Recent SEC Settlement with Midsize PE Firm Raises Broker-Dealer Issues

The SEC on Wednesday announced a settlement with Maryland-based private equity adviser Blackstreet Capital Management and its owner regarding charges that they, among other things, engaged in brokerage activity and charged fees without registering as a broker-dealer.  The SEC order contains multiple allegations against the adviser, so it is difficult to determine how much emphasis the agency placed on the alleged unregistered broker-dealer activity specifically. Nevertheless, the matter does demonstrate the SEC’s continued interest in the issue of unregistered broker-dealer activity, and emphasizes the need for private equity firms to be aware of the issue when they take securities-related transaction fees in connection with the purchase or sale of securities. This is also why ACG PERT continues to keep possible broker-dealer registration on our list of key issues and for discussion around best practices.

With that, ACG PERT has met twice in the past with the SEC’s Division of Trading & Markets to discuss broker-dealer issues for private equity firms, and to explain why private equity firms should not be required to register as a broker-dealer. We expect to meet with them again in the coming months, and will be sure to keep PERT members appraised of our conversations.

If you have questions or comments, please do not hesitate to contact Amber Landis, ACG vice president of public policy, at (312) 957-4272.