Broker-Dealer Litigation - Greenberg Traurig LLP

In re Keybanc Capital Markets, Inc., NYSE Hearing Panel Decision 2011-1; 2011 NYSE Disc.
Action LEXIS 1 (Jan. 31, 2011).
In a settled disciplinary proceeding, consented to by respondent without admitting or
denying the allegations, respondent was found to have violated NYSE Rule 342 by failing to
reasonably supervise and implement adequate controls, including a reasonable system of followup
and review, in connection with its Control Room procedures, Watch and Restricted Lists, and
related trading activities. Specifically, while respondent had written policies and procedures
pertaining to its Control Room, Watch and Restricted Lists, and related trading activities which
required reporting of material nonpublic information to the Control Room for inclusion on the
Watch and Restricted Lists, the NYSE found that the firm failed to establish adequate controls,
including a reasonable system of follow-up and review, to ensure that its employees were
adhering to such policies and procedures, including adequate training. Moreover, NYSE found
that the firm failed to report a significant number of companies, issuers and event updates to its
Watch and Restricted Lists, as required by its procedures, and consequently failed to monitor for
trades that were potentially associated with material nonpublic information.
In addition, respondent was found to have violated NYSE Rules 351(e)(ii) and 476(a) by
failing to disclose to the NYSE in its quarterly attestation that it had completed an internal
investigation of possible insider trading, Finally, respondent was found to have violated NYSE
Rule 342.21(a) for an inadequate system of obtaining, reviewing, and monitoring trade
confirmations and account statements for employee trades. As a result, respondent consented to
a censure and a $ 350,000 fine.
P.3
Q. SEC Litigation Affecting Broker-Dealers
1. Direct SEC Proceedings
a. Sales Practice Violations
Q.1.a
SEC v. Vianna, Litig. Release No. 21905, 2011 SEC LEXIS 1039 (S.D.N.Y. Mar. 28, 2011).
A federal district court entered a final judgment by consent against Vianna, a former
registered representative of a registered broker-dealer (the “Firm”). The Commission’s
complaint alleged that Vianna participated in a scheme to divert dozens of profitable stock trades
and millions of dollars in trading profits from one customer to another customer. Vianna
simultaneously entered orders to trade the same amounts of the same stock in the accounts of a
customer of the Firm and a company known as Creswell. Each time, he placed a buy order in
one of the accounts and a sell order in the other account. When the market moved to make the
customer’s trade profitable, Vianna diverted the profitable trade to Creswell by misusing the
Firm’s order management system to switch the identity of buyer and seller. The court
permanently enjoined Vianna from violating and from aiding and abetting violations of the
antifraud provisions of the federal securities laws . The final judgment ordered Vianna to pay
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