Securities and Exchange Commission v. Quest Capital Strategies, Inc. and David Chen Yu, Civil Action No. 02 CV 1512 (D.D.C.)
The Securities and Exchange Commission announced today that it filed a complaint and application for a preliminary injunction in the U.S. District Court for the District of Columbia seeking to enforce a supervisory bar the Commission previously imposed on David Chen Yu. The Commission's complaint charges that Yu is continuing to act as a supervisor at Quest Capital Strategies, Inc. in violation of a supervisory bar imposed by the Commission in an Order Imposing Remedial Sanctions issued on October 15, 2001.
Named as defendants in the Commission's Complaint are:
- David Chen Yu, age 54, who currently resides in Monarch Beach, California. Yu has been Quest's president since its incorporation in 1983, and at various times has held the title of compliance officer.
- Quest, which has its principal office in Laguna Hills, California, and has been registered with the Commission as a broker-dealer since 1985 and with the National Association of Securities Dealers since 1986. Quest currently has two branch offices located in California and employs approximately 500 registered representatives. Quest's registered representatives are located throughout the United States, many in one-person offices.
The Commission Order arose from Quest's and Yu's 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 laws. In the Opinion accompanying the Commission order, the Commission found that Quest and Yu had abdicated their supervisory responsibility, and characterized their failure to supervise Nakoski as "egregious" and Yu's attitude towards his supervisory responsibilities as "particularly disturbing." As a result, the Commission found that it was in the public interest that Yu be barred from associating with a broker-dealer in a supervisory capacity, provided that he may apply to become so associated after one year.
The Commission's Complaint charges that, despite the Commission Order, Yu continues to associate with Quest in a supervisory capacity by:
- continuing to serve as Quest's president;
- speaking with Quest registered representatives about subjects that Quest's compliance personnel are not willing to handle;
- advising and supervising Quest's compliance personnel; and
- being directly involved with the implementation of provisions of the Commission Order relating to the annual inspection of registered representatives not in Quest's main office or one of its branch offices.
The Complaint seeks preliminary and permanent injunctions to stop Yu from violating the Commission Order and to stop Yu and Quest from violating Section 15(b)(6)(B) of the Securities Exchange Act of 1934. The Complaint also seeks civil penalties against Yu and Quest for their violations of the Exchange Act.
For more information on the prior proceedings against Quest, Yu, and Nakoski, see Quest Capital Strategies, Inc. and David Chen Yu, Release Nos. 34-44935 and 40-1990 (October 15, 2001), and SEC v. John T. Nakoski, Litigation Release No. 14515 (May 30, 1995).
