Three Investment Adviser Representatives Settle SEC Charges for Acting as Unregistered Brokers

SEC Takes Action Against VCP Financial and Investment Advisers for Regulatory Violations

Investment Advisers Caught Selling Pre-IPO Investments Without Proper Registration

The Securities and Exchange Commission (SEC) has announced settled charges against three investment adviser representatives—Tamir Shabat, Danny Z. Spiegel, and Joseph J. Orlando, Jr.—for operating as unregistered brokers while selling membership interests in LLCs that purportedly invested in pre-IPO companies. Additionally, VCP Financial LLC faces regulatory action for requiring retail clients to sign liability disclaimers that were deemed impermissible under securities laws.

Unregistered Brokers Solicited Investments for Pre-IPO Shares

According to the SEC, between June 2019 and March 2020, Shabat, Spiegel, and Orlando actively solicited investors for StraightPath Venture Partners, LLC, a firm previously charged by the SEC. These representatives engaged in brokerage activities without the required broker-dealer registration, violating federal securities laws.

Investigations revealed that Shabat and Spiegel, as principals of VCP Financial and its predecessor LPS Financial, created an entity in 2019 to enter agreements with StraightPath Venture Partners. These agreements ensured that Shabat and Spiegel received compensation based on successful investments, a hallmark of broker activity.

Further, Spiegel and Shabat orchestrated a sales force of individuals who were also not registered brokers, including Orlando, an adviser at VCP Financial. Their responsibilities involved:

• Distributing marketing materials to investors
• Advising clients on the merits of the investments
• Receiving transaction-based compensation

Since they were not registered as brokers, their actions violated Section 15(a) of the Securities Exchange Act.

VCP Financial’s Improper Liability Disclaimers and Conflict of Interest

The SEC also found that between March 2021 and October 2024, VCP Financial failed to manage its conflict of interest when recommending investments in private funds managed by an affiliated entity. The firm required clients to sign liability disclaimers that:

• Disclaimed VCP Financial’s role in their investment decisions
• Asserted that VCP Financial was not acting as their investment adviser

These disclaimers directly contradicted the firm’s own conflict-of-interest disclosures and could have misled investors into believing they had waived certain legal protections provided under state and federal law.

Regulators Emphasize Compliance with Broker Registration and Fiduciary Duties

SEC officials underscored the importance of broker registration and adherence to fiduciary obligations. Sheldon L. Pollock, Associate Regional Director at the SEC’s New York Office, stated:

“This case highlights yet another way the StraightPath Funds were marketed and reflects that being associated with a registered investment adviser does not give one license to also act as a broker without complying with broker registration requirements.”

He also emphasized that investment advisers cannot use liability disclaimers to avoid their fiduciary duties, particularly when onboarding clients for a specific investment.

Financial Penalties and Suspensions for the Violators

The SEC found Shabat, Spiegel, and Orlando in violation of Section 15(a) of the Exchange Act. As part of the settlement, the individuals agreed to the following penalties:

• Tamir Shabat: Ordered to pay $180,559 in disgorgement and prejudgment interest, plus a $40,000 civil penalty
• Danny Z. Spiegel: Ordered to pay $175,873 in disgorgement and prejudgment interest, plus a $40,000 civil penalty
• Joseph J. Orlando, Jr.: Ordered to pay $83,255 in disgorgement and prejudgment interest, plus a $20,000 civil penalty

Additionally, all three individuals received six-month industry and penny stock suspensions.

The SEC also ruled that VCP Financial violated Section 206(2) of the Investment Advisers Act, requiring the firm to:

• Pay a $100,000 civil penalty
• Accept a censure

The nearly $540,000 in financial penalties collected from the three individuals will be allocated to the court-appointed receiver in SEC v. StraightPath Venture Partners, LLC for distribution to harmed investors.

Key Takeaways for Investment Advisers and Investors

This enforcement action serves as a warning for investment advisers, brokerage firms, and investors:

1. Registration Matters – Engaging in broker activities without proper registration violates securities laws and can lead to severe penalties.
2. Fiduciary Duties Cannot Be Disclaimed – Investment advisers cannot use liability disclaimers to sidestep fiduciary obligations.
3. Marketing Pre-IPO Investments Requires Caution – Firms must ensure compliance when offering pre-IPO investment opportunities to avoid regulatory scrutiny.
4. Conflicts of Interest Must Be Disclosed Transparently – Any affiliation with recommended funds must be fully disclosed to clients, and firms must align their actions with their disclosures.

SEC Press Release

 

Editor’s Note: Readers are reminded that the SEC often over-charges, and ultimately backs away once a target mounts a defense. Unless the release indicates that the respondent has settled the charges, these are the SEC’s allegations, not evidence of wrongdoing. The respondent has not yet had the opportunity to present evidence or to counter the allegations contained in the SEC Press Release.

Representing Advisors and Investors, Nationwide.