SECURITIES AND EXCHANGE COMMISSION Washington, D.C. SECURITIES EXCHANGE ACT OF 1934 Rel. No. 39056 / September 11, 1997 Admin. Proc. File No. 3-9196 : In the Matter of the Application of : : ROBERT A. QUIEL : 79013 Bayside Court : Bermuda Dunes, California 92201 : : For Review of Disciplinary Action Taken by the : : NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.: : OPINION OF THE COMMISSION REGISTERED SECURITIES ASSOCIATION -- REVIEW OF DISCIPLINARY PROCEEDING Violation of Rules of Fair Practice Failure to Provide Requested Information General securities and financial principal associated with a member firm of registered securities association failed to provide complete information requested by association in connection with investigations. Held, association's finding of violation and sanctions it imposed are sustained. APPEARANCES: H. Thomas Fehn and Gregory J. Sherwin, of Fields, Fehn & Sherwin, for Robert A. Quiel. Norman Sue, Jr. and John F. Malitzis, for NASD Regulation, Inc. Appeal filed: December 6, 1996 Last brief received: April 14, 1997 I. Robert A. Quiel, a general securities and financial principal of Monaco Securities, Inc. ("Monaco"), formerly known as Desert Mountain Securities, Inc. ("Desert Mountain"), a member of the National Association of Securities Dealers, Inc. ("NASD"), appeals from NASD disciplinary action. <(1)> The NASD found that Quiel incompletely responded to NASD requests for information and that he failed to cooperate with an NASD investigation. The NASD determined that Quiel's conduct violated Article III, Section 1 and Article IV, Section 5 of its Rules of Fair Practice ("Rules"). <(2)> The NASD censured Quiel, fined him $12,500, suspended him for thirty days, and required him to requalify as a general securities principal and as a general securities representative. We base our findings on an independent review of the record. II. The parties do not dispute the pertinent facts. The NASD interviewed Quiel on August 11, 1993 regarding his trading activity in Newport Carpet Mills, Inc. ("NCM") securities. Among other things, Quiel testified that he owned Quiel Securities, Inc. ("Quiel Securities"), which was inactive at the time of the interview. On February 24, 1994, NASD staff sent Quiel a letter, pursuant to Article IV, Section 5, requesting that he provide information regarding an investigation into NCM stock activity. The letter posed five questions and enclosed documents to aid Quiel in responding to its requests. Among other things, the letter asked that Quiel identify the "circumstances surrounding" Quiel Securities' receipt and disposition of $89,245, state whether he "provided or shared any amount deriving" from those funds, and explain the "reasons behind such receipts and disbursements." By letter dated March 14, 1994, Quiel replied that he had not located the records necessary to answer the NASD's inquiries. He suggested that the records "may" have been lost in a recent move, and he asked that the NASD send him copies of its records in order to "expedite" his responses. <(3)> <(1)> The NASD's complaint in this matter consisted of two causes of action. The second cause, from which this appeal arises, alleged that Robert and Michael Quiel (a registered representative of Monaco) failed to provide information as the NASD requested. Only Robert Quiel's appeal is before us. <(2)> The NASD recently revised and renumbered its Rules of Fair Practice. Article III, Section 1 [new Rule 2110] requires that a member "observe high standards of commercial honor and just and equitable principles of trade" in conducting his business. Article IV, Section 5 [new Rule 8210] requires that a person associated with a member firm report to the NASD with regard to any matter involved in an NASD investigation. <(3)> Quiel stated that, if he was "able to uncover [the] records," he would answer the NASD's questions. He responded briefly to the staff's additional inquiries (continued...) ======END OF PAGE 2====== On May 19, 1994, the NASD forwarded Quiel copies of various financial records and wire transfers that "indicat[ed] cash movements" referenced in its February 24 letter. The NASD staff also renewed its request for information regarding the funds received by Quiel Securities. The staff further asked Quiel to send copies of the complaint and answer filed in a suit that this Commission had brought against him. <(4)> In a June 6, 1994 reply, Quiel provided a copy of the order dismissing the suit without prejudice, dated May 24, 1994, "in lieu of" the requested complaint and answer. Quiel asserted that, because of the dismissal, it would be "moot" to send copies of the other documents pertaining to the suit. Quiel further asserted that he was "unable" to provide information relating to Quiel Securities because of "misplaced" records, and that he could not answer the staff's questions based on the documents sent by the NASD staff. On November 28, 1994, the NASD sent Quiel a letter warning that the staff had discovered "certain areas" that could result in formal disciplinary action. The letter reiterated the staff's prior requests for information, specified deficiencies in Quiel's previous responses, and warned that his failure to provide information requested in connection with an investigation appeared to violate the Rules. On December 19, 1994, Quiel replied that he had answered the NASD's letters to the "best of [his] ability." He also stated that his records "were lost and therefore [he] was unable to supply whatever was requested." The District Business Conduct Committee ("District Committee") subsequently determined that Quiel's failure to provide information violated Article III, Section 1 and Article IV, Section 5 of the Rules. Quiel appealed. At a National Business Conduct Committee ("National Committee") hearing on June 5, 1996, a panel member asked whether Quiel had any information when he received the NASD's requests that would have helped him answer them. In response, Quiel admitted that he had "partial" information and that he "never indicated that [he] couldn't remember at all." Quiel recalled that Quiel Securities may have received a total of $100,000 from persons who were associated with NCM and other enterprises. He suggested that the funds may have been a loan tied to a business enterprise in which he was involved. He was uncertain whether the money related to NCM, but he stated that he "believe[d] it possible" that the money "had nothing to do with Newport Carpet." Quiel also admitted that certain individuals could have assisted him in responding to the NASD. He testified that he could not contact those people when he received the NASD's request, but that subsequent to his "meeting" with the District Committee, he "managed to get ahold" of them. <(3)>(...continued) regarding certain NCM sales literature. The NASD did not inquire further regarding that material. <(4)> The May 19 letter also recited that the requests were pursuant to Article IV, Section 5 and enclosed a copy of that Rule. The letter requested that Quiel respond no later than June 3, 1994. ======END OF PAGE 3====== Quiel did not explain the cause of his temporary inability to locate or communicate with these people, who included one of Desert Mountain's registered representatives. III. NASD members and associated persons must cooperate fully with NASD information requests so that it may perform its self-regulatory functions effectively. <(5)> The NASD "should not have to bring a disciplinary proceeding . . . in order to obtain compliance with its rules relating to investigations." <(6)> Thus, under the Rules, a person who incompletely responds to an NASD information request violates Article III, Section 1 and Article IV, Section 5. <(7)> We reject Quiel's assertions that he cooperated to the best of his ability and that lack of information and documentation prevented his more complete cooperation with the NASD's requests. Our decisions make clear that, to find a violation of Article IV, Section 5, it is unnecessary to find "an intentional or deliberate effort to withhold information." <(8)> Further, even if Quiel could not access readily the information that the NASD requested, we find that he failed to explain the deficiencies in his responses or answer as completely as he was able. Although the NASD furnished the documents that Quiel requested in his March 14 letter, he replied that he was unable to "provide anything" in response to the NASD's requests. Quiel's testimony at the National Committee hearing indicates, however, that he possessed information that he should have provided to the NASD investigators. Quiel admitted that he could have supplied the NASD with "partial" information concerning the source and purpose of the funds received by Quiel Securities. Among other things, Quiel should have informed the NASD that he required the assistance of others, and he should have provided those persons' identities. <(5)> See Barry C. Wilson, Rel. No. 37867 (October 25, 1996), 63 SEC Docket 272, 276 (stating that a person associated with a member firm has a duty to cooperate with NASD investigators); Charles R. Stedman, 51 S.E.C. 1228, 1232 (1994); John A. Malach, 51 S.E.C. 618, 621 (1993); Michael David Borth, 51 S.E.C. 178, 180 (1992). <(6)> Charles R. Stedman, 51 S.E.C. at 1232. <(7)> See Barry C. Wilson, 63 SEC Docket at 276; Richard J. Rouse, 51 S.E.C. 581, 588 (1993) ("Delay and neglect on the part of members and their associated persons undermine the ability of the NASD to conduct investigations and thereby protect the public interest."). <(8)> Richard J. Rouse, 51 S.E.C. at 585 (stating that members cannot counter information requests with "inaction"). ======END OF PAGE 4====== Additionally, in his June 6, and December 19, 1994 letters, Quiel failed to detail the circumstances that had caused the "misplaced" or "lost" records. Nor did he ever indicate any attempts he had made to locate the records or the information they apparently contained. Instead, in his December 19 letter, Quiel adopted an aggressive position with respect to the investigators. He demanded to know how the NASD had acquired the information it sent him on May 19, and he stated his belief that the NASD had obtained the information in a "less than savory manner." Quiel also erred when he substituted his judgment for that of the NASD in his reply to the investigator's request for copies of documents and information concerning this Commission's injunctive complaint against him. We have stated that a member or associated person may not second guess the NASD's requests. <(9)> Similarly, one may not "impose conditions" on one's response to an NASD request. <(10)> Thus, a member or associated person assumes at his peril that an objectively incomplete response would satisfy an NASD investigative request. We find that Quiel violated Article III, Section 1 and Article IV, Section 5 of the Rules. IV. Quiel argues that the sanctions imposed by the National Committee were inappropriate. We disagree. The National Committee considered the facts that weighed in Quiel's favor. <(11)> The National Committee recognized that he had given <(9)> Mark Allen Elliott, 51 S.E.C. 1148, 1151 (1994); Michael David Borth, 51 S.E.C. at 181. The order dismissing the suit was entered only five days after the NASD's request for the documents. The court had granted the dismissal without prejudice. Thus, the lawsuit could have been reinstituted. Quiel's assertion that "it would be a moot point" to send copies of what the NASD requested was unjustified. In his initial response, moreover, Quiel did not suggest that he could not provide the requested documents. <(10)> Brian L. Gibbons, Rel. No. 37170 (May 8, 1996), 61 SEC Docket 2597, 2601; Richard J. Rouse, 51 S.E.C. at 585; Michael David Borth, 51 S.E.C. at 180. <(11)> Quiel asserts that he honestly believed that his response to the NASD's request for the law suit documents would satisfy its request. We recognize that the Commission's complaint and Quiel's answer are public documents that the NASD could have obtained independently. In evaluating Quiel's violations and the sanctions imposed, we also have considered that the (continued...) ======END OF PAGE 5====== testimony to the NASD staff and had partially responded to the request for documents pertaining to this Commission's suit against him. The National Committee imposed sanctions within the range set forth by the NASD Sanction Guidelines. <(12)> Based on the circumstances here, we do not find that the sanctions imposed are excessive or oppressive. An appropriate order will issue. <(13)> By the Commission (Chairman LEVITT and Commissioners WALLMAN, JOHNSON, and HUNT). Jonathan G. Katz Secretary <(11)>(...continued) NASD viewed the dismissal order as partially responsive to its request for information regarding the status of the suit. <(12)> See NASD Sanction Guidelines (1996). "Failure to Respond Completely" carries a potential monetary sanction between $10,000 and $20,000 and a potential suspension of between six months and two years, particularly for a failure to respond in any respect. The Guidelines also suggest consideration of requalification by examination. <(13)> We have considered all of the parties' contentions. We have rejected or sustained them to the extent that they are inconsistent or in accord with the views expressed herein. ======END OF PAGE 6====== UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Rel. No. Admin. Proc. File No. 3-9196 : In the Matter of the Application of : : ROBERT A. QUIEL : 79013 Bayside Court : Bermuda Dunes, California 92201 : : For Review of Disciplinary Action Taken by the : : NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.: : ORDER SUSTAINING DISCIPLINARY ACTION TAKEN BY REGISTERED SECURITIES ASSOCIATION On the basis of the Commission's opinion issued this day, it is ORDERED that the disciplinary action taken by the National Association of Securities Dealers, Inc. against Robert A. Quiel, and the Association's assessment of costs, be, and they hereby are, sustained. By the Commission. Jonathan G. Katz Secretary