1. SEC Charges Major Portuguese Bank for Violating Registration Provisions of U.S. Securities Laws
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SEC Charges Major Portuguese Bank for Violating
Registration Provisions of U.S. Securities Laws
Banco Espirito Santo S.A. to Pay Nearly $7 Million to Settle Charges
FOR IMMEDIATE RELEASE
2011-221
Washington, D.C., Oct. 24, 2011 – The Securities and Exchange
Commission today charged multinational banking conglomerate Banco
Espirito Santo S.A. (BES) with violations of the broker-dealer and
investment adviser registration provisions and the securities transaction
registration provisions of the federal securities laws.
Additional Materials
Administrative Proceeding
The SEC's enforcement action finds that Lisbon, Portugal-based BES offered
brokerage services and investment advice between 2004 and 2009 to
approximately 3,800 U.S.-resident customers and clients who were primarily
Portuguese immigrants. However, during this time, BES was not registered
with the SEC as a broker-dealer or investment adviser, and it offered and
sold securities to its U.S. customers and clients without the intermediation
of a registered broker-dealer. None of these securities transactions was
registered and many of the securities offerings did not qualify for an
exemption from registration.
BES agreed to settle the SEC's charges and pay nearly $7 million in
disgorgement, prejudgment interest and penalties. In determining to accept
BES's offer to settle, the SEC considered remedial acts promptly undertaken
by BES and its cooperation with SEC staff.
"The registration provisions are core safeguards of the integrity of our
securities markets and the financial institutions that act as gatekeepers of
those markets," said George S. Canellos, Director of the SEC's New York
Regional Office. "BES brazenly ignored those provisions over the course of
many years by acting as an investment adviser and broker-dealer without
registration and by offering and selling securities to members of the U.S.
public without any of the disclosures required by the law."
Sanjay Wadhwa, Associate Director of the SEC's New York Regional Office,
added, "Foreign entities seeking to provide financial or securities-related
services in the U.S. must familiarize themselves with the statutory and
regulatory framework in this arena. A failure to do so, as was the case
here, can be a costly misstep."
The SEC's order instituting administrative proceedings against BES describes
the various ways that the bank offered and sold securities and provided
brokerage and advisory services to its U.S. customers and clients. BES used
its Portugal-based Departmento de Marketing de Comunicacao & Estudo do
Consumidor (Department of Marketing, Communications, and Consumer
Research) to mail U.S. residents marketing materials. A customer service
call center operated by a third party and located in Portugal (known as the
http://www.sec.gov/news/press/2011/2011-221.htm[28-12-2011 19:58:48]

2. SEC Charges Major Portuguese Bank for Violating Registration Provisions of U.S. Securities Laws
ES Contact Center) employed individuals who were dedicated to servicing
BES's U.S. customers and offered such U.S. customers various financial
products. BES also used a state-licensed money transmission service named
Espirito Santo e commercial Lisbona Inc. with offices in Connecticut, New
Jersey, and Rhode Island. BES also had U.S.-dedicated International Private
Banking relationship managers who visited the U.S. approximately twice a
year to meet with clients and serviced U.S. clients from Portugal.
The SEC's order finds that by acting as an unregistered broker-dealer and
investment adviser to U.S. customers and clients, BES willfully violated
Section 15(a) of the Securities Exchange Act of 1934, and Section 203(a) of
the Investment Advisers Act of 1940. According to the SEC's order, BES
also willfully violated Sections 5(a) and 5(c) of the Securities Act of 1933 by
offering and selling securities in the U.S. without registration and without an
applicable exemption from registration.
Without admitting or denying the SEC's findings, BES has agreed to cease
and desist from committing or causing any violations of Sections 5(a) and
5(c) of the Securities Act, Section 15(a) of the Exchange Act, and Section
203(a) of the Advisers Act, and to pay nearly $7 million in disgorgement,
prejudgment interest and penalties. BES also has agreed to an undertaking
that requires it to pay a certain minimum rate of interest to its U.S.
customers and clients on securities purchased through BES, and to make
whole each of its U.S. customers and clients for any realized or unrealized
losses with respect to any securities purchased through BES.
The SEC's investigation was conducted by Amelia A. Cottrell, John C.
Lehmann, and Charles D. Riely of the SEC's New York Regional Office. The
office's broker-dealer examination team of Robert A. Sollazzo, Ellen N.
Hersh, Ashok Ginde, and Jennifer A. Grumbrecht provided assistance with
the investigation.
# # #
For more information about this enforcement action, contact:
George S. Canellos
Director, SEC's New York Regional Office
(215) 597-3191
Sanjay Wadhwa
Deputy Chief, SEC Market Abuse Unit and Associate Director, New York
Regional Office
(212) 336-0181
Amelia A. Cottrell
Assistant Director, SEC's New York Regional Office
(212) 336-1056
http://www.sec.gov/news/press/2011/2011-221.htm
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