SEC Rules Disciplinary Proceeding Unfair

SEC Rules Disciplinary Proceeding Unfair

Delays Prejudice Broker, Finding Set Aside.

By John M. Baker, Esq.

The SEC recently ruled that New York Stock Exchange disciplinary proceedings against a registered representative must be set aside because they were unfairly delayed.

The representative was charged with failure to disclose risk to investors in limited partnership interests from February 1982 to April 1990 and with related failures to maintain accurate records. The Exchange was informed of the misconduct in 1991, began an investigation in May 1993, and brought its charges in November 1996.

The Exchange’s finding of violations and its sanctions were unchallenged on appeal. The SEC ruled that the Exchange has a statutory obligation to ensure the fairness and integrity of its disciplinary proceedings, and the delay was inherently unfair. It distinguished this holding from the representative’s claim that the action was time-barred (on which the SEC did not rule).

It also noted that, without further inquiry, it could not find, as a factual matter, that the representative’s ability to mount an adequate defense was impaired by the delay.

The Commission’s decision, In re Hayden, Release No. 34-42772 (May 11, 2000), is available online at http://www.sec.gov/enforce/opinions/34-42772.htm

Copyright 2000, John M. Baker, Esq., Stradley, Ronon, Stevens & Young, LLP, 1220 19th Street, N.W., Suite 700, Washington, DC 20036 – (202) 822-9611- Fax (202) 822-0140 This article was originally posted to the FundLaw List, http://www.egroups.com/group/fundlaw. To subscribe to FundLaw, send a blank e-mail to fundlaw-subscribe@egroups.com

Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article.  

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