Not in My Hood- SEC Charges Un-regulated Foreign Brokers for Dealing with US Clients

The United States Securities and Exchange Commission charged four financial services firms based in India for providing brokerage services to institutional investors in the United States without being registered with the SEC as required under the federal securities laws.

The four firms – Ambit Capital Private Limited, Edelweiss Financial Services Limited, JM Financial Institutional Securities Private Limited, and Motilal Oswal Securities Limited – agreed to pay more than $1.8 million (INR 84 million) combined to settle the SEC’s charges.

Nauman Anees, Managing Director of ThinkForex believes "Foreign Brokers must be vigilant of all regulations, as regulators clamp down more and more brokers will come under scrutiny ".

“The broker-dealer registration provisions are critical safeguards for the integrity of our securities markets,” said Scott W. Friestad, Associate Director of the SEC’s Division of Enforcement. “These four firms and all other foreign broker-dealers must educate themselves on the U.S. laws and regulations when they provide services to U.S. investors.”

Mohsin Jameel, CEO of Tradenext Limited a UK based firm with regulated entities in India says "the regulators need to ensure that they share critical information, in the FX and CFD space its crystal clear that we cannot deal with US based clients (unless regulated in USA) however is this common knowledge in the Equities Equities Equities can be characterized as stocks or shares in a company that investors can buy or sell. When you buy a stock, you are in essence buying an equity, becoming a partial owner of shares in a specific company or fund.However, equities do not pay a fixed interest rate, and as such are not considered guaranteed income. As such, equity markets are often associated with risk.When a company issues bonds, it’s taking loans from buyers. When a company offers shares, on the other hand, it’s selling pa Equities can be characterized as stocks or shares in a company that investors can buy or sell. When you buy a stock, you are in essence buying an equity, becoming a partial owner of shares in a specific company or fund.However, equities do not pay a fixed interest rate, and as such are not considered guaranteed income. As such, equity markets are often associated with risk.When a company issues bonds, it’s taking loans from buyers. When a company offers shares, on the other hand, it’s selling pa Read this Term space?"

According to the SEC’s orders against the firms, they engaged with U.S. investors in some of 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.

In their respective settlements, the firms agreed to be censured while neither admitting nor denying the SEC’s charges. Ambit agreed to pay disgorgement and prejudgment interest totaling $30,910. Edelweiss agreed to pay $568,347. JM Financial agreed to pay $443,545. Motilal agreed to pay $821,594.

“The firms’ cooperation with the Commission staff and their prompt remedial measures, including entering into Rule 15a-6 chaperoning agreements with U.S. registered broker-dealers and/or initiating registration with the Commission as a broker-dealer, were important factors in accepting the firms’ settlement offers, particularly the Commission’s decision not to impose a cease-and-desist order or a penalty,” said Mr. Friestad.

The SEC’s investigation, which is continuing to look for potential violations at other firms, has been conducted by Amy Friedman and supervised by Laura Josephs.

US regulators have been firm in laying down the laws for FX broker dealers dealing with US based clients, the CFTC CFTC The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss Read this Term charged Trading Point a Cyrpus based broker for unlawfully soliciting US traders. Alex Ivanov runs FXRebateGurus a cash back portal, he deals with clients from across the globe, he says "since the changes set by the regulator our strategy has been to work in other jurisdictions".