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Withdrawing BD Registration Doesn’t Stop the SEC from Prosecuting for Failure to Supervise

 

The SEC fined a broker-dealer and its CEO for failure to supervise even though the firm withdrew its registration.  A broker at the firm pleaded guilty to providing inflated quotes to an investment manager as a quid pro quo for receiving future trading business.  The SEC alleges that the CEO knew that the trader provided quotes but failed to adopt and implement reasonable procedures to supervise the trader and his provision of price quotes to third parties.  The BD withdrew from registration, but an SEC Enforcement official warned, “Deregistering with the Commission in the midst of an enforcement investigation will not enable such firms to evade liability.”

Just because you abandon your car before the police can stop you doesn’t mean that you can’t get arrested.  It appears that the respondent’s efforts to avoid prosecution by withdrawing may have exacerbated their SEC problems by making them look more guilty.