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Bahamian Broker Left At Sec Mercy

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian broker/dealer and its staff remain at the mercy of US regulators after a federal court found its principal had failed to justify the imposition of an emergency restraining order.

Chief district judge Jose Linares, sitting in the New Jersey federal court, ruled on Friday that Guy Gentile had not proven that he and his Bay Street-based broker/dealer, MintBroker International, would suffer “irreparable harm” if the Securities & Exchange Commission (SEC) continued its nine-year probe into their activities.

Mr Gentile had argued that himself and MintBroker, previously called SwissAmerica Securities, had seen six financial institutions - including banks and clearing houses - sever business and account relationships as a result of SEC subpoenas requesting information on them.

Fearing more subpoenas, and the loss of more such relationships, Mr Gentile applied to the New Jersey court for a temporary injunction to halt the SEC’s probe until his full case demanding that it cease and desist can be heard.

In particular, Mr Gentile warned that the future of MintBroker International and its 60 Bahamian jobs was under threat unless the US federal regulator was restrained, but his argument appeared to carry little weight with Judge Linares.

Pointing out that temporary injunctions were “extraordinary remedies that are not routinely granted”, the US judge found Mr Gentile “has failed to demonstrate a ‘clear showing of immediate irreparable injury’ in the absence of” its imposition - a fatal flaw to his case.

While several financial institutions had severed their relationships with himself and his Bahamian broker/dealer, Judge Linares said this was “past harm” that - if Mr Gentile won his case - wad best dealt with via a damages award rather than an injunction that merely preserved the “status quo”.

The New Jersey court also ruled that Mr Gentile’s fear of future harm from more SEC subpoenas was “speculative”, as he did not produce proof showing any were imminent or had been issued.

“Furthermore, plaintiff has failed to demonstrate that any future harm would not be adequately addressed by an award of monetary damages,” Judge Linares wrote. “Because plaintiff has failed to meet his burden of demonstrating immediate, irreparable harm in the absence of a temporary restraining order, his application for a temporary restraining order must be denied.”

The verdict is a fresh blow for Mr Gentile in his long-running battle with the SEC, and exposed MintBroker International to further investigations and regulatory pressure until his full lawsuit demanding a complete - not temporary - halt to the probe is heard.

Tribune Business reported last week how Mr Gentile had alleged in court documents that the US regulator’s “never-ending investigation” of his Bahamian business was endangering both its continued operation and his career.

He claimed that his broker/dealer, which has been renamed from Swiss America Securities to MintBroker International, had been “stigmatised” by the US capital markets regulator’s nine-year probe to the extent that six separate financial institutions had severed relationships with it.

Arguing that the SEC was becoming more bold and “audacious”, and persisting with an “unending and retaliatory” investigation that was starting to cripple MintBroker’s operations, Mr Gentile denied he or his company had ever acted as an unregistered broker/dealer that openly solicited US investors and clients.

That claim represents the foundation of the SEC’s case, but Mr Gentile alleged in an affidavit obtained by Tribune Business that MintBroker has taken elaborate precautions to ensure it can never be accused of marketing its products and services directly to Americans.

“I have been under investigation by the SEC for nine years now, though it has never alleged that I have taken action after 2008 (11 years ago) that could constitute a violation of US securities laws,” the MintBroker chief alleged in his March 5 affidavit.

“My business in The Bahamas, where I employ 60 individuals, is highly-regulated.... The SEC’s nine-year long investigation of me and my business has caused stigmatisation by inference. Its actions have real consequences.

“If they continue this never-ending investigation they will eventually succeed in making it impossible for me to continue, and effectively exclude me from my chosen profession without ever asserting another claim. This conduct risks not only my livelihood, but the livelihoods of my dozens of Bahamian employees.”

Revealing that MintBroker had lost customers and “client referral sources” due to the SEC investigation and associated subpoenas, he said: “SwissAmerica, and later MintBroker, a Bahamian broker/dealer, does not solicit US customers.

“It maintains a website that is accessible from anywhere in the world, but no marketing efforts whatsoever are directed towards the United States. All of the company’s advertisements on the Internet explicitly state that the advertisement was not intended for US persons, and the broker/dealer’s website contains a pop-up which prevents access to anyone with a US Internet IP address unless they confirm they have not been solicited.

“If a US-based investor seeks an account they cannot circumvent the pop-up and sign for one over the Internet. Instead, they must contact The Bahamas and request an access code. That code, once obtained, will allow the investor to create an online account and acts as proof that the client was not solicited by SureTrader [one of MintBroker’s trade names], but rather voluntarily took steps to find the website and open an account.

“I understand that the securities laws to not preclude unregistered broker/dealers from serving United States customers, and that the prohibition is on soliciting them - something SureTrader takes great effort to avoid doing.”

Comments

banker 1 year, 10 months ago

One is only left at the SEC's mercy if one deserves to be under an SEC microscope and has done something not in the SEC's liking. If you want to be in the game with the big boyz, you have to follow their rules.

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