Broker-Dealer Litigation - Greenberg Traurig LLP

and a former registered representative of the Firm, permanently enjoining him from future
violations of the securities and broker-dealer registration and antifraud provisions of the federal
securities laws, and barring him from association. Keating had conducted an unregistered
private securities offering outside the scope of his employment with the Firm. The
Commission’s complaint alleged that Smith failed to establish reasonable policies and
procedures to adequately supervise Keating. It further alleged that Smith failed to establish
systems to implement and enforce policies for supervisors and the Firm’s compliance
department, and failed to monitor registered representatives’ outside business activities and to
follow up on activities that might signal selling away. The Commission suspended Smith from
supervision for nine months and ordered him to pay a $25,000 civil penalty.
In re TD Ameritrade, Inc., Release No. 63829, 2011 SEC LEXIS 389 (Feb. 3, 2011).
Q.1.f
The Commission accepted an offer of settlement from TD Ameritrade, Inc., a registered
broker-dealer. The Commission’s complaint alleged that the Firm violated Section 15(b)(4)(E)
of the Securities Exchange Act of 1934 by failing to reasonably supervise its registered
representatives to prevent violations of Section 17(a)(2) of the Securities Act of 1933 in
connection with their offer and sale of a mutual fund (the “Fund”). According to the
Commission’s complaint, from January 2007 to September 2008, the Firm failed to ensure that
trainings mandated by its policies and procedures occurred or that the materials used in the
trainings that did occur were the ones the Firm had prepared. The Firm subsequently
implemented a computer-based system designed to generate reports to assist managers in
conducting a suitability review of transactions in the Fund. However, the Commission’s
complaint alleged that the system was not reasonably designed to prevent violations of Section
17(a)(2) because it did not assist managers in determining whether registered representatives
were making proper disclosures about the Fund to customers. As a result of these failures,
registered representatives mischaracterized the Fund as a money market fund, overstated its
safety and liquidity and failed to disclose its risks, in violation of Section 17(a)(2) of the
Securities Act. In its offer of settlement, the Firm undertook to distribute $0.012 per share to
each customer who purchased Fund shares at the Firm during the relevant period and who
continued to hold such shares as of the date of the order. The distribution was expected to
amount to approximately $10 million. The Commission also censured the Firm.
In re Pagliarini, Release No. 63964, 2011 SEC LEXIS 682 (Feb. 24, 2011).
Q.1.f
The Commission accepted an offer of settlement from Pagliarini, CCO and anti-money
laundering compliance officer of a former registered broker-dealer (the “Firm”). The
Commission’s complaint alleged that Pagliarini failed reasonably to supervise Ahn, a registered
representative and primary trader for the broker-dealer who engaged in market manipulation.
Specifically, the Commission’s complaint alleged that Pagliarini failed to follow up on the red
flags posed by Ahn’s trading activity, and failed to cause the broker-dealer to file suspicious
activity reports concerning Ahn’s wash transactions, suspicious cash transfers to and from the
brokerage account of a co-owner of the broker-dealer, and $4 million wire transfer that violated
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