SEC Enforcement Opens Door To Define Most Traders As “Dealers”

The SEC instituted an action against a private fund that could have a significant impact on private equity, hedge funds and institutional investors. The SEC’s position is that the fund bought and sold securities as part of its regular business and should be defined as a “dealer.” If the SEC prevails, as it has in other cases, then institutional investors such as private funds, hedge funds, bridge lenders and day traders will be required to register with the SEC as a “dealer” – with the same oversight and net capital requirements of a broker dealer (generally, $100,000 net capital as defined by the SEC). Expanding the definition of a "dealer" may cause exiting funds and trading firms to violate the Securities Exchange Act and significantly disrupt the financial industry .

Memorandum Summarizing Issues

SEC Final Rule and Adopting Release

SEC v. Kramer -- Complaint

SEC v. Kramer -- Defendant's Letter Dated July 9, 2024 to Court

SEC v. Kramer -- SEC's Letter Dated July 18, 2024

SEC v. Almagarby -- Decision

SEC v. Keener Decision