Securities and Exchange Commission Issues Opinion Regarding Nicholas S. Savva and Hunter Scott Financial, LLC c/o Michael Schwartzberg, Esq.
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In the Matter of the Application of
c/o
For Review of Action Taken by FINRA
OPINION OF THE COMMISSION
Registered securities association denied member firm's application to permit continued association of an individual who was subject to a statutory disqualification because of his consent t o a 2004 final order of a state regulator y authority based on violations of laws or regulations that prohibit fraudulent, manipulative, or deceptive conduct . Held, the review proceeding is dismissed.
APPEARANCES:
Appeal filed:
Last brief received:
Hunter Scott Financial , LLC ( "
I. Background
A. Statutory disqualifications and FINRA ' s eligibility proceedings Astatutory disqualification constitutes an encumbrance to membership in, or association with a member of , a self - regulatory organization ( " SRO " ), but it does not necessarily preclude a person from participating in the securities industry. 7 Instead, a statutory disqualification can render a member or associated person in eligible to participate: a person subject to statutory disqualification cannot become or remain associated with a FINRA member firm unless the person ' s member firm applies for, and is granted, in FINRA ' s discretion, relief from the statutory disqualification. 8 A member firm can appl y for relief from the statutory disqualification by filing an MC - 400 Application, which initiates an eligibility proceeding. 9 The critical inquiry in every eligibility proceeding is whether the proposed or continued association of the person subject to disqualification would be consistent with the public interest and the overriding regulatory goal of ensuring the protection of investors. 10 Denial s of a member's application to permit the proposed or continued association of the person are reviewable by the Commission. 11
The Sarbanes - Oxley Act of 2002 expanded the definition of "statutory disqualification" in Exchange Act Section 3(a)(39) by creating new categories of disqualification . 12 Under the expanded definition, a person is subject to statutory disqualification if the person is subject to a final order of a state securities regulator that either bars the person from association with an entity regulated by such a regulator or is based on violations of laws or regulations prohibiting fraudulent, manipulative, or deceptive conduct. 13 The statutory disqualification s in Exchange Act Section 3(a)(39) are not self - executing and must be implemented by an SRO through its own provisions. FINRA did not amend its By - Laws to implement the Sarbanes - Oxley Act ' s expanded definition of "statutory disqualification" until 2007, when FINRA made its By - Laws coextensive with Exchange Act Section 3(a)(39), such that any person who was subject to "statutory disqualification" under the Exchange Act also would be subject to "disqualification" under FINRA rules. 14
In 2009, FINRA proposed, and the Commission approved, amendments to the eligibility proceedings -- the FINRA Rule 9520 Series -- to cover persons subject to disqualification as a result of the am ended By - Laws. 15 Among other things, the amendments establish edeligibility proceedings for persons currently in the securities industry who were subject to disqualification as a result of the Sarbanes - Oxley Act. 16 In a notice to members describing the amendments, FINRA specified the circumstances under which members would be required to file a membership continuance application under the new eligibility rules . 17 In particular, and as relevant here, members had to file a membership continuance application to associate with persons who, as of
See the rest of the document here: http://www.sec.gov/litigation/opinions/2014/34-72485.pdf
TNS 30TagarumaMar-140703-4787758 30TagarumaMar
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