Washington, D.C., Dec. 8, 2008 (LAWFUEL) – The Securities and Exchange Commission today charged a Moscow-based unregistered broker-dealer for registration and reporting violations, alleging that it solicited institutional investors in the U.S. to purchase and sell small cap stocks of Russian companies without registering as a broker-dealer with the SEC or meeting the requirements for an exemption.
“Today’s action demonstrates that the Commission will closely scrutinize the activities of foreign broker-dealers soliciting investors in our domestic markets,” said Scott Friestad, Deputy Director of the SEC’s Division of Enforcement. “The broker-dealer registration and reporting requirements ensure that foreign entities soliciting business in the United States provide the levels of disclosure and transparency required by U.S. law to protect American investors.”
In addition to instituting administrative proceedings against OOO CentreInvest Securities (CI-Moscow), the SEC charged its registered U.S. affiliate, CentreInvest, Inc. (CI-New York) and four individuals: CI-Moscow’s former executive director Dan Rapoport, CI-New York’s former managing director, FINOP and CFO Svyatoslav Yenin, CI-New York’s former head of sales Vladimir Chekholko, and CI-New York’s chief compliance officer William Herlyn.
“It is incumbent upon foreign broker-dealers and domestic broker-dealers working with them to familiarize themselves with, and take all necessary steps to comply with, the appropriate registration requirements required by U.S. law before soliciting business from American investors,” said James Clarkson, Acting Regional Director of the New York Regional Office. “Today’s action is a significant step in ensuring that these provisions are properly followed.”
In the administrative proceeding, the SEC’s Division of Enforcement alleges that from about 2003 through November 2007, CI-Moscow and Rapoport solicited investors in the U.S. both directly, and indirectly, through CI-New York, Yenin, Chekholko and Herlyn. CI-Moscow and Rapoport were not registered as a broker-dealer as required by law, nor did they meet the requirements for the exemption from registration for foreign broker-dealers.
The SEC’s Division of Enforcement also alleges that Yenin and Herlyn were responsible for the filing of amendments to CI-New York’s broker-dealer disclosure form that failed to disclose CI-Moscow and Rapoport’s control of CI-New York, or that the license of the CI-New York’s parent company had been revoked by the Cyprus SEC. The Division further alleges that CI-New York either failed to maintain business-related emails, or failed to produce them at the request of the Commission’s staff as required by law, and that Yenin was responsible for CI-New York’s failure to maintain these business-related e-mails.
The SEC’s Division of Enforcement is seeking cease-and-desist orders, orders directing respondents to provide accountings, pay disgorgement and financial penalties, and orders imposing any remedial action appropriate in the public interest, including, but not limited to, bars from association with any broker or dealer, or revocation of registration. A hearing will be held before an Administrative Law Judge to determine whether the allegations of the Enforcement Division in the SEC’s order are true, and if so, what relief is appropriate. The Commission ordered the Administrative Law Judge to issue a decision not later than 300 days from the date of service of the order.