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Securities Compliance Sentinel Analysis of cutting-edge securities industry issues

When in Rome Do as the Romans or At Least Play by the Rules

Posted in Broker-Dealer Registration, Broker-Dealer Regulation, Foreign Broker-Dealers, International Securities Regulation

Usually, we spend a fair amount of time advising our American broker-dealer clients, who do business overseas, that they have to follow the rules of those countries as well.  However, the “shoe” may sometimes be on the other “foot.”  See http://www.sec.gov/litigation/admin/2014/34-71593.pdf.

Recently, a foreign broker-dealer was forced to pay a 9 figure judgment to resolve an action brought by the SEC.  This foreign broker-dealer solicited and serviced thousands of American clients and made 8 figures in annual revenue over a 5 year period.  However, a slight detail was ignored.  The foreign broker-dealer never bothered to register as an American broker-dealer or investment adviser.

Sadly, some will never learn especially in this case where it seemed the foreign br0ker-dealer could have easily become registered.  In any event, this is a good example of what happens when you believe you can avoid the rules if you do not speak the “language.”