WAYNE M. CARLIN
Regional Director
Attorney for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
233 Broadway
New York, New York 10279

UNITED STATES DISTRICT COURT
DISTRICT OF COLUMBIA

Plaintiff Securities and Exchange Commission, for its Complaint against defendants Quest Capital Strategies, Inc. and David Chen Yu, alleges as follows:

PRELIMINARY STATEMENT

1. This action arises out of continuing violations of a Commission order that barred Yu from associating with a broker-dealer in a supervisory capacity. On October 15, 2001, the Commission issued an Order Imposing Remedial Sanctions against Quest, a registered broker-dealer, and Yu that, among other things, barred Yu from association with a broker-dealer in a supervisory capacity (the "Commission Order" or "Order"). The Order was based on the Commission's finding that it was in the public interest that Yu be barred from associating with a broker-dealer as a supervisor because of Quest's and Yu's egregious failure to supervise a Questregistered representative and Yu's attitude towards his supervisory responsibilities, an attitude that the Commission found "particularly disturbing." Despite the Commission Order, Yu continues to associate with Quest in a supervisory capacity.

2. Because he is still Quest's president and deals with compliance issues involving Quest registered representatives and their supervision, Yu has violated, and continues to violate, the Commission Order.

3. As a result of Yu's continued association with Quest in a supervisory capacity in violation of the Commission Order, Quest and Yu have violated, and continue to violate, Section 15(b)(6)(B) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78o(b)(6)(B).

4. Unless Defendants are enjoined by this Court, Defendants will continue to engage in the acts and practices alleged herein.

5. By this action, the Commission seeks: (a) a preliminary inunction enjoining Yu from violating the Commission Order and enjoining Quest and Yu from violating Section 15(b)(6)(B) of the Exchange Act; (b) permanent injunctive relief to enjoin Yu from violating the Commission Order and to enjoin Quest and Yu from violating Section 15(b)(6)(B) of the Exchange Act; (c) civil penalties; and (d) such further relief as the Court deems appropriate.

JURISDICTION AND VENUE

6. The Commission brings this action under Section 21(e) of the Exchange Act, 15 U.S.C. § 78u(e). This Court has jurisdiction over this action under Sections 21(e) and 27 of the Exchange Act, 15 U.S.C. §§ 78u(e) and 78aa.

7. The Commission Order that barred Yu from associating with a broker-dealer in a supervisory capacity was issued in the District of Columbia.

THE DEFENDANTS

8. Yu, age 54, currently resides in Monarch Beach, California. He has been Quest's president since its incorporation in 1983, and at various times has held the title of compliance officer.

9. Quest, which has its principal office in Laguna Hills, California, has been registered with the Commission as a broker-dealer since 1985 and with the National Association of Securities Dealers ("NASD") since 1986. Quest currently has two branch offices located in California. According to NASD records, as of April 10, 2002, there were approximately 553 registered representatives associated with Quest. These registered representatives are located throughout the United States, many in one-person offices.

FACTS

10. The Commission Order against Quest and Yu arose from their failure to reasonably supervise John T. Nakoski, a Quest registered representative, with a view to preventing Nakoski's violations of the antifraud provisions of the Securities Act of 1933, the Exchange Act, and the Investment Advisers Act of 1940. On June 12, 1995, without admitting or denying the charges against him, Nakoski consented to a permanent injunction from further violations of the federal antifraud provisions. SEC v. Nakoski, 95-CV-0738 (RSP) (N.D.N.Y.). Nakoski also consented to the entry of an order barring him from association with any broker, dealer, investment adviser, investment company, or municipal securities dealer. John T. Nakoski, 1995 SEC LEXIS 1727. In February 1996, Nakoski pleaded guilty to violating NewYork state securities laws. On October 15, 2001, the Commission issued the Order that barred Yu from associating with a broker-dealer in a supervisory capacity. Quest Capital Strategies and David Chen Yu, 2001 SEC LEXIS 2147, at *32. In its accompanying Opinion, the Commission found that Quest and Yu had abdicated their supervisory responsibility, thus permitting Nakoski's fraudulent scheme to continue and resulting in substantial losses to investors. Quest Capital Strategies and David Chen Yu, 2001 SEC LEXIS 2147, at *30.

11. The Commission Order imposed the following sanctions and limitations on Quest and Yu:

(a) The Order required Quest and Yu each to pay a $50,000 civil penalty;

(b) The Order barred Yu from association in a supervisory capacity with a broker-dealer or investment adviser, with a right to reapply to be so associated after one year; and

(c) The Order prohibited Quest from: (i) maintaining any branch office that is not supervised by an on-site registered principal and subjected to semi-annual inspections; and (ii) employing or contracting with any registered representative who is not in its main office or a branch office unless that representative is subjected to an annual inspection, on a surprise basis if possible.

12. Yu continues to associate with Quest in a supervisory capacity. Yu is still Quest's president, speaks with Quest registered representatives about subjects that Quest's compliance personnel are not willing to handle, and advises and supervises Quest's compliance personnel. Further, Yu is directly involved with the implementation of the provisions of the CommissionOrder relating to the annual inspection of registered representatives not in Quest's main office or one of its branch offices.

13. Yu and Quest have acted with deliberate or reckless disregard of the requirement that Yu cease to be associated with a broker-dealer in a supervisory capacity.

CLAIM FOR RELIEF

Violation of a Commission order and of Section 15(b)(6)(B) of the Exchange Act, 15 U.S.C. § 78o(b)(6)(B)

14. The Commission repeats each and every allegation in Paragraphs 1 through 13, as if fully set forth herein.

15. Because of his continued supervision of associated persons of Quest, as alleged in Paragraph 12 above, Yu violated, and continues to violate, the Commission Order.

16. Because of his continued supervision of associated persons of Quest, as alleged in Paragraph 12 above, Yu violated, and continues to violate, Section 15(b)(6)(B)(i) of the Exchange Act.

17. Because of Yu's continued supervision of associated persons of Quest, as alleged in Paragraph 12 above, with Quest's permission, Quest has violated, and continues to violate, Section 15(b)(6)(B)(ii) of the Exchange Act.

PRAYER FOR RELIEF

WHEREFORE, the Commission respectfully requests that this Court grant relief against defendants Quest and Yu as follows:

1. Issue findings of fact and conclusions of law that Yu violated the Commission Order and that Quest and Yu violated Section 15(b)(6)(B) of the Exchange Act.

2. Enter a final judgment: (a) permanently enjoining Yu from directly or indirectly, supervising, or otherwise exercising supervisory authority over, any associated person of Quest, including but not limited to registered representatives and compliance personnel, in violation of the Commission Order or Section 15(b)(6)(B) of the Exchange Act; (b) permanently enjoining defendant Quest from, directly or indirectly, singly or in concert, violating Section 15(b)(6)(B) of the Exchange Act; and (c) directing Defendants to pay civil penalties under Section 21(d)(3) of the Exchange Act, 15 U.S.C. § 78u(d)(3).

3. Grant a preliminary injunction, pending entry of a final judgment, against: (a) Yu, enjoining him from directly or indirectly, supervising, or otherwise exercising supervisory authority over, any associated person of Quest, including but not limited to registered representatives and compliance personnel, in violation of the Commission Order or Section 15(b)(6)(B) of the Exchange Act; and (b) Quest, enjoining it from, directly or indirectly, singly or in concert, violating Section 15(b)(6)(B) of the Exchange Act.

4. Retain jurisdiction over this action in accordance with the principles of equity and the Federal Rules of Civil Procedure in order to implement and carry out the terms of all orders and decrees that may be entered, or to entertain any suitable application or motion for additional relief within the jurisdiction of this Court.

5. Grant such other relief as the Court deems proper.

Dated: July 29, 2002

Of Counsel:

Leslie Kazon
Timothy G. Hansen
Sandeep Savla

http://www.sec.gov/litigation/complaints/complr17644.htm