Foreign Bank Pays $12.5 Million for Failing to Register as BD/IA 

A large foreign bank agreed to pay $12.5 Million and admit wrongdoing for soliciting and servicing U.S. clients without registering as a broker-dealer or investment adviser.  According to the SEC, the bank’s relationship managers made several visits to the U.S. to service clients over an 8-year period.  The bank maintained both brokerage and advisory accounts, accepted and executed orders, solicited securities transactions, handled funds, provided account statements, and provided investment advice.  The SEC states that the bank failed to implement its own compliance policies even after warnings from its own compliance and internal audit functions and directives from senior management.  The SEC indicates that the firm made $5.7 Million in pretax income from the activities.

OUR TAKE: The SEC has focused on failure to register in recent years.   In addition to non-U.S. entities, the SEC has also targeted firms and individuals that conduct private fund solicitation activities.  It is also noteworthy that the firm paid more than double the income earned to settle the charges.