Hedge Fund Focus

SEC Charges Broker With Operating as Unregistered BD

One of the more important issues for people in the securities industry is that they should be very aware not to act as an unlicensed broker.  This generally means that a person should not accept compensation for brokering a deal (bringing together buyers and sellers of a security) without being properly licensed and without following all applicable securities rules.

The following SEC release reprinted in full, can be found here and you can also view the SEC Release on Unregistered PIPE BD.

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The SEC Charges Ram Capital Resources, LLC and Its Two Principals With Operating an Unregistered Broker-Dealer

On June 19, the Securities and Exchange Commission instituted a settled administrative proceeding charging Ram Capital Resources, LLC (Ram) and its two principals - Michael E. Fein and Stephen E. Saltzstein - with willfully violating Section 15(a) of the Securities Exchange Act of 1934 (Exchange Act).

The Commission found that Michael E. Fein and Stephen E. Saltzstein, neither of whom was registered as a broker or associated with a registered broker-dealer, operated and controlled Ram as an unregistered broker-dealer while serving as it principals. Specifically, from 2001 through early 2005, Ram engaged in the business of identifying, structuring, and soliciting investors — a majority of which were hedge funds — for PIPE offerings (an acronym for “private investments in public equities”). Ram’s business model focused on identifying investment opportunities within the PIPEs market and soliciting hedge funds and other investors to invest in these PIPE offerings. Ram also played a significant role in structuring, and negotiating the terms of, the PIPE offerings.

The investors compensated Ram by paying to it a certain percentage of the gross amount invested and, in most instances, allocated to Ram a certain percentage of any warrants they received as part of their investment in the PIPE offerings. Fein’s and Saltzstein’s compensation was directly derived from the fees Ram earned.

Under the terms of the settlement, Ram, Fein, and Saltzstein, without admitting or denying the Commission’s findings, consented to the issuance of an administrative order requiring each of them to cease and desist from committing or causing any violations and any future violations of Section 15(a) of the Exchange Act. Ram also consented to the issuance of an administrative order imposing a censure. In addition, Fein and Saltzstein consented to the issuance of an administrative order (i) requiring each to pay disgorgement of $364,721, plus prejudgment interest of $83,657; (ii) requiring Fein and Saltzstein to pay civil penalties of $90,000 and $60,000, respectively; and (iii) suspending Fein and Saltzstein from association with any broker or dealer for a period of twelve and six months, respectively. (Rel. 34-60149; File No. 3-13524)