The Securities and Exchange Commission (“SEC”) recently charged Banco Espirito Santo S.A. (“BES”) with violations of the broker-dealer, investment adviser and securities transaction registration provisions of the federal securities laws (the “Enforcement Action”). Pursuant to the Enforcement Action, Portugal-based BES offered brokerage services and investment advise between 2004 and 2009 to approximately 3,800 United States residents who were primarily Portuguese immigrants (“Customers”). However, during this time, BES was not registered with the SEC as a broker-dealer or investment adviser, and it offered and sold securities to the Customers without the intermediation of a registered broker-dealer. None of BES securities transactions were registered and many of the securities offering did not qualify for an exemption from registration.
The Enforcement Action describes the various ways BES offered and sold securities and provided brokerage and advisory services to the Customers. BES used its Portugal-based marketing department to mail U.S. residents marketing materials. A customer service call center operated by a third party in Portugal employed individuals who were dedicated to servicing the Customers and offering the Customers various financial products. BES also used a state-licensed money transmission service and U.S.-dedicated International Private Banking relationship managers who visited the U.S. from Portugal approximately twice a year to meet with Customers.
BES agreed to: (i) pay nearly $7 million in disgorgement, prejudgment interest and penalties; (ii) pay a certain minimum rate of interest to its Customers on securities purchased through BES; and (iii) make whole each Customer for any realized or unrealized losses with respect to any securities purchased through BES.
To read a complete copy of the Enforcement Action, click here.
This publication is for general information only.It is not legal advice, and legal counsel should be contacted before any action is taken which might be influenced by this publication.
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