NAC Extends Interpretations of 2110 to include court awards
The National Adjudicatory Council, which is the national committee that reviews initial decisions rendered in NASD disciplinary proceedings, has ruled that NASD rules require the timely payment of court awards. Division of Enforcement v. Shvarts, Complaint No. CAF980029 (June 2, 2000).
It has for some time been established that NASD Conduct Rule 2110, which requires adherence to “high standards of commercial honor and just and equitable principles of trade,” is violated if broker-dealers or their associated persons fail to make prompt efforts to pay arbitration awards.
In this case, however, the original hearing panel had ruled that Rule 2110 did not apply to the respondent’s failure to pay a state court award of attorney fees and costs to former clients. On appeal, the National Adjudicatory Council held that Rule 2110 applies generally to the payment of court orders in business-related cases.
The Council ordered the respondent fined $5,000, suspended for six months, and ordered to submit proof of payment of the court award plus interest within 60 days, and to be barred from association with any member firm in any capacity if he did not so submit the proof of payment.
The Council noted that, given the respondent’s status as an individual whose registration has been revoked for failure to pay an NASD fine, its ability to address his misconduct is somewhat limited, but the sanctions would at least ensure that he could not work in the securities industry unless he pays the customer award.
The Council’s opinion is available in PDF and text formats from http://www.nasdr.com/4600.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 email@example.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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Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
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