Broker-Dealer Litigation - Greenberg Traurig LLP

desist order from committing or causing any further securities violations, and a fine in the
amount of $10 million.
In re Smith, Release Nos. 63834 & 3152, 2011 SEC LEXIS 390 (Feb. 3, 2011).
The Securities and Exchange Commission instituted administrative proceedings against
the president of a broker-dealer. In anticipation of the institution of those proceedings, the
president submitted an offer of settlement, which the SEC agreed to accept. The SEC alleged
that one of the broker-dealer’s registered representatives acted as an unregistered broker-dealer
in violation of Section 15(a) of the Securities Exchange Act of 1934, when he conducted a
private, unregistered offering of securities outside the scope of his employment with the brokerdealer.
The president failed to establish reasonable policies and procedures to assign
responsibility for supervising the registered representative. No one reviewed the registered
representative’s daily correspondence or telephone calls, other than in cursory annual audits.
The president’s delegation of most of the office’s daily responsibilities to the registered
representative resulted in the registered representative supervising himself. If the registered
representative had not been left to supervise himself, his outside sales activities likely would
have been detected and prevented. Without admitting or denying the allegations, the president
consented to a censure, a suspension from supervision of any broker or dealer or investment
advisor for a period of nine months, and a civil money penalty in the amount of $25,000.
In re TD Ameritrade, Inc., Release No. 63829, 2011 SEC LEXIS 389 (Feb. 3, 2011).
The Securities and Exchange Commission instituted administrative proceedings against a
broker-dealer pursuant to Section 15(b) of the Securities Exchange Act of 1934. In anticipation
of the institution of those proceedings, the broker-dealer submitted an offer of settlement which
the SEC agreed to accept. The SEC alleged that the broker-dealer offered and sold shares in a
diversified mutual fund, even though its registered representatives marketed the fund as though it
was a money market fund that generated higher returns. The fund-specific training materials
accurately characterized the fund and described the various risks associated with investing in the
fund. Nevertheless, registered representatives at times mischaracterized the fund as a “money
market fund”, “enhanced money market fund” or a “higher yielding money market.” They also
at times equated the fund to a money market fund in terms of “safety and liquidity” or offered the
fund in response to a customer’s specific request for a money market fund or an instrument with
similar risk, without discussing the nature or riss of the fund. As a result, the registered
representatives violated securities laws by disseminating false or misleading information about
the funds. The broker-dealer, in turn, failed to have a system to implement procedures for the
training and education of its representatives regarding the fund which would reasonably be
expected to prevent and detect the improper conduct by its representatives. For instance, the
broker-dealer did not take adequate steps, such as providing additional training, refresher
courses, or continuing education about the fund to ensure that its representatives actually
understood the product. Without admitting or denying the allegations, the broker-dealer
accepted a censure. No monetary penalty was imposed.
H.5
H.5
286