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Monday, March 30, 2015

SEC CHARGES SEVERAL INDIVIDUALS AND COMPANIES WITH FAILING TO REGISTER AS A BROKER-DEALER

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 
03/26/2015 11:05 AM EDT

The Securities and Exchange Commission today charged nearly two dozen companies and individuals who regularly bought and sold securities on behalf of a suburban Chicago-based trading firm without registering with the SEC as a broker-dealer as required under the federal securities laws.

The broker-dealer registration provisions of the securities laws ensure the protection of customers by requiring firms to undergo periodic inspections by the SEC and maintain books and records for their securities transactions.  An SEC investigation found that Global Fixed Income LLC, which was primarily in the business of purchasing investment grade corporate bonds, entered into agreements with third parties that acted as unregistered broker-dealers on its behalf and bought billions of dollars’ worth of newly issued bonds causing Global Fixed Income’s allocation in the bond offerings to increase.  Because the offerings were often oversubscribed, Global Fixed Income was generally able to sell or “flip” the bonds within a few days for a small profit compared to the dollar value of the trade, and it split profits with the third-party participants.

Global Fixed Income and its owner Charles Perlitz Kempf, who arranged the deals, agreed to settle the SEC’s charges along with 21 third-party participants.  They must collectively pay nearly $5 million in disgorgement of profits plus approximately $1 million in penalties.

“Global Fixed Income essentially hired firms to act as brokers on its behalf and purchase billions of dollars of newly issued bonds to increase profitability in the bond market, yet none of the firms or their employees were registered to legally act as brokers,” said Michele W. Layne, Director of the SEC’s Los Angeles Regional Office.

According to the SEC’s orders instituting settled administrative proceedings, the misconduct occurred from July 2009 to June 2012.  The order finds that Global Fixed Income and Kempf caused violations of Section 15(a)(1) of the Securities Exchange Act of 1934, and Kempf willfully aided and abetted violations of Section 15(a)(1).  The third-party participants committed violations of Section 15(a)(1) and include companies and 12 individuals.

Global Fixed Income, Kempf, and the third-party participants consented to the orders without admitting or denying the findings.  In addition to the disgorgement amounts set forth in the orders, Global Fixed Income agreed to pay a $500,000 penalty, each corporate participant agreed to pay a $50,000 penalty, and each individual participant agreed to pay a $5,000 penalty.  The SEC’s order suspends Kempf from associating with a registered entity or participating in a penny stock offering for 12 months.

The SEC’s investigation was conducted by David Rosen and supervised by Finola H. Manvelian of the Los Angeles Regional Office.


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