SEC Brings Charges Against Two Dozen Unregistered Broker-Dealers

By Patricia Uceda, Spring 2015 Graduate Research Assistant

The SEC recently charged two dozen with selling unregistered securities. According to the SEC:

“An SEC investigation found that Global Fixed Income LLC, which was primarily in the business of purchasing investment grade corporate bonds, entered into agreements with third parties that acted as unregistered broker-dealers on its behalf and bought billions of dollars’ worth of newly issued bonds causing Global Fixed Income’s allocation in the bond offerings to increase.  Because the offerings were often oversubscribed, Global Fixed Income was generally able to sell or ‘flip’ the bonds within a few days for a small profit compared to the dollar value of the trade, and it split profits with the third-party participants.”

None of the third parties were registered as broker-dealers, and that is a violation of the law. SEC’s broker-dealer registration requirements ensure the protection of investors because the SEC inspects broker-dealers’ books and records.