June 9, 2014 — A California securities salesman has been charged with selling millions in oil-and-gas securities without registering as a broker-dealer with the Securities and Exchange Commission (SEC) or associating with a registered broker-dealer. Under Section 15(a) of the Securities Exchange Act of 1934, securities salesmen must register themselves as broker-dealers or be associated with registered broker-dealers. The law is intended to ensure that investors are protected by the SEC’s regulatory oversight and supervision of brokerage firms. To settle the SEC’s charges, Behrooz Sarafraz, of Tiberon, California, will pay more than $16 million in disgorgement, $6 million in prejudgment interest and $50,000 in penalties — over $22 million combined.
In 2010, Congress set up a financial fraud whistleblower program as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Insiders may take home significant rewards when they collaborate with the SEC about a salesman’s or a firm’s failure to register with the SEC. Rewards for tipsters may be as high as thirty percent of the total recovery, so long as it exceeds $1 million.
Unregistered Securities Salesman to Pay $22 Million in Disgorgement, Penalties and Prejudgment Interest
Tri-Valley Corporation and TVC Opus I Drilling Program LP, oil-and-gas ventures based in Bakersfield, California, generated over $140 million between February 2002 and April 2010. The primary salesman for the ventures, Sarafraz worked full-time pitching the investment program to potential investors, to buy either Opus partnership interests or Tri-Valley securities. Sarafraz’s commissions on the sales varied from seven to 17 percent of sales proceeds. Sarafraz was so successful that in just eight years, he received more than $18 million in sales commissions. Sarafraz allegedly paid $1.9 million of that amount in referral fees and retained $16.4 million for himself.
During the entire time, Sarafraz was unassociated with any registered broker-dealer.
Tipsters Notify SEC When Salesmen Fail to Register
Insiders need to understand the rules of the Dodd-Frank whistleblower program before they collaborate with the SEC. With qui tam lawyers in California, where the misconduct allegedly occurred in this case, as well as Texas and the Washington, D.C. area, Waters & Kraus has the experience needed to protect whistleblowers’ rights and advance their interests. Contact us by email or phone our whistleblower attorneys at 855.784.0268 to learn more about how we can work together to do the right thing.