Angel Oak Capital Partners, LLC ("Angel Oak") agreed to pay $3.6 million to settle SEC charges that the company violated the broker-dealer registration requirements of Section 15(a) of the Exchange Act by operating as an unregistered broker-dealer.
The SEC Order found that Angel Oak operated as an unregistered broker-dealer by entering into an independent contractor agreement with Peraza Capital & Investment, LLC ("Peraza"), a registered broker-dealer, for the purpose of conducting a securities business. According to the SEC Order, Angel Oak employees that were registered as "associated persons" of Peraza entered into hundreds of trades, solicited customers repeatedly, and often marketed the securities business while using the "Angel Oak" name. In addition, the SEC Order found that Angel Oak exercised control over the securities business, including making hiring and firing decisions, determining which employees would become registered representatives of Peraza, "determining compensation (including transaction-based compensation) for the employees and participating in relevant discussions as to how to operate the business."
The SEC Order also determined that Peraza facilitated Angel Oak in operating a brokerage business without registering as a broker-dealer by providing access to its trading platform and settlement and clearance capabilities.
Commentary / Steven Lofchie
The holding in this case serves as a reminder that (i) anyone who exercises day-to-day supervisory authority over the activities of a broker-dealer must be registered as a principal of the broker-dealer and (ii) a legal entity that shares in brokerage commissions generally is required to register as a broker-dealer.
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