Broker-Dealer Litigation - Greenberg Traurig LLP

Q.1.f
In re Gallardo, Release No. 65658, 2011 SEC LEXIS 3848 (Oct. 31, 2011).
The Commission accepted an offer of settlement from Orion Trading, LLC (the “Firm”),
a registered broker-dealer, and Zurita, president of the Firm and supervisor of a branch office of
the Firm. The Commission alleged that a registered representative under Zurita’s supervision
had solicited foreign investors to provide him with approximately $1.2 million that he
represented would be invested by an investment company for a guaranteed rate of return.
Instead, the registered representative invested a portion of the money himself, returned
approximately $275,000 as “distributions,” and misappropriated approximately $685,000 for his
personal use. The Commission alleged that Zurita failed to follow-up on red flags regarding this
activity, including certain suspect emails from the registered representative’s foreign investors
that Zurita had reviewed. As a result, Zurita and the Firm failed reasonably to supervise the
registered representative within the meaning of Section 15(b)(4)(E) of the Securities Exchange
Act of 1934. The Commission further alleged that Zurita permitted an unlicensed associate to
perform the functions of a registered representative. As a result, the Firm willfully violated, and
Zurita willfully aided and abetted and caused the Firm’s violations of, Section 15(b)(7) of the
Exchange Act and Rule 15b7-1 thereunder. The Commission ordered Respondents to cease and
desist from violating the federal securities laws. It barred Zurita from association in a
supervisory capacity, with a right to reapply in three years, and ordered him to pay a $35,000
civil penalty. The Commission censured the Firm and ordered it to pay a $50,000 civil penalty.
The Firm also undertook to hire an individual with appropriate supervisory licenses and
qualifications to assume supervisory authority at the Firm.
In re Inv. Placement Group, Release No. 66055, 2011 SEC LEXIS 4547 (Dec. 23, 2011).
Q.1.f
The Commission accepted an offer of settlement from Investment Placement Group, a
registered broker-dealer and a former registered investment adviser (the “Firm”), and Gonzalez-
Rubio, former COO and current CEO of the Firm. The Commission alleged that Respondents
failed to supervise reasonably Rodriguez, a former registered representative and trader who
engaged in a fraudulent interpositioning scheme. In particular, the Firm failed to establish a
reasonable system to implement its policies and procedures to prevent and detect
interpositioning, and Gonzalez-Rubio effectively allowed Rodriguez to supervise himself by
delegating trading supervisory oversight to Rodriguez. Additionally, Gonzalez-Rubio failed to
respond to red flags regarding Rodriguez’s fraudulent scheme, including a dramatic rise in
revenue resulting from the interpositioned transactions. As a result of Rodriguez’s misconduct,
four Mexican pension funds paid approximately $65 million more for certain notes than they
would have otherwise paid, and the Firm and Rodriguez received more than $6 million in
additional markups.
The Commission censured the Firm and ordered it to pay a $260,000 civil penalty,
disgorgement of $3,572,016, and prejudgment interest of $240,012. The Commission suspended
Gonzalez-Rubio from association in a supervisory capacity for three months. Gonzalez-Rubio
also undertook to provide to the Commission an affidavit within fifteen days after the end of his
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