SEC Charges UK Financial Firm, Global Investment Strategy UK Ltd., with Acting as Unregistered Broker-Dealer in Clearing Billions of Dollars in U.S. Securities Transactions
(STL.News) The Securities and Exchange Commission Wednesday charged Global Investment Strategy UK Ltd. (GIS), a London, UK-based financial services firm, for clearing and settling billions of dollars of U.S. securities transactions without registering as a broker-dealer in violation of the federal securities laws. The SEC also charged John William Gunn, its founder and principal, with aiding and abetting those violations.
According to the complaint, from at least 2015 through 2019, GIS-a financial firm located in the United Kingdom that has never been registered as a broker or dealer in the United States-provided clearance and settlement services to hundreds of U.S. customers for trades primarily between U.S. buyers and sellers and involving billions of dollars’ worth of securities. The complaint alleges that GIS was acting as an unregistered broker by providing the clearance and settlement services for its U.S. customers, receiving transaction-based compensation for the trades, extending margin to its customers, holding customer funds and securities, and soliciting customers for its brokerage services. As alleged, by failing to register with the SEC, GIS avoided having to comply with the financial responsibility rules that apply to firms that provide clearance and settlement services to U.S. customers, including rules limiting the amount a customer can initially borrow from a broker-dealer to purchase an equity security. As set forth in the complaint, by clearing through GIS, a customer could purchase securities valued at 20 or 30 times the equity in the account. U.S. customers allegedly chose to clear their trades through GIS because of the increased leverage available, even though GIS purportedly charged higher per-trade fees than U.S. firms.
The SEC’s complaint, filed in the Southern District of New York, charges GIS with violating the broker-dealer registration provisions of Section 15(a) of the Securities Exchange Act of 1934 and Gunn with aiding and abetting GIS’s violations, and seeks injunctive relief and civil penalties.
The SEC’s investigation, which is ongoing, is being conducted by James Burt, Peter Lamore, and Sheldon Pollock of the New York Regional Office, and supervised by Lara Shalov Mehraban, with assistance from Kathleen Dolan, Thomas McGowan, Joanne Rutkowski, Randall Roy, Sheila Swartz, and Shauna Sappington in the Division of Trading and Markets, Stephen Ng and Nicholas Brady in the Office of General Counsel, Marianne Olson and Sharmila Matugama in the Office of International Affairs, and Carina Chambarry and Michael Barnes in the Division of Economic and Risk Analysis. The litigation will be led by David Stoelting and James Burt.
The staff would like to acknowledge the assistance of the Financial Conduct Authority of the UK.