← Broker database 2025-05-02
Silver Leaf Partners Appeals SEC Decision on Payments to Non-Members
According to FINRA, Silver Leaf Partners, LLC has appealed an SEC decision to the United States Court of Appeals for the Second Circuit. The SEC sustained FINRA's National Adjudicatory Council findings that the firm paid transaction-based compensation to non-members in violation of securities rules.
The New York firm was fined $50,000 for paying transaction-based compensation to non-members and an additional $50,000 for failing to establish a supervisory system to prevent such payments and for failing to reasonably supervise its corporate advisory business. The firm was also ordered to retain an independent consultant and was suspended from its corporate advisory business until implementing the consultant's recommendations.
The findings established that the firm knowingly approved and facilitated payments of more than $50,000 in transaction-based compensation to an unregistered finder. Additionally, the firm directly deposited more than $2.6 million in transaction-based compensation into bank accounts owned by non-member entities affiliated with registered persons at the firm.
The SEC had previously notified the firm that its practice of paying commissions to registered persons' entities was among its deficiencies. Despite this warning, the firm continued the practice.
The firm was also found to have failed to establish any supervisory system for its corporate advisory business, despite recognizing the risks involved. The firm had no written supervisory procedures for this business and failed to correct deficiencies even after encountering red flags.
The firm's procedures regarding compensation practices were not tailored to its business and did not address payments to unregistered finders or non-member entities.
The sanctions are not in effect pending the appellate court's review.
For investors, this case highlights the importance of transaction-based compensation being paid only to properly registered individuals and member firms.