Securities and Exchange Commission v. Martino

Carol Martino (defendant) was the president and owner of CMA Noel Ltd. (CMA) (defendant). Martino had been barred from associating with a broker or dealer because of securities-law violations. Neither Martino nor CMA was registered with the Securities and Exchange Commission (SEC) (plaintiff) as a broker or dealer. Martino and CMA entered into agreements with five companies to broker sales of the companies’ Regulation S stocks to overseas investors. Each of the agreements provided that Martino was to perform the duties normally associated with the sale of securities, act as liaison between buyer and seller, and receive a percentage of the sales as commissions. Under these agreements, Martino identified, solicited, and provided information to potential purchasers; advised and assisted the companies in negotiations with prospective purchasers; and encouraged investors to purchase stocks. One foreign client testified that Martino knew about his Regulation S stock transactions; repeatedly encouraged him to invest; and was in continuous contact with him to discuss payment, his satisfaction, and the receipt of purchase agreements. Other clients referred to Martino as their broker or stated that they relied on Martino as their broker. Martino brokered millions of dollars in sales and received millions of dollars in cash and stock commissions. The SEC charged Martino and CMA with, among other violations, acting as an unregistered broker in violation of the federal securities laws and sought disgorgement of their illegal brokerage commissions. The SEC moved for summary judgment.