by T. GormanPosted on Posted in SECActions

The Investment Advisers Act requires that firms or individuals that are in the business of advising others about securities investments and are compensated for their services register with the Commission with few exceptions. A number of provisions of the Advisers Act are designed to protect clients. Some provisions of the Advisers Act are designed to protect the securities markets and the national economy. The Act, accordingly, requires those who have $25 million under management, with certain exceptions, to register. The Commission’s latest cases on this question is SEC v. Concord Management LLC, Civil Action No. 23-cv-8253 (S.D.N.Y. Filed September 19, 2023).

Despite the dictates of the Advisers Act, Defendants Concord Management LLC and Michael Martin have operated an advisory that has had billions of dollars under management for years. Defendant Concord Management is based in Tarrytown New York. Mr. Martin was born in Russia and emigrated to the United States in 1988. He now resides in New York state and is a U.S. citizen. He founded Concord in 1988. The firm has only one client, UBO. A, a Russian individual that is the ultimate beneficial owner (UBO) of all the assets under management by Concord.

Mr. Martin has operated an advisory for the benefit of his one client since 1999. The advisory, which has a complex structure, provides supervisory and management services so that the client’s assets are continuously invested in a diverse portfolio of US private fund investments. Over time the size of the investments has increased. By 2012, for example, Respondents employed about a dozen investment professionals. As of January 2022, Concord managed a private fund portfolio with an estimated value of $7.2 billion.

From 2012 through 2022 Respondents received about $85 million in total compensation from its client. The client ownership of the private fund investments through an interrelated group of entities. Concord, however, is one business.

In March 2022 the client was designated as a sanctioned individual by the U.K. and the EU. The assets were frozen. Since the freeze Respondents have not actively engaged in investment activity. Nevertheless, many of the underlying remain active. The Order alleges violations of Advisers Act Section 209(d). The case is in litigation.

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by T. GormanPosted on Posted in SECActions

Purchasing and selling securities for the account of others without registering as a broker has long been held to be a violation of the Exchange Act Section 15(a). Similarly, purchasing and selling securities for your own account has long been held to be a violation of that same section – the conduct constitutes acting as a dealer. This is true even though the transactions are conducted with the person’s own capital and solely for the benefit of that person – the conduct violates the requirement that those acting as a dealer register. The point is illustrated by the Commission’s most recent case in the area, SEC v. Rondini, Civil Action No. 9-cv-81285 (S.D. Fla. Filed September 18, 2023).

Named as defendants in Rondini are: Wilson Rondini, III, Falcon Capital LLP and Falcon Capital Partners Limited. Mr. Rondini is the managing partner of Falcon LLP and indirectly owns Falcon Limited. Falcon Capital had been registered with the U.K.’s Financial Conduct Authority. It has never been registered with the Commission. Falcon Limited is a Hong Kong entity that is owned by Falcon Capital Partners Private Foundation which is registered in Curacao and is owned by Mr. Rondini. It has never been registered with the Commission.

Each Defendant effected transactions in securities for others. Each of the entity Defendants entered into agreements with over a dozen entities (“issuers”), or their underwriters, agreeing to be paid commission-based compensation in exchange for their efforts too solicit investors to purchase issuers’ securities. Following the execution of the agreements Defendant Rondini distributed mass emails to prospective investors, touting the issuers’ stock and encouraging investors to purchase it. He engaged in similar conduct in one-on-one discussions with potential investors.

Each of Defendants also purchased and sold securities for their account. These transactions were typically called “private transactions ” – dealing in securities of some of the issuers prior to any IPO. In some transactions Defendants would purchase the shares for their account and then resell them to an investor at a mark-up.

The actions of Defendants violated Exchange Act Section 15(a)(1) since none were registered with the Commission as either a broker or a dealer. Those of Defendant Rondini also violated Exchange Act Section 20(a). The case is in litigation. See Lit. Rel. No. 25831 (September 18, 2023).

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