SEC Charges Four India-Based Brokerage Firms with Violating U.S. Registration Requirements (with Lofchie Comment)

The SEC charged four financial services firms based in India for providing brokerage services to institutional investors in the U.S. without registering under the federal securities laws. The four firms agreed to pay more than $1.8 million combined to settle the SEC’s charges. According to the Orders, the firms engaged with U.S. investors in the following ways despite being unregistered broker-dealers:

• Sponsored conferences in the U.S.
• Had employees travel regularly to the U.S. to meet with investors.
• Traded securities of India-based issuers on behalf of U.S. investors
• Participated in securities offerings from India-based issuers to U.S. investors.

Lofchie Comment: Since Rule 15a-6 was adopted in 1989, this is the first instance in which I am aware that the SEC pursued non-U.S. firms that did not have a U.S. office for doing institutional business in the United States in violation of the Rule. (The "foreign broker-dealer" cases of which I am aware were generally brought by the states, involved retail investors, or involved an improper allocation of duties between a U.S. broker-dealer and its offshore affiliate.) The SEC's statement as to each of the four cases was fairly unremarkable; none of them alleged fraud or other moral misconduct. The case involving "JM Financial" indicated a soft dollar violation of some type, but without enough detail to determine what the violation was (or even if there really had been a violation in this specific regard).

View Press Release and Orders here (links externally to SEC website). For general background on cross-border broker-dealer activities, seeLofchie's Guide to Broker-Dealer Regulation: Non-U.S. Broker-Dealers.