Regulatory Enforcement

An active, risk-taking business can create dissatisfied clients or partners that might lodge complaints with regulators. If you broker trades of securities or commodities on behalf of clients, provide financial advice on the trading of stocks, or solicit investments in a business, you’ll be subject to restrictive fraud protections and due diligence requirements by regulatory authorities like the U.S. Securities and Exchange Commission (“SEC”), the Financial Industry Regulatory Authority (“FINRA”), and the Commodity Futures Trading Commission (“CFTC”). Additionally, in New York, the General Business Law’s “Martin Act” carries civil and criminal penalties for fraud related to the offering and sale of securities. If one of these bodies accuses you or your business of misconduct, the penalties can be severe and long-lasting.

Learn more about the SEC’s investigations.

What Is a Security?

Any investment of money in a common enterprise with a reasonable expectation of profits based upon the entrepreneurial/managerial efforts of others.

What Is a Commodity?

Any fungible (not unique) good subject to a forward-looking or “future delivery” promise to buy or sell at a set price.

What About Cryptocurrency?

Under the CFTC’s regulations and interpretation, Bitcoin, Ethereum, and other cryptocurrencies are considered to be commodities.

Considering an Investment?

Triggers for Enforcement Actions
  • Misrepresentation or omission of important information about securities
  • Manipulating the market prices of securities
  • Stealing customers' funds or securities
  • Violating broker-dealers' responsibility to treat customers fairly
  • Insider trading (violating a trust relationship by trading on material, non-public information about a security)
  • Selling unregistered securities.
Notice From Regulators
Both the SEC and FINRA will provide a subject of an investigation with “Wells Notices” or “8210 letters,” and that’s when you need to enlist an attorney to negotiate on your behalf. Failure to respond or cooperate with these investigations can lead to heavy fines or a bar from the securities industry entirely. Consult a lawyer before you take action.
Penalties and Sanctions
Regulators can seek injunctions, which may prohibit certain practices, require audits of accounting, or set up supervision of your business. Financial fines or orders to return profits (disgorgement) are also common. Regulators can even suspend you from serving as a corporate officer for a set number of years.
What if I'm the Victim of Fraud
There are multiple avenues in regaining squandered funds, through FINRA arbitration, recovery of SEC disgorged funds, civil court claims, or seeking asset restitution from a law enforcement entity.

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We are located on the 7th Floor of 305 Broadway in Manhattan, across from the Federal Building, next door to Duane Reade. Nearby trains include the 4/5/6 at Brooklyn Bridge-City Hall, the N/Q/W/R at Canal Street, and the 1/2/3 at Chambers Street. Consultations are by appointment only.

New York Office
305 Broadway 7th Floor

New York, NY 10007

Phone: 646.290.7033

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