Broker-Dealers Fined for Wrongful Bond Trades

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Broker-Dealers Fined for Wrongful Bond Trades

The SEC charged nearly two dozen companies and individuals who bought and sold securities for a Chicago-based trading firm without registering as a broker-dealer with the SEC as required under the federal securities laws.

The securities laws regulating broker-dealer registration ensure the protection of investors by allowing the SEC to conduct periodic inspections of firms and requiring firms to maintain books and records for all securities transactions.

An SEC investigation uncovered Global Fixed Income, LLC, which primarily purchased investment grade corporate bonds, entered into contracts with third parties who worked as unregistered broker-dealers.  The unregistered brokers bought billions of dollars’ worth of newly issued bonds which caused Global Fixed Income’s allocation in the bond offerings to increase.  Because the offerings were oversubscribed, Global Fixed Income could sell the bonds quickly for a profit compared to the dollar value of the trade.  This wrongful profit was split among Global Fixed Income and the third-party unregistered broker-dealers.  The parties committed this misconduct from July 2009 to June 2012.

“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,” stated Michele W. Layne, SEC Regional Director.

Global Fixed Income, its owner, and the 21 third-party participants agreed to settle the SEC’s charges of nearly $5 million in disgorgement of profits plus approximately $1 million in penalties.  All participants consented to the orders without admitting or denying the findings.  In addition to paying a disgorgement amount, Global Fixed Income will pay a $500,000 penalty, and each individual participant will pay a $5,000 penalty.  The SEC suspended the owner of Global Fixed Income from associating with a registered entity or participating in a penny stock offering for one year.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies or complete the contact form.

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