charging fees without registering as a broker-dealer. A whistleblower may receive an award of between 10% and 30% of the total monetary sanctions collected if their information leads the SEC to a successful enforcement action with monetary sanctions in excess of $1 million. If represented by counsel, a whistleblower may submit a tip anonymously to the SEC.

Since 2012, the SEC has paid $1.3 billion in awards to whistleblowers. The largest SEC whistleblower awards to date are $114 million and $50 million. See our article: How to Report Unregistered Convertible Debt Lenders or Penny Stock Dealers and Earn an SEC Whistleblower Award.

Our firm has secured multi-million dollar SEC whistleblower awards for our clients.

If you have information that may qualify for an SEC whistleblower award, contact the Director of our SEC whistleblower practice at [email protected] or call our leading SEC whistleblower lawyers at (202) 930-5901 or (202) 262-8959. All inquiries are confidential. In conjunction with our courageous clients, we have helped the SEC halt multi-million dollar investment schemes, expose violations at large publicly traded companies and return funds to defrauded investors.

Recently the Association of Certified Fraud Examiners published a profile of SEC whistleblower lawyer Matt Stock’s success working with whistleblowers to fight fraud:

Contact us today to find out the strategies that we have successfully employed to secure SEC whistleblower awards for our whistleblower clients.

When Must a Broker Register?

Under Section 15 of the Securities Exchange Act of 1934, most “brokers” and “dealers” must register with the SEC. A “broker” is defined broadly as “any person (individual or entity) engaged in the business of effecting transactions in securities for the account of others.” A “dealer” is defined as “any person engaged in the business of buying and selling securities for his own account, through a broker or otherwise.”

On the SEC’s Broker-Dealer page, it notes that “[s]ometimes you can easily tell if someone is a broker or dealer. For example, a person who executes transactions for others on a securities exchange clearly is a broker. And a firm that advertises publicly it makes a market in securities is obviously a dealer. Other situations can be less clear.”

If an individual or entity is a broker or dealer, it must be properly registered before it provides brokerage services and receives compensation in return.

SEC Enforcement Actions

SEC Enforcement Action Against Private Equity Fund

On June 1, 2016, the SEC announced that a private equity fund advisory firm, Blackstreet Capital Management, and its owner have agreed to pay more than $3.1 million to settle charges that they engaged in brokerage activity and charged fees without registering as a broker-dealer. According to the SEC’s order, Blackstreet fully disclosed to its funds and investors that it would provide brokerage services in exchange for a fee, yet the firm failed to comply with the registration requirements to operate as a broker-dealer.

In addition, the SEC investigation revealed that the owners engaged in conflicted transactions and inadequately disclosed fees and expenses. Notably, the SEC has recently made violations by investment advisers and companies an enforcement priority.

SEC Enforcement Action Against Offshore Broker-Dealers

On April 18, 2013, the SEC charged Gibraltar Global Securities, Inc. a Bahamas-based broker-dealer, $25 million for unlawfully operating as a broker-dealer in the United States. According to the SEC’s complaint, the Bahamas-based broker-dealer clearly targeted and solicited U.S. customers though its website by:

Offering “offshore” brokerage services with commissions comparable to those on the “mainland.”
Stating that “[u]sing a Gibraltar offshore brokerage account will enable you to trade on most stock exchanges in the world at a cost equivalent to that incurred using mainland brokers, without paying taxes on the profits.”
Promising prospective customers an “extra layer of confidentiality” to protect assets from “government seizures or frivolous divorce settlements.”
Showing price-volume graphs solely for U.S. markets.
Only charging fees in U.S. dollars – with no provision for currency exchange.

Using these marketing tactics, the Bahamas-based broker-dealer was able to sell approximately $100 million of low-priced microcap securities on behalf of U.S. customers, charging them commissions of between 2-3%.

SEC Fines Florida-based Mining Corp. $8.5 Million

In August 2017, the SEC charged Florida-based Hidalgo Mining Corp. $8.5 million after the company and two of its executive mislead investors in a Mexican silver mine. According to the SEC’s complaint, the company raised $10.35 million from approximately 85 investors by misleading investors about the investment and violating federal securities laws, which included:

Failing to register with the SEC in order to lawfully sell the securities;
Making personal written guarantees to some investors that the company’s executives would “assume full responsibility” for repaying investors if the company defaulted (which they could not);
Failing to disclose this guarantee to the other investors; and
Failing to disclose to investors that 10% of their investments would be used to pay commissions directly to the executives and the sales team to push their securities offering.

In 2014, the Hidalgo Mining Corp. defaulted and the company executives could not repay the investors. The company allegedly defaulted due to lack of capital and low silver prices. This scheme appears to be prevalent in Florida. In December 2014, the SEC brought a similar enforcement action against a Florida-based gold mining investment company, Aurum Mining LLC. According to the SEC’s complaint, the company and its executives raised approximately $4 million from investors in Florida by making false statements about the investment. The executives then used the funds to purchase personal luxury items, including upscale apartments in Lima and other living and travel expenses.

SEC Whistleblower Reward Program

Under the SEC Whistleblower Program, whistleblowers may be eligible for monetary awards when they voluntarily provide the SEC with original information about violations of federal securities laws that leads the SEC to bring a successful enforcement action resulting in monetary sanctions exceeding $1 million. Click below to hear SEC whistleblower lawyer Matthew Stock’s tips for SEC whistleblowers:

Qualifying for an SEC Whistleblower Award

Whistleblower Protections for SEC Whistleblowers

The SEC Whistleblower Program also protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity. Furthermore, the Dodd-Frank Act protects whistleblowers from retaliation by their employers for reporting violations of securities laws.

For more information about protections and remedies for corporate whistleblowers, download our free guide Sarbanes-Oxley Whistleblower Protection: Robust Protection for Corporate Whistleblowers.

SEC Whistleblower Attorneys

For more information about whistleblower rewards and bounties, contact the SEC whistleblower lawyers at Zuckerman Law at 202-262-8959.

U.S. News and Best Lawyers® have named Zuckerman Law a Tier 1 firm in Litigation – Labor and Employment in the Washington DC metropolitan area in the 2018 edition “Best Law Firms.” Washingtonian magazine named two of our attorneys top whistleblower lawyers.

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