Unregistered Brokers, Dealers and Selling Agents: The Referral Agreement Came With a Sales Script

The Securities and Exchange Commission can bring actions against unregistered brokers, dealers and selling agents for securities sales made without required registration. The work behind the sale matters: who approached investors, described the investment, delivered the paperwork and received a payment when the money arrived. If you work in sales, finance or compliance, a referral agreement and a commission ledger may show a business very different from the one investors heard about.

This page follows the people paid to bring in investors. Our page on pre-IPO investment fraud follows the promised shares and where the investors’ money went. The same transaction can leave evidence of both the selling operation and the underlying investment scheme.

When an Introduction Becomes the Sales Job

A securities intermediary’s work can extend from introducing an investor to explaining the investment, supplying offering materials and helping the purchase happen. In a 2012 Securities and Exchange Commission order settling an action against a Grifphon funds sales consultant, the agency described exactly that progression. The agency alleged that the consultant was the primary contact for some investors, discussed the funds’ supposed returns and investments, vouched for the manager and supplied private placement memoranda and marketing materials.

The order also alleged that he helped some investors establish self-directed retirement accounts so they could invest. In the agency’s account, several investors never spoke with the fund manager or other employees before committing their money, and the consultant was paid a percentage of each investment he brought in. The alleged role reached through the sale, and the compensation followed the investment.

The order applied the broker registration requirement to that selling work. For an insider, the useful account is equally concrete: what the intermediary said, what documents he supplied, what he helped complete and how the business paid him. A job title cannot tell that story by itself.

StraightPath Put the Sales Network Behind the Pitch

StraightPath Venture Partners allegedly used a large sales network to sell fund interests presented as access to shares in private companies before they went public. The Securities and Exchange Commission’s May 2022 complaint alleged that the defendants raised at least $410 million from more than 2,200 investors. Investors bought interests in subdivisions of private funds, while the sales pitch quoted a price per underlying share and a number of shares the investor would supposedly own.

According to the complaint, the network included more than 100 sales agents and at least three registered brokerage firms. Many agents cold-called prospective investors using lead lists and scripts supplied by a founder. The fund manager also ran makeshift sales offices in New York, New Jersey and Florida. The complaint alleged that the unregistered agents had neither licenses nor an association with registered brokerage firms.

The complaint described company email addresses and business cards that presented agents as employees even though they were not employees. It also described standardized contracts called “Referral Agent Agreements.” Those agreements sat alongside recruitment, training, scripts and commissions. We see a sales job behind the referral label.

The Commission Can Sit Inside the Price

Transaction-based compensation pays the intermediary according to the investment brought in. In StraightPath, the Securities and Exchange Commission alleged that upfront commissions generally amounted to 10% of an investor’s contribution and sometimes reached 18%. The fund manager also typically promised agents a share of profits after an initial public offering.

The alleged funding source was a hidden markup: the difference between what StraightPath paid for the private shares and the price used to sell corresponding fund interests. The complaint put total commissions to unregistered sales agents at nearly $48 million, while investors were being told upfront fees had been waived. Some investors received separate letters confirming that they would pay no upfront fees. The fee waiver left the commission intact.

The offering memorandum, welcome letter and side letter show what the investor was told about charges. The purchase price, investor’s payment, referral agreement and commission payment show how the seller was paid. We connect those records with you to determine who approved the difference and who knew about it.

Woodbridge Group of Companies illustrates another way compensation can sit inside an investment’s pricing. In its 2017 complaint, the Securities and Exchange Commission alleged that Woodbridge offered its mortgage investment product to outside sales agents at a 9% wholesale rate. The agents offered investors annual interest of 5% to 8% and received the difference as a commission. The investor’s promised return and the agent’s compensation were parts of the same arrangement.

The Offering and the Seller Have Separate Registration Questions

The registration question concerns both what was sold and who sold it. StraightPath claimed a private-offering exemption under Regulation D, but the Securities and Exchange Commission alleged that the offerings failed its conditions, including investor verification. The complaint separately alleged that the defendants operated an unregistered broker-dealer by hiring, training and paying the sales network.

A business can combine brokerage and investment advice. In StraightPath, the Securities and Exchange Commission alleged that a person presented as an executive of the fund manager or adviser also solicited investments and collected sales commissions.

For someone inside a private offering, the useful facts include who issued the investment, who controlled the pitch, whose registration covered the selling activity and what exemption the business claimed. We examine those facts with securities whistleblower lawyers who know private offerings.

What Evidence Shows an Unregistered Broker or Selling Agent?

For an unregistered selling operation, useful whistleblower evidence connects the seller’s work to a particular investment and the payment for bringing it in. Marketing emails and scripts show the pitch. Subscription documents identify the purchase, while commission agreements and payment records identify the sales incentive. Instructions and approvals can connect those records to the people directing the operation.

Woodbridge’s complaint alleged that the company supplied sales packets and approved every piece of sales material. It also described a telephone recording system monitored by quality assurance personnel, who reported departures from the script to the head of sales. For a sales or compliance insider, the approved script, the actual call and the response to a deviation can show how closely the company controlled the message.

StraightPath’s complaint shows why sales communications matter. The investigators’ request covered finders, marketers and consultants used to identify investors. The Securities and Exchange Commission alleged that founders deleted agents’ email accounts after investigators requested their communications. The complaint quotes a founder’s instruction to another founder:

The SEC alleged that email accounts were deleted that same day and that a founder told investigators the agents did not have company email addresses. Knowing who used an account, who directed its use and who could remove it helps show who controlled the sales communications.

A study in the Journal of Forensic & Investigative Accounting, The Significance of Whistleblowing as an Anti-Fraud Measure, found that frauds involving more participants were more likely to be detected through whistleblowing. The 2018 study examined occupational fraud cases. In a sales network, scripts, payments and investor communications pass through different hands. An insider may know how those pieces fit together.

The Selling Agent Has a Role Separate From the Operator

The Securities and Exchange Commission can bring an action over a selling agent’s solicitation and compensation separately from its action against the investment operator. In its June 2026 announcement concerning Wells Real Estate Investment sales agents, the agency alleged that Sanders Family Office and its principal raised approximately $40 million and earned at least $2.97 million in transaction-based commissions. The agency alleged that they acted directly and through a sales team without broker-dealer registration or association with a registered broker-dealer.

The same announcement described a separate seller who allegedly promoted Wells Real Estate notes online and on his radio program. The agency alleged that he and a team he managed solicited investors without being registered to sell. The Securities and Exchange Commission had separately charged the investment operator with an alleged fraudulent offering and Ponzi scheme.

The broader offering-fraud question follows what investors were promised and how their money was used. The selling-agent question follows the pitch, the purchase and the compensation. The particular complaint or order identifies whose conduct the SEC challenged and what it alleged against that participant.

Who Investigates Unregistered Brokers and Selling Agents?

The Securities and Exchange Commission investigates unregistered selling operations and brings civil actions and administrative proceedings. An insider’s account can connect the sales operation to the investor transactions under examination. We work through reporting securities fraud to the SEC with you, including the evidence of who recruited, directed and paid the sellers.

Under the SEC whistleblower program, eligible whistleblowers can share an award of 10% to 30% of the money collected from a qualifying action with more than $1 million in ordered payments. The award opportunity belongs alongside the evidence when we assess your case. If anonymity or your own role in the sales operation is on your mind, we work through that with you and the appropriate securities whistleblower lawyers.

You Know Who Got Paid to Sell

If you know who received commissions, supplied the scripts or approved a pitch that hid the cost of the investment, speak with our whistleblower experts about the selling operation. We build the case with you around the transactions and decisions you know, bring in securities whistleblower lawyers who understand sales networks and private offerings, and stay beside you through the process.