SEC Files Settled Charges Against Three StraightPath Sales Agents for Unregistered Broker Activity

In a recent development, the U.S. Securities and Exchange Commission (SEC) announced the settlement of charges against three sales agents from StraightPath Venture Partners for unregistered broker activity. These agents, Anthony Guarino, Robert Seropian, and Frank Vecchio, were involved in selling membership interests in LLCs that claimed to invest in pre-IPO companies. The SEC’s case also included previously announced fraud charges against Vecchio.

Illegal Activities in Pre-IPO Investments

The SEC’s order revealed that Guarino, Seropian, and Vecchio provided investors with marketing materials, advised them on the supposed benefits of the investments, and received transaction-based compensation. Despite these actions being indicative of broker activities, none of them were registered as brokers, a violation of federal securities laws. Collectively, the trio solicited over $17 million from at least 75 investors, earning around $2.1 million in transaction-based compensation among themselves.

Involvement of Legend Venture PartnersIn addition to his role at StraightPath, Guarino also actively solicited investments for Legend Venture Partners, an investment adviser previously charged by the SEC with fraud. Legend Venture Partners similarly claimed to invest in pre-IPO companies, further complicating the legal standing of the investments solicited by Guarino. The SEC’s findings against Guarino and Seropian reflect the broader crackdown on unregistered broker activities, particularly in the context of pre-IPO investments marketed to retail investors.

Fraudulent Misrepresentations to InvestorsVecchio’s case involved more than unregistered broker activity. According to the SEC’s complaint, Vecchio made false or misleading statements to investors he solicited on behalf of StraightPath. These misleading statements primarily revolved around the fees he and the fund manager received, further deceiving investors into believing they were entering a legitimate investment.

SEC’s Continued Enforcement in Pre-IPO Investment SectorSheldon L. Pollock, Associate Regional Director in the New York Regional Office of the SEC, emphasized the Commission’s ongoing efforts to hold unregistered brokers accountable. He stated, “Today’s resolutions demonstrate our continued efforts to hold accountable unregistered brokers, including those who facilitate the sale of pre-IPO investments to retail investors.” The SEC remains vigilant in ensuring that brokers adhere to registration requirements, particularly when selling investments that may be enticing to retail investors due to their pre-IPO nature.

Financial Penalties and Legal ConsequencesThe legal consequences for Guarino, Seropian, and Vecchio are substantial. Guarino and Seropian, without admitting or denying the findings, agreed to cease and desist from future violations of federal securities laws. Additionally, both were barred from participating in the securities industry and penny stock offerings. Guarino is required to pay disgorgement and prejudgment interest amounting to $431,287, along with a civil penalty of $100,000. Seropian faces harsher penalties, with a total disgorgement and prejudgment interest payment of $1,392,367 and a civil penalty of $300,000.

Vecchio’s Settlement and Financial PenaltiesVecchio’s case, while similarly involving unregistered broker activity, also included fraudulent activity. Without admitting or denying the findings, Vecchio agreed to a permanent injunction barring him from future violations of both the antifraud and broker-dealer registration provisions of federal securities laws. Vecchio also faced industry and penny stock bars, with financial penalties amounting to $544,250 in disgorgement and prejudgment interest, and a $90,000 civil penalty.