The Securities and Exchange Commission today announced settled charges against RSE Markets Inc. for operating as an unregistered exchange by maintaining and providing a marketplace and facilities that brought together purchasers and sellers of securities, specifically equity interests in “collectible assets” such as valuable cars and watches.
The SEC’s order finds that, between July 1, 2018, and November 20, 2021, RSE operated the Rally Platform, consisting of the RallyRd.com website, the Rally App, and trading functionality, for retail investors based in the United States to purchase and sell securities. Secondary market trading for these securities occurred exclusively on the Rally Platform within trading windows provided by RSE. RSE used an algorithm to match orders based on price and time priority, calculated a final clearing price at which matched orders would execute, and required matched buyers and sellers to provide confirmation of their willingness to transact at the final clearing price. According to the SEC’s order, the trading interests that RSE accepted were firm orders, as demonstrated by representative data showing that almost all matched trading interests were confirmed and executed. Despite these facts, and RSE marketing the Rally Platform as a stock exchange, the company neither registered the Rally Platform as a national securities exchange nor operated it pursuant to an exemption from such registration.
“RSE operated and marketed its platform as an exchange but failed to comply with the SEC’s registration provisions,” said Tejal D. Shah, Associate Regional Director of the SEC’s New York Regional Office. “When a firm operates an unregistered trading platform, as RSE did, it deprives investors of important protections under the securities laws, including requirements to file disclosures with the Commission and create and maintain certain books and records.”
Without admitting or denying the SEC’s findings, RSE agreed to cease and desist from committing or causing any violations and any future violations of Section 5 of the Securities Exchange Act of 1934 and to pay a $350,000 civil penalty.
The SEC’s investigation was conducted by Rebecca Reilly, John Lehmann, and Sandeep Satwalekar, all of the New York Regional Office. The case was supervised by Ms. Shah.