“What the SEC says now is forget about all of that. “For 90 years, it’s been well understood that a dealer is one who takes the other side of a customer’s trade using their own account,” Brian Richman, an attorney at Gibson, Dunn & Crutcher who represents a defendant in a similar case, told Forbes.
That includes background checks, compliance checklists, escalated record-keeping costs and capital requirements.
#Best penny stock newsletters 2020 registration#
The court said that his trading frequency “had made him more than an active investor” and agreed with the government that a trader with a business model based entirely on purchases and sales of securities had to go through the hassle of registration and the increased scrutiny of being a dealer. District Court for the Southern District of Florida agreed with the SEC that Almagarby - and Microcap Equity - had run afoul of the agency’s rules by not registering as a dealer. So there were few headlines in August 2020 when the U.S. Each of Almagarby’s transactions averaged a modest $30,000 or so - hardly the kind of clout that can sustain a long legal battle with the U.S. The agency chose a convertible-securities trader who was not only less than sympathetic because of how he makes his money, but because, by Wall Street standards, he’s small fry. It’s plausible that the SEC played a strategic hand, selecting Almagarby as its opening salvo in a campaign to extend its tendrils into every last financial crevice. Since 1934, when the definition for “dealer” was written into law, nobody who traded only for their own account, like Almagarby did, was required to register as one. The agency sued Almagarby and Microcap Equity Group in November 2017 for “acting as unregistered securities dealers.” To hear securities lawyers and other experts tell it, this was unprecedented. Because it feeds the bittersweet narcotic of high-interest loans to desperate companies, it’s been called “death-spiral financing,” and its conversion to stock often causes the company’s share prices to tumble.īut the unsavory nature of the trade wasn’t the government’s objection when the SEC came calling. It’s legal, but you probably wouldn’t see a Mother Teresa making this trade.
No doubt, convertible debt is controversial.
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