Broker-Dealer Litigation - Greenberg Traurig LLP

Q.2.h
In re Picozzi, Release No. 65569, 2011 SEC LEXIS 3609 (Oct. 14, 2011).
The Commission considered an appeal by Picozzi, a former associated person of a
member firm of PCX Equities, Inc. (“PCX”), the predecessor-in-interest to NYSE Euronext and
NYSE Regulation Inc. In 2004, PCX filed a complaint against Picozzi charging him with
violation of PCX Rule 10.2(d) for failing to furnish information and testimony requested by
PCX. PCX mailed the complaint to Picozzi, but Picozzi failed to respond. PCX issued a Notice
of Summary Determination that censured and barred Picozzi, and stated that if Picozzi and his
member firm fully cooperated within three months after issuance of the Notice, the bar would be
lifted and an appropriate sanction for obstructing the investigation would be imposed. On
appeal, Picozzi argued that he did not receive any of the PCX documents until 2010. The
Commission overturned PCX’s findings of violation and sanction, noting the lack of evidence
surrounding PCX’s attempts to serve Picozzi and PCX’s successor’s statement that it did not
oppose Picozzi’s petition. The Commission declined Picozzi’s request that it expunge his CRD
record, noting its assumption that FINRA would update the record.
i. Failure to Honor Arbitration Award/Failure to Pay Fines and
Costs/Failure to Comply with Sanctions Imposed
Q.2.i
In re FCS Sec., Release No. 64852, 2011 SEC LEXIS 2366 (July 11, 2011); In re FCS Sec.,
Release No. 65267, 2011 SEC LEXIS 3330 (Sept. 6, 2011).
The Commission rejected a request for reconsideration by FCS Securities, a registered
broker-dealer (the “Firm”), and Kleinser, its sole proprietor. Applicants sought review of the
Commission’s earlier decision sustaining a FINRA decision from 2008 finding violations of
Section 17(e) of the Securities Exchange Act of 1934, Rule 17a-5 thereunder, and NASD Rule
2110 by FCS Securities and Kleinser for failure to file audited financial statements. FINRA had
fined the Firm and Kleinser $5,000, jointly and severally, and suspended the Firm from
membership for four months, with the suspension to convert to an expulsion if the Firm did not
file audited annual reports for 2006 and 2007 before the suspension ended. Applicants first
appealed to the National Adjudicatory Council, which sustained FINRA’s decision. On appeal
to the Commission, the Commission found that the Firm failed to file audited financial reports
for fiscal years 2006 and 2007 and failed to show that the exemption contained in Rule 17a-
5(e)(1)(i)(B) under the Securities Exchange Act of 1934 permitted them to file unaudited annual
reports for those years. The Commission further rejected the Applicants’ argument that their
situation was similar to that described in certain No Action Letters, distinguishing the facts
described in those letters and stating that the Commission was not bound by the statements of
Commission staff in such letters. In denying Applicants’ subsequent motion for reconsideration,
the Commission found that the motion raised arguments that the Commission had already
rejected and did not introduce any newly discovered evidence.
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