Consultant Charged with Aiding/Abetting Client’s Securities Fraud
The SEC commenced a lawsuit against a consultant for aiding and abetting fraud conducted by his private fund client. The SEC asserts that the consultant arranged sham transactions and provided false documents to the auditor in order to help his client conceal declining valuations. The client was charged with securities fraud and the principal was criminally prosecuted. The SEC charges the consultant with aiding and abetting the fraud by “knowingly or recklessly” providing “substantial assistance” to the unlawful activities.
You don’t need to be a registered entity or licensed person to incur securities law liability. The SEC has increasingly used aiding/abetting charges to bring cases against unregistered persons for participating in unlawful schemes perpetrated by their registered clients.