United States Securities and Exchange Commission
Securities Exchange Act of 1934
PUBLIC PROCEEDINGS INSTITUTED AGAINST LEGG MASON WOOD WALKER, INC., THOMAS M. DALY, AND JOSEPH SULLIVAN
The Securities and Exchange Commission ("Commission") announces the institution of public administrative proceedings against Legg Mason Wood Walker, Inc. ("Legg Mason"), Thomas A. Daly ("Daly") and Joseph Sullivan ("Sullivan"), pursuant to Sections 15(b), 15B(c), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act").
The Commission's Order Instituting Public Proceedings ("Order") alleges that, from 1994 through 1998, Legg Mason, assisted by Daly and Sullivan, failed to timely file final official statements and advance refunding documents with the Municipal Securities Rulemaking Board ("MSRB"), in connection with Legg Mason's participation in initial bond offerings. The Order also alleges that Legg Mason, Daly and Sullivan failed to supervise Legg Mason's municipal securities business in order to ensure compliance with MSRB rules. The Order further alleges, that the respondents' violations occurred despite their having received prior notice of both increased attention to MSRB rule compliance, and of deficiencies in Legg Mason's MSRB rules compliance.
The Order alleges that, in connection with Legg Mason's participation in initial offerings, including advance refundings, of municipal securities during the relevant period, Legg Mason willfully violated MSRB Rules G-36(b)(i) and (ii) in that it failed to file, or filed delinquently, documents required to be filed under those rules. The Order further alleges that Daly, who managed both Legg Mason's municipal securities sales and trading and public finance functions from approximately 1983 through April 18, 1997, willfully aided and abetted and/or was a cause of Legg Mason's violations of MSRB Rules G-36(b)(i) and (ii) in that he knew, should have known and/or was reckless in not knowing of Legg Mason's Rule G-36 violations yet he did not cure those violations or otherwise ensure that Legg Mason complied with Rule G-36. The Order alleges that Sullivan, who has managed Legg Mason's municipal securities sales and trading since at least April 18, 1997, was a cause of Legg Mason's violations of MSRB Rules G-36(b)(i) and (ii) in that he knew or should have known of Legg Mason's Rule G-36 violations yet he did not cure those violations or otherwise ensure that Legg Mason complied with Rule G-36.
Finally, the Order alleges that Legg Mason, Daly and Sullivan willfully violated MSRB Rules G-27(a) -(d) in that they failed to effectively supervise the conduct of Legg Mason's municipal securities business and staff, failed to designate principals to be responsible for such supervision, failed to codify an adequate supervisory system for ensuring compliance with, at least, MSRB Rule G-36(b)(i) and (ii), and failed to adequately update and review written procedures.
A public hearing will be scheduled to determine whether the Division of Enforcement's allegations are true, and if so, whether any remedial sanctions, including the issuance of a cease-and-desist order, are appropriate and in the public interest and whether respondents should be ordered to pay civil penalities.