In recent years, the SEC has aggressively pursued enforcement actions against microcap convertible lenders under a novel theory that their investment activity renders them "dealers" within the meaning of the Securities and Exchange Act of 1934 (the Exchange Act). The SEC maintains that these lenders operated as unregistered dealers by selling equity shares acquired through convertible promissory notes, and it has sought remedies such as civil penalties, disgorgement of profits, and injunctions. The SEC's expansive position on who must register as a dealer has significant consequences for investors whose activities, until recently, were widely understood as falling within an exception for traders.