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Regulation and Compliance > Federal Regulation > SEC

Selling Stock Without a License

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The Securities and Exchange Commission announced May 15 that it had settled with a guy named Behrooz Sarafraz, who went around finding investors and pitching them on interests in oil and gas partnerships. The partnerships are now bankrupt, so that’s not great, but it’s not the SEC’s problem.

The SEC’s problem is that Sarafraz performed his securities pitching “without being registered with the SEC as a broker-dealer or associated with a registered broker-dealer.” Anyway:

The SEC alleges that Opus and Tri-Valley paid Sarafraz approximately $18.3 million in sales commissions. He paid approximately $1.9 million to others as referral fees and kept the remaining $16.4 million for himself.

Sarafraz has agreed to settle the SEC’s charges by consenting to entry of a final judgment ordering him to pay a total of $22,482,318.87 without admitting or denying the allegations.

Huh. So I was once associated with a broker-dealer—had my Series 7 and everything—and I don’t recall making $18.3 million in sales commissions. (Though unlike Sarafraz I didn’t get “commissions that ranged from seven to 17 percent of the sales proceeds.” And though, like Sarafraz, the deals I worked on occasionally ended in bankruptcy.)

You can see why the SEC wouldn’t want people to sell securities without a license—”By failing to become associated with a registered broker-dealer, Sarafraz denied investors the protections of regulatory oversight and firm supervision,” says an SEC guy—but for me this story mostly shows that a lot of people selling securities without a license are probably better at it than the licensed broker-dealers.

Someone should really hire this guy to go legit.

(See ThinkAdvisor’s SEC enforcement roundup for more details; or view the SEC’s litigation release.)


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