## Facts

- In 1985, Pakistan developed a plan to sell foreign-exchange-bearer certificates (FEBCs), instruments giving holders the right to purchase a foreign currency at a predetermined exchange rate.
- Pakistan’s central bank, acting through the New York offices of three Pakistani nationalized banks, intended to offer and sell FEBCs in the United States.
- The banks sought guidance on U.S. securities-law compliance from the law firm Dunn & Zuckerman.
- No one at Dunn & Zuckerman had prior securities-law experience, but Jeffrey L. Feldman, a lawyer and partner at the firm, advised the banks on the FEBC offering.
- Feldman advised that the FEBCs were not “securities” and recommended that the banks take no steps to register the offering or make filings with the Securities and Exchange Commission (SEC).
- Feldman persisted in that advice even after receiving contrary information and guidance from:
  - the Office of the Comptroller of the Currency (U.S. Department of the Treasury), and
  - the SEC’s Division of Corporation Finance.
- The SEC instituted administrative proceedings concerning whether Feldman violated Securities Act § 5 by advising the banks to proceed in a manner that resulted in unregistered U.S. offers and sales.
- Feldman submitted an offer of settlement. Without admitting or denying the SEC’s findings, he consented to the SEC issuing findings and a cease-and-desist order.

## Issues

1. Whether FEBCs offered and sold in the United States through New York offices were “securities” subject to the Securities Act registration requirements of § 5.
2. Whether an attorney can be found to have violated § 5 in an SEC administrative proceeding by advising clients to offer and sell securities in the United States without registration or an exemption.
3. Whether continued advice that no registration or filings are required, despite contrary regulatory guidance, supports an SEC cease-and-desist order in a settled administrative disposition.

## Decision

- The SEC instituted administrative proceedings against Feldman based on his advice concerning the U.S. offering and sale of FEBCs without registration.
- The SEC accepted Feldman’s offer of settlement.
- Without admitting or denying the SEC’s findings, Feldman consented to the SEC’s issuance of findings and a cease-and-desist order addressing conduct connected to Securities Act § 5.

## Legal Principles

- Securities Act § 5 generally prohibits offers and sales of securities in the United States unless a registration statement is in effect or an exemption applies.
- In SEC administrative enforcement, a lawyer’s conduct may support § 5-based relief where the lawyer’s advice is a meaningful factor in clients proceeding with unregistered U.S. offers and sales.
- Persisting in an incorrect conclusion about whether an instrument is a security, while disregarding contrary guidance from banking and SEC regulatory sources, can support Commission findings and prospective cease-and-desist relief.
- A settled SEC administrative order may be entered on consent, with the respondent neither admitting nor denying the Commission’s findings, while still imposing forward-looking remedial restrictions.

## Conclusion

In the Matter of Jeffrey L. Feldman involved an SEC administrative proceeding arising from Feldman’s advice to Pakistani banks that FEBCs sold through New York offices were not securities and required no SEC registration or filings; after contrary regulatory guidance and the SEC’s enforcement action, Feldman settled on a neither-admit-nor-deny basis and consented to findings and a cease-and-desist order tied to Securities Act § 5.


In the Matter of Jeffrey L. Feldman, Securities Act Release No. 7014 (1993)