Commission Charges Former Broker as Unregistered Dealer

Since the creation of the Securities Exchange Act of 1934 those acting as broker or dealers have been required to register with the Commission. The definition for each term, as originally drafted, is broad. For example, the definition of what constitutes a deal under Exchange Act Section 15(a)(1) is essentially open ended. Many have acted as an unregistered dealer and been changed by the Commission with failure to register. Some of those charged under Section 15(a)(1) have argued that the definition is so broad that it is unconstitutional. While the legal argument may have some appeal, no one has prevailed. Nevertheless, millions and billions of shares of microcap stock are sold each year by unregistered dealers. The Commission’s latest case in this area is SEC v. Tri-Bridge Ventures, LLC, Civil Action No. 3:24-cv-05711 (D.N.J. Filed April 29, 2024).

Named as defendants in the action are: The company and John F. Forsythe, III. The company was founded in about 2016. It is controled by Defendant Forsythe. The firm is now based out of his home in New Jersey. Mr. Forsythe has been associated with 10 brokers over the years.

Over a five-year period, beginning in early 2017 and continuing through at least November 2022, Defendants engaged in the business of buying and selling securities. Defendants conducted this business by: a) entering into convertible notes with microcap issuers or purchasing such notes; b) converting the notes into stock; and c) selling the shares of the microcap issuers into the over-the-counter or OTC markets.

During the relevant period securities were sold of at least 31 issuers. During the period May 2019 to November 2022 Defendants engaged in this business and sold shares of at least 25 issuers yielding over $18 million in gross sales. Neither Defendant is registered with the Commission. The complaint alleges violations of Exchange Act Section 15(a)(1). The case is in litigation. See Lit. Rel. No. 25987 (April 29, 2024).