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2 charged with facilitating securities trades despite being unregistered with SEC

On Behalf of | Dec 2, 2022 | Regulatory Investigations

The Securities and Exchange Commission has charged two men with facilitating securities trading despite being unregistered with the commission as broker-dealers. In a news release, the SEC announced the charges against Jeffrey K. Galvani, Stuart A. Jeffery, and two New York-based entities they controlled.

Galvani and Jeffery created GEL Direct Trust and managed it through its trustee, GEL Direct, LLC. Acting through those entities, the defendants provided brokerage services to about 60 customers from 2019 to at least May 2022. The SEC said they were involved in at least 19,000 securities trades, primarily in penny stocks, that amounted to over $1.2 billion.

According to the SEC’s complaint filed in federal court, Galvani and Jeffery provided services that included taking possession of customer securities, directing trades to executing brokers, facilitating trade settlements, and disbursing trading proceeds to customers.  For these services, the two defendants allegedly received at least $12 million in compensation.

Galvani and Jeffery were both registered brokers at a registered broker-dealer unconnected with this case, but did not register GEL Direct Trust and GEL Direct, LLC with the SEC, the commission said.

“Broker-dealer registration protects investors and our markets. It is not optional,” said David L. Peavler, Director of the SEC’s Fort Worth Regional Office. “As securities industry professionals, Galvani and Jeffery knew the rules, but we allege they didn’t follow them.”

Galvani, Jeffery, GEL Direct Trust, and GEL Direct, LLC were charged with violating the broker-dealer registration requirement of Section 15(a) of the Securities Exchange Act of 1934. Galvani and Jeffery were also charged as “control persons” of the GEL entities under Section 20(a) of the Exchange Act. The SEC is seeking permanent injunctions, disgorgement, prejudgment interest, civil penalties, and penny stock bars against all the defendants.

The attorneys at Lewitas Hyman fully understand the regulatory scrutiny financial professionals and their firms face from the various regulators that oversee the financial services industry. We have decades of experience representing clients with respect to examinations, investigations and enforcement proceedings initiated by the SEC, FINRA, state securities regulatory agencies and other self-regulatory organizations. If your firm is facing an investigation from a regulatory agency, please contact Lewitas Hyman at (888) 655-6002 or through our online contact form.