SEC Charges Individual with Violation of Broker Registration Requirements

The SEC charged a Canadian attorney with selling billions of penny stock shares on behalf of others without registering with the SEC as a broker.

In the Complaint, filed in the District Court for the Eastern District of New York, the SEC alleged that the individual (i) took possession of his customers’ penny stocks; (ii) drafted documents purporting to transfer ownership of those shares to himself or his law firm and provided those documents to transfer agents; (iii) deposited those shares in accounts he held at various brokerage firms; (iv) sold those shares at the direction of his customers, (v) charged his customers a commission based on a percentage of the stock sale proceeds; and (vi) disbursed stock sale proceeds to his customers.

The SEC charged the attorney with violating the securities registration provisions of SEA Section 15(a)(1) ("Securities activities of OTC derivatives dealers").

To settle the case, the attorney agreed to (i) pay a $70,000 civil penalty; (ii) pay $231,363 in disgorgement; (iii) pay $33,907 in prejudgment interest; and (iv) a bar from participating in any offering of a penny stock. Without admitting or denying the allegations, the attorney consented to the entry of a final judgment permanently enjoining him from future violations of the charged provisions. The settlement is subject to court approval.