SEC Charges Unregistered Securities Salesman
The U.S. Securities and Exchange Commission has charged a Tiburon, Calif.-based securities salesman for selling millions of dollars in oil-and-gas investments without being registered with the SEC as a broker-dealer or associated with a registered broker-dealer.
Behrooz Sarafraz has agreed to settle the SEC’s charges by paying disgorgement of his commissions, prejudgment interest, and a penalty for a total of more than $22 million.
“By failing to become associated with a registered broker-dealer, Sarafraz denied investors the protections of regulatory oversight and firm supervision,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office. “The SEC is committed to holding such unregistered salespeople accountable for their conduct.”
According to the SEC’s complaint filed in federal court in San Francisco, Sarafraz acted as the primary salesman on behalf of TVC Opus I Drilling Program LP and Tri-Valley Corporation, which were based in Bakersfield, Calif. From February 2002 to April 2010, these companies raised more than $140 million for their oil-and-gas drilling venture. While Sarafraz was raising money for these entities, he was not associated with any broker-dealer registered with the SEC.
The SEC’s complaint charges Sarafraz with violating Section 15(a) of the Securities Exchange Act of 1934, which requires securities salesmen to be associated with broker-dealers that are registered with the SEC.
According to the SEC’s complaint, Sarafraz worked full-time locating investors for the Opus and Tri-Valley oil-and-gas ventures. He described the investment program to investors and recommended they purchase Opus partnership interests or securities of Tri-Valley and its affiliated entities. In return, Sarafraz received commissions that ranged from seven to 17 percent of the sales proceeds that he and members of a sales network generated. The SEC alleges that Opus and Tri-Valley paid Sarafraz approximately $18.3 million in sales commissions. He paid approximately $1.9 million to others as referral fees and kept the remaining $16.4 million for himself.
Sarafraz has agreed to settle the SEC’s charges by consenting to entry of a final judgment ordering him to pay a total of $22,482,318.87 without admitting or denying the allegations. The sum consists of $16,406,459 in disgorgement, $6,075,859.87 in prejudgment interest, and a $50,000 penalty. The final judgment will also permanently enjoin him from violating Section 15(a) of the Exchange Act. The settlement is subject to court approval.
The SEC’s investigation was conducted by William Fiske and Marc Blau of the Los Angeles Regional Office.