Broker-Dealer Litigation - Greenberg Traurig LLP

contact the customers himself. Instead, the branch manager left it to the registered representative
to follow up with the customers. The branch manager failed to take any steps to modify his
practice in the face of repeated red flags. The representative supervised by the branch manager
was the subject of complaints that would have reinforced the need to contact customers where
unusual trading was apparent. If the branch manager had reasonably followed up, it is likely that
he would have prevented or detected the registered representative’s violations of securities laws.
As a result of this conduct, the branch manager failed to reasonably supervise the representative
within the meaning of the Exchange Act. Pursuant to the settlement, the branch manager was
barred from association in any supervisory capacity with any broker, dealer, investment advisor,
municipal securities dealer, or transfer agent with the right to reapply for association after two
years. He was also ordered to pay disgorgement of $4,753.00, prejudgment interest of $355.47,
and a civil penalty of $10,000.00.
In re Application of Kamiski, Release No. 65347, 2011 SEC LEXIS 3225 (Sept. 16, 2011).
The Securities and Exchange Commission upheld a FINRA enforcement decision which
included an 18-month suspension and $50,000 fine against a senior executive officer for
violating NASD Conduct Rules 3010 and 2110 by failing to supervise the firm’s review of its
variable annuity trading. The SEC agreed with FINRA that the officer ignored staffing
shortages, failed to diligently inform senior management of compliance needs, placed individuals
from other departments in compliance positions for which they were not qualified, failed to
effectively communicate the need for increased supervision to senior management, and failed to
limit the firm’s activities when resources were not made available. The officer received
numerous red flags from members of his staff that the firm’s compliance department was having
difficulty meeting its responsibilities in the face of increased regulatory requirements and rapid
expansion of the firm’s business, but he did not adequately address those concerns. By failing to
devote adequate attention and resources to the compliance department, the officer demonstrated
a significant failure of supervision. In affirming the NASD’s sanctions, the SEC noted the
officer’s conduct was egregious and supported by the record. The officer’s lack of disciplinary
history and the absence of a finding of customer harm were not considered to be mitigating
factors.
In re Lopez-Tarre, Release No. 65391, 2011 SEC LEXIS 3311 (Sept. 23, 2011).
The Securities and Exchange Commission instituted administrative proceedings against a
chief compliance officer of a registered broker-dealer pursuant to Section 15(b) of the Securities
Exchange Act of 1934. In anticipation of the institution of these proceedings, the chief
compliance officer submitted an offer of settlement which the SEC accepted. The SEC alleged
that the chief compliance officer failed to reasonably supervise the president and an employee of
the broker-dealer. The president, with the assistance of an employee, engaged in tens of millions
of dollars of unauthorized trades in a customer’s accounts. The president and employee
attempted to hide the fraud by providing false account statements to the customer. The chief
compliance officer had sole responsibility for all supervisory reviews of customer account
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