Blog

Securities & Exchange Commission charges day trading education firm for unregistered security based swap transactions

Tradenet Capital Markets Ltd has been charged by the Securities and Exchange Commission with offering and selling security-based swaps to over 5,000 retail investors without registration and for failing to transact its swaps on a registered national exchange. The SEC’s order says that from November 2017 to June 2020, Tradenet sold investors packages of materials that claimed to be for the purpose of educating investors about day trading but also paid investors a portion of net profits from simulated trades conducted in a funded trading account provided as part of the packages.  Tradenet charged from $500 to $9,000 for the educational packages that included the simulated trading accounts and investors whose portfolios increased in value received payouts equal to a percentage of the simulated net profits, but if the value of the portfolio decreased by a certain amount, the funded trading account was closed. The SEC’s order finds that the contracts to provide funded trading accounts were security-based swaps under the U.S. federal securities laws. The SEC found that no registration statement had been filed for the swaps, and that the swaps were not sold through a national securities exchange.

“Companies seeking to sell U.S. retail investors synthetic exposure to stocks must ensure compliance with the federal securities laws,” said Daniel Michael, Chief of the Complex Financial Instruments Unit. “We will continue to watch the market for unregistered offerings of security-based swaps.”

The SEC also found that Tradenet violated provisions of the federal securities laws concerning unregistered offers and sales of security-based swaps and requiring that certain swap transactions occur on a registered national exchange. Without admitting or denying the findings in the order, Tradenet consented to a cease-and-desist order and agreed to pay a penalty of $130,000.

Jeffrey A Newman represents whistleblowers nationwide including SEC whistleblowers with information on violations of securities laws and regulations. He can be reached at jeff@jeffnewmanlaw.com or at 617-823-3217

Website developed in accordance with Web Content Accessibility Guidelines 2.1.
If you encounter any issues while using this site, please contact us: 617.823.3217