SECURITIES AND EXCHANGE COMMISSION Washington, D.C. SECURITIES EXCHANGE ACT OF 1934 Rel. No. 37895 / October 30, 1996 Admin. Proc. File No. 3-8982 ------------------------------------------------- : In the Matter of the Application of : : ROBERT A. GRUNBURG : 4551 Glencoe Avenue, Suite 215 : Marina Del Rey, California 90292 : : For Review of Disciplinary Action Taken by the : : NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.: ------------------------------------------------- OPINION OF THE COMMISSION REGISTERED SECURITIES ASSOCIATION - REVIEW OF DISCIPLINARY PROCEEDINGS Sanctions Imposed by Association Where association, on remand of proceeding against respondent for clarification of the choice of sanctions imposed, articulated reasoned basis for its choice of sanctions, and these sanctions were neither excessive nor oppressive, held, sanctions assessed by association sustained. APPEARANCES: Robert A. Grunburg, pro se. Alden S. Adkins and Deborah F. McIlroy, for NASD Regulation, Inc. Appeal filed: April 5, 1996 Last brief received: July 16, 1996 I. Robert A. Grunburg, formerly a general securities principal and chief compliance officer of Pilgrim Distributors Corporation ("PDC"), a member of the National Association of Securities Dealers, Inc. ("NASD"), again appeals from NASD disciplinary action. On remand from this Commission for clarification of the NASD's choice of sanctions against Grunburg, the NASD determined again to impose a censure, a suspension from acting in any ==========================================START OF PAGE 2====== principal capacity for one month, a requirement to requalify by examination as a principal, and a fine of $5,000. Our findings are based on an independent review of the record on remand. II. When this matter was appealed to us previously, we found Grunburg responsible for: 1) two misleading mutual fund advertisements that were published by PDC in violation of specified provisions of the NASD's Rules of Fair Practice ("Rules"); 2) PDC's failure to file the advertisements with the NASD within 10 days of first use in violation of another provision of the Rules; 3) PDC's issuance of inaccurate mutual fund prospectuses; and 4) PDC's failure to establish and maintain adequate written supervisory procedures as the Rules require. -[1]- We accordingly sustained the NASD's findings of violations entered against Grunburg. -[2]- We remanded the proceedings, however, for a further explanation of the NASD's choice of sanctions. As our opinion related, the District Business Conduct Committee ("District Committee") originally imposed on Grunburg a fine of $25,000; of this total, $10,000 was assessed against Grunburg individually for his role in permitting the advertisements to be disseminated, and another $10,000 was assessed against Grunburg individually for his failure to ensure appropriate supervision of sales concession arrangements. The District Committee imposed the remaining $5,000 jointly and severally on Grunburg and PDC for failure to disclose the concession arrangement in the mutual fund prospectuses. The District Committee also suspended Grunburg for one year. On review, the National Business Conduct Committee ("National Committee") affirmed the District Committee's findings but reduced Grunburg's sanctions. The National Committee reduced the suspension to one month (from one year), reduced the ---------FOOTNOTES---------- -[1]- Robert A. Grunburg, Securities Exchange Act Rel. No. 36182, 60 SEC Docket 430 (Sept. 1, 1995). -[2]- The NASD also had made findings and imposed sanctions against PDC, its president, and another PDC employee (who did not appeal from the District Business Conduct Committee's decision). PDC and its president did not appeal to us from the National Business Conduct Committee's decision. ==========================================START OF PAGE 3====== individual fine imposed from $20,000 to $5,000, and eliminated the $5,000 joint and several fine. -[3]- In doing so, the National Committee erroneously suggested that the District Committee's sanctions were attributable primarily to Grunburg's role in the publication of the two misleading advertisements. We were unable to determine from the National Committee's opinion whether it had considered the fact that a significant portion of the $25,000 fine was imposed, not for the violations relating to the misleading advertisements, but rather for Grunburg's failure to ensure appropriate supervision of sales concession arrangements. The National Committee had set aside entirely the $20,000 fine that the District Committee had assessed against PDC for that entity's failure to establish and maintain adequate supervisory procedures, on the ground that the sanction was unnecessary given the improvement in procedures at the firm. We therefore were concerned that Grunburg may not have been afforded the benefit of this mitigative factor. -[4]- In light of these issues, we remanded the proceedings to the NASD for a further explanation of the choice of sanctions. On remand, the National Committee determined that its earlier sanctions -- a censure, a one-month principal suspension, a requirement that Grunburg requalify as a principal, -[5]- ---------FOOTNOTES---------- -[3]- The National Committee increased the sanctions in one respect: it directed Grunburg to requalify by examination as a principal before reassociating with any NASD member in any principal capacity. -[4]- We suggested that this factor "may have had some applicability to Grunburg." Robert A. Grunburg, 60 S.E.C. Docket at 439 n.22. We also were concerned that the National Committee did not specify whether it considered certain mitigative factors in determining Grunburg's sanctions, when it explicitly stated that it had considered these factors in reducing the sanctions of the other respondents. -[5]- In our first decision in this matter, we approved the requalification requirement imposed: "We think requalification is appropriate, given [Grunburg's] compliance failures and in light of his troublesome view that the first advertisement at issue here was not problematic." Robert A. Grunburg, 60 S.E.C. Docket at 438 n.19. We will not revisit that determination. Bruce Martin Zipper, Securities Exchange Act Rel. No. 35606 (April 17, 1995), 59 SEC Docket 332, 333 (refusing to revisit finding made in prior appeal). ==========================================START OF PAGE 4====== and a $5,000 fine -- were "appropriately remedial." The National Committee expressed its view that, in the aggregate, the sanctions imposed for Grunburg's multiple violations were reasonable and justified given the specific facts and circumstances involved. -[6]- The National Committee further explained that, in imposing these sanctions, it had taken into account "various mitigative factors, including Grunburg's lack of prior disciplinary problems, the single publication of the ads in question, the absence of a correlation between the ads and fund sales, and the relatively isolated nature of the misconduct at issue." -[7]- III. On appeal, Grunburg challenges the sanctions as "utterly devoid of logic" and ridicules as "intellectually bankrupt" the NASD's argument that the sanctions are lenient. Grunburg argues, among other things, that the sanctions are unfair because the NASD has not established that it previously has imposed these same sanctions for similar misconduct. -[8]- We reject this claim, as we consistently have held that the appropriate remedial action depends on the facts and circumstances of each particular case and cannot be precisely determined in comparison with the actions taken in other proceedings. -[9]- ---------FOOTNOTES---------- -[6]- The NASD also noted that the sanctions were well below the aggregate range recommended by the NASD Sanction Guidelines for Grunburg's varied misconduct. For instance, the NASD Sanction Guidelines recommend a fine of between $5,000 and $25,000 for a single supervisory violation, as well as a suspension or, in egregious cases, a supervisory or principal bar of the individual involved. NASD Sanction Guidelines at 53 (1996). -[7]- These were the mitigative factors that the National Committee specifically had considered when sanctioning other respondents but had not referenced in connection with Grunburg. -[8]- Grunburg also argues that the NASD cannot, without precedent for doing so, use the NASD Sanction Guidelines to justify these sanctions. -[9]- J.V. Ace & Co., Inc., 50 S.E.C. 461, 467 (1990). See also Butz v. Glover Livestock Commission Co. Inc., 411 U.S. 182, 187 (1973); Hiller v. SEC, 429 F.2d 856, 858-59 (2d Cir. 1970); Jeffrey D. Field, 51 S.E.C. 1074, 1077 (1994); Robert A. Amato, 51 S.E.C. 316, 321 n.25 (1993), aff'd, 18 F.3d 1281 (5th Cir. 1994). ==========================================START OF PAGE 5====== We now are satisfied that the National Committee's choice of sanctions in fact was not "the result of [its] misapprehension of the bases for the District Committee's sanction decision." -[10]- Moreover, we do not view the sanctions imposed here as either excessive or oppressive. Grunburg has admitted that he saw the first misleading advertisement and that, although he was authorized to stop an advertisement that was not in compliance, he did not "pull" it. Grunburg further has admitted that he was responsible for the omission to disclose the sales concession arrangement. In light of these admissions of certain Rules violations and our determination that he is liable for other Rules violations, we find no basis for disturbing the NASD sanctions. In sum, we conclude that the sanctions imposed on remand are neither excessive nor oppressive, given the number and nature of Grunburg's violations of essential regulatory provisions governing the mutual fund industry. An appropriate order will issue. -[11]- By the Commission (Chairman LEVITT and Commissioners WALLMAN, JOHNSON, and HUNT). Jonathan G. Katz Secretary ---------FOOTNOTES---------- -[10]- Robert A. Grunburg, 60 SEC Docket at 438. -[11]- All of the contentions advanced by the parties have been considered. They are rejected or sustained to the extent that they are inconsistent or in accord with the views expressed herein. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. SECURITIES EXCHANGE ACT OF 1934 Rel. No.37895 / October 30, 1996 Admin. Proc. File No. 3-8982 ------------------------------------------------ : In the Matter of the Application of : : ROBERT A. GRUNBURG : 4551 Glencoe Avenue, Suite 215 : Marina Del Rey, California 90292 : : For Review of Disciplinary Action Taken by the : : NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.: ------------------------------------------------ ORDER SUSTAINING SANCTIONS IMPOSED BY REGISTERED SECURITIES ASSOCIATION On the basis of the Commission's opinion issued this day, it is ORDERED that the sanctions imposed by the National Association of Securities Dealers, Inc. against Robert A. Grunburg, be, and they hereby are, sustained. By the Commission. Jonathan G. Katz Secretary