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U.S. Securities and Exchange Commission

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.

SECURITIES EXCHANGE ACT OF 1934
Rel. No. 44956 / October 19, 2001

Admin. Proc. File No. 3-9932r



In the Matter of the Application of
 
ROBERT FITZPATRICK
c/o Merit Capital Associates
1221 Post Road East
Westport, Connecticut 06611
 
For Review of Action Taken by the
 
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.


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OPINION OF THE COMMISSION

REGISTERED SECURITIES ASSOCIATION — REVIEW OF DISCIPLINARY PROCEEDINGS

Violations of Conduct Rules

Failure to Supply Requested Information

Conduct Inconsistent with Just and Equitable Principles of Trade

Former registered principal of former member firm of registered securities association failed to supply information requested by association in a timely manner. Held, association findings of violation and sanctions it imposed are sustained.

APPEARANCES:

Robert Fitzpatrick, pro se.

Alden S. Adkins, Susan L. Beesely, and James S. Wrona, for NASD Regulation, Inc.

Appeal filed: June 30, 1999
Remanded: March 22, 2000
Last brief received: March 23, 2001

I.

Robert Fitzpatrick, formerly the Director of Compliance for SFI Investments, Inc. ("SFI"), a former member of the NationalAssociation of Securities Dealers, Inc. ("NASD"), appeals from an NASD disciplinary action.1 The NASD found that Fitzpatrick violated NASD Procedural Rule 8210 and Conduct Rule 2110 by failing to respond timely to an NASD staff request for information.2 The NASD censured Fitzpatrick, fined him $2,500, and suspended him in all capacities for five business days.3We base our findings on an independent review of the record.

II.

The Request for Information

The NASD began a routine examination of SFI in June 1995. SFI hired Fitzpatrick as its Director of Compliance in November 1995. At a November 1995 meeting, the NASD examiner learned that Fitzpatrick would be the principal SFI contact person for responding to NASD requests for information.

Following the routine examination, the NASD began investigating, among other things, whether two former SFI employees, Michael Haynes and Christopher Chu, had worked assalespersons without NASD registration. Blair Mathies, an NASD compliance examiner, led this aspect of the investigation. In a February 14, 1996, letter addressed to Fitzpatrick as SFI's Director of Compliance, Mathies requested that Fitzpatrick provide the following documents regarding Haynes and Chu: sales tickets and "sales memoranda" related to trades they executed;4 /any commission runs for Haynes and Chu; and payroll records reflecting payments to them from SFI. Mathies requested that the documents be provided by February 29, 1996. Neither Fitzpatrick nor SFI responded to the request.

Mathies notified Fitzpatrick in a March 1, 1996, letter that SFI had not produced the information requested in the February 14 letter. The March 1 letter repeated the request for the specified information about Haynes and Chu, set a new deadline of March 15, and advised Fitzpatrick that failure to respond timely to the request could result in formal disciplinary proceedings against him. Fitzpatrick did not provide the documents to the NASD.5

On March 19, Mathies informed Fitzpatrick that SFI still had not provided the requested information. Mathies requested that Fitzpatrick provide the information described in the February 14 and March 1 letters by March 27, 1996. The letter warned that failure to respond timely could result in disciplinary action against him.

On March 20, Fitzpatrick wrote to Mathies explaining that SFI was doing its best to respond to the requests for information. Fitzpatrick described some of the production difficulties6and enclosed some of the documents - but not the ones at issue in this proceeding - that Mathies had requested. Fitzpatrick did not notify Mathies that any other person at SFI could better handle the request for information, nor did he request a further extension of the production deadline.

By letter dated April 9, Mathies again demanded that Fitzpatrick produce "copies of all tickets and confirmations for sales made by [Haynes and Chu], as well as commission runs (disclosing gross commissions) with respect to sales made by such employee[s] and payroll records as evidence of payments of such commissions to such employee[s]."7 Mathies requested production of the documents on or before April 17.

On April 18, Fitzpatrick advised Mathies that SFI had produced all the requested records, except the payroll records, which Fitzpatrick characterized as voluminous.8 Fitzpatrick invited Mathies to inspect the payroll documents at SFI's offices.

By letter dated May 1, Mathies informed SFI's president, Frank J. Fasano, that, despite repeated requests, SFI had failed to produce all the information requested in the February 14, March 1, and April 9 letters.9 Mathies notified Fasano that NASD staff would recommend formal disciplinary proceedings against SFI and Fitzpatrick. On May 7, Mathies sent a facsimile transmission to SFI's outside counsel forwarding a copy of the May 1 letter.

On June 3, Mathies notified SFI's outside counsel that SFI had yet to comply with the information request, enclosed a copy of the May 1 letter to Fasano, and sent copies of the June 3 letter and its enclosure to Fasano and Fitzpatrick. On July 19, Mathies wrote a letter to SFI's outside counsel demanding compliance by July 30, with a copy to Fasano. Fitzpatrick produced all of the requested information by July 29, five months after the initial deadline. On November 14, 1997, the NASD filed a complaint against Fitzpatrick.

III.

NASD Procedural Rule 8210 requires that member firms and persons associated with them provide information to NASD investigators upon request. We have made clear that, "[i]n order for the NASD to carry out its regulatory functions, it must have the full and prompt cooperation of persons associated with members when requests for information are made."10 Fitzpatrick does not deny that he received the information requests addressed to him or that he failed to produce the requested documents relating to Haynes and Chu to NASD staff until July 29. Fitzpatrick raises three arguments, which he contends establish that he has not violated NASD rules.

Fitzpatrick asserts that he referred the request to SFI's FINOP and argues that the NASD cannot hold him responsible for the FINOP's failure to produce timely the records because he lacked supervisory authority over the FINOP with respect to production of financial records. Fitzpatrick's argument overlooks several important considerations. He was SFI's Director of Compliance, a logical person to whom Mathies could address requests for information regarding SFI compliance issues. Moreover, Mathies had learned from SFI in a November 1995 meeting that Fitzpatrick was the NASD's point of contact for requests for information about SFI. Thereafter, Fitzpatrick never informed NASD staff that some or all information requests should be addressed to SFI's FINOP or other SFI personnel.11

We have held that the addressee of an NASD information request (here, Fitzpatrick) must promptly comply with that request.12 The addressee "has a duty to respond himself or to supervise others diligently with adequate follow-up to ensure a prompt response to the NASD."13 Fitzpatrick has produced noevidence of any attempt to determine whether the FINOP was, in fact, complying with the NASD's request. From the record, Fitzpatrick's only apparent response to the NASD's requests was to refer them to SFI's outside counsel; that is not an adequate response.14 There is no indication that Fitzpatrick followed up on his referrals, asked SFI's president or outside counsel for help in responding to the requests, or attempted to search for the documents himself.15

Fitzpatrick also argues that his April 18 offer to allow NASD staff to inspect and copy the requested documents at SFI's offices fully satisfied his duty to respond to the information request. This argument conflicts with our view that the NASD alone determines the type of production that it needs.16Fitzpatrick's April 18 offer was inadequate.17 The NASD's requirement that Fitzpatrick produce the requested documents at the NASD's offices was reasonable given the likelihood thatFitzpatrick and the firm would be able to identify the relevant records more efficiently than could the NASD.18

Fitzpatrick complains that Mathies asked for "sales memoranda" and, when Fitzpatrick explained to Mathies that he (Fitzpatrick) did not understand what "sales memoranda" were, Mathies refused to clarify his request.19 The NASD dismissed the charges against Fitzpatrick regarding his failure to respond timely to the staff's request for sales confirmations in part because of the confusion created by the wording of NASD's requests. In any case, the confusion regarding "sales memoranda" does not excuse Fitzpatrick's failure to respond timely to the NASD's requests for commission runs and payroll documents.20

We find, as did the NASD, that Fitzpatrick violated NASD Procedural Rule 8210 and Conduct Rule 2110.

IV.

Fitzpatrick argues that the NASD denied him due process of law and otherwise failed to give him a fair hearing. While self-regulatory organizations need not provide the same level of procedural due process as government agencies,21Exchange Act Section 15A(b)(8) requires that they provide "fair procedures" for disciplining members.22 We consider Fitzpatrick's specific objections below.

The Alleged Ex Parte Contact

Fitzpatrick states that, on August 3, 1998, he reached the hearing room before the arrival of counsel for the NASD. The Hearing Officer was the only person in the hearing room when Fitzpatrick arrived, and she told him to wait in the reception area until he was called. While Fitzpatrick waited outside, counsel for the NASD and other NASD staff entered the hearing room.23 Approximately 10 to 20 minutes after the NASD staff's arrival, the Hearing Officer requested that Fitzpatrick enter the hearing room. When Fitzpatrick entered the room, there was ongoing conversation among the Hearing Officer, the Hearing Panel members, counsel for the NASD, and others. Fitzpatrick did not object or raise any issue about being excluded from the hearing room at any time before or during the hearing.

However, before the NASD's National Adjudicatory Council ("NAC"), Fitzpatrick argued that the pre-hearing gathering from which the Hearing Officer had excluded him constituted an improper ex parte contact forbidden by Procedural Rule 9143.24The NAC's opinion did not mention Fitzpatrick's objection. On appeal to us, Fitzpatrick complained of the alleged improper ex parte conduct.

On March 22, 2000, we remanded this matter to the NAC for appropriate proceedings to determine two issues: "1) whether the chronology of events alleged by Fitzpatrick occurred in the manner described by him; and 2) if they did occur, whether any communications occurred that are prohibited by NASD Procedural Rule 9143."25 The NAC directed the individuals involved in the alleged ex parte conduct to submit affidavits addressed to the issues on remand.26 None of the affidavits disputes Fitzpatrick's chronology. Among the affidavits submitted, the Hearing Officer and lead counsel for the NASD both stated that they had little specific recall of the events preceding the hearing, but both were certain that no improper ex parte contact occurred. The NAC reviewed the requested affidavits and on November 13, 2000, rendered a decision finding that there had been no violation of Procedural Rule 9143.

The record on remand supports Fitzpatrick's assertion that he was excluded from a gathering in the hearing room that included counsel from the NASD and the Hearing Panel. The record does not support, however, his allegation that any improper ex parte communication within the ambit of Procedural Rule 9143 occurred during that gathering. Because no evidence supports Fitzpatrick's allegation, we do not find that there was any improper conduct.27

The Hearing Officer's Participation

1. Fitzpatrick also objects to the Hearing Officer's warning regarding his cross-examination of Blair Mathies:

And Mr. Fitzpatrick, I am warning you right now, you are being very belligerent with this witness. There is no need to be belligerent. He is trying to be cooperative with you. If necessary I will -- I will terminate your cross-examination. The tone of your voice and your demeanor is vituperative and belligerent, and it is not appreciated by the Hearing Panel. I have gotten comments from one panelist already on your behavior. If it continues, we are going to terminate this hearing. So be warned Mr. Fitzpatrick.

I am also warning you as to what is relevant. I have told you three times. If you do it again, sir, I will terminate this hearing.28

Fitzpatrick argues that this warning had a "chilling effect" on his conduct of his defense. We find that Fitzpatrick's conduct with respect to the witness warranted the Hearing Officer's warning and the threat to curtail his cross-examination.

From the record, it appears that the Hearing Officer, having appropriately admonished Fitzpatrick for badgering, overreacted somewhat in her threat to terminate the entire hearing forfailure to abide by a relevance instruction.29 The Hearing Officer's reaction, while intemperate, does not warrant a reversal of the decision, nor a remand for a new hearing. Fitzpatrick did not object to the Hearing Officer's continued participation in the case.

2. Fitzpatrick further alleges that, in what he characterized as an off-the-record pre-hearing conference for which he did not provide a date, the Hearing Officer made statements that raised a question regarding her objectivity. According to Fitzpatrick, the Hearing Officer stated that she had made up her mind about the appropriate sanctions for the charges, if they were proved, and later noted that hearing panels sometimes tend to "split the difference" to ensure that the respondent is sanctioned somehow, even when the respondent makes a strong case. There is no contemporaneous transcript of the conference in the record.30 Fitzpatrick again did not object to the described statement when it was allegedly made, nor did he request the removal of the Hearing Officer.

We have required that objections to the composition of the Hearing Panel be raised first to the Hearing Panel so that the situation can be considered and, if appropriate, remedied as soon as possible.31 Fitzpatrick, a lawyer, failed to raise the issue in a timely fashion.32

The Panel Member's Comments

In his brief, Fitzpatrick objects to two statements he attributes to one of the Panel Members. In the first statement, the Panel Member told Fitzpatrick during the hearing, and on therecord, "Don't confuse me with the facts." Our independent review of the record and of the statement in its context convinces us that the statement was merely an attempt at levity. The panel member's statement did not prejudice Fitzpatrick.

In his brief, Fitzpatrick also takes exception to a comment by the same Panel Member which Fitzpatrick alleges he overheard during a break. According to Fitzpatrick, the Panel Member said "He [Fitzpatrick] has already lost me." No evidence supports Fitzpatrick's allegation. Even if the Panel Member made the statement, it reflects no impermissible bias against Fitzpatrick or his case. There is no allegation that the Panel Member formed his opinion on the basis of anything other than the case Fitzpatrick had presented to the Hearing Panel.33

The Hearing Officer's Evidentiary Rulings

Fitzpatrick objects to various evidentiary rulings by the Hearing Officer. The Hearing Officer played an active role in these proceedings. She limited both sides to relevant, non-repetitive testimony. She curtailed NASD counsel's reading of letters into the record because the letters spoke for themselves. She allowed Fitzpatrick considerable latitude in introducing his evidence. Nonetheless, Fitzpatrick objects to several evidentiary rulings by the Hearing Officer.

1. Fitzpatrick objects to the admission of a statement from an on-the-record interview of Fasano that identified Fitzpatrick as the person at SFI who was responsible for responding to the NASD inquiries. Fitzpatrick's main objection was that Fasano's statement was hearsay from a convicted felon.

Hearsay is, of course, admissible in administrative proceedings.34 There is, as described, ample evidence in the record, including testimony at the hearing, to support Fasano's statement, and Fitzpatrick does not contest the statement's accuracy. Fitzpatrick, therefore, has not been unfairly prejudiced.

2. Fitzpatrick's complaint that the Hearing Officer unfairly limited his redirect examination of witnesses to matters raised by counsel for the NASD on cross-examination lacks any merit. That unexceptional limitation reflects normal hearing practice.

3. Fitzpatrick complains that the Hearing Officer limited some of his testimony regarding the confusion regarding Mathies' request for "sales memoranda," as opposed to sales confirmations. The NASD had conceded that its requests before the April 1996 letter were unclear. The Hearing Officer correctly limited additional evidence on that issue.35

4. Fitzpatrick complains further that the Hearing Officer curtailed his ability to present evidence that he complied with several NASD requests in a timely manner. The NASD amended its complaint to omit charges regarding the information requests to which Fitzpatrick responded.36 The Hearing Officer allowed Fitzpatrick some latitude in this area. The Hearing Officer correctly ruled that prompt compliance with some requests for information does not excuse dilatory compliance with other requests.

The Claim of Selective Prosecution

Fitzpatrick claims that he has been the victim of impermissible selective prosecution. To succeed on this claim, Fitzpatrick must establish that he was singled out for enforcement action while others who were similarly situated were not, and that his prosecution was motivated by arbitrary or unjust considerations such as his race, religion, or the desire to prevent his exercise of a constitutionally protected right.37 Fitzpatrick has not alleged any of these elements, much less established them. Accordingly, we reject Fitzpatrick's claim.

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We find that Fitzpatrick received a fair hearing.

V.

Fitzpatrick argues that the NASD's sanctions are excessive. The violation charged by NASD is serious because, if members and their associated persons do not comply with Procedural Rule 8210, the NASD's ability to fulfill its regulatory responsibilities suffers. In assessing its sanctions, the NASD considered other NASD staff requests for information (which are not at issue in these proceedings), the disorganized state of the relevant records at SFI, the fact that Fitzpatrick was not responsible for the record-keeping at SFI, and his timely production of some of the records requested by the NASD. It therefore imposed sanctions that are at the low end of the recommended range for these violations.38

The Commission in the past has sustained significantly more severe sanctions for failure to supply requested information than those imposed on Fitzpatrick. We would be willing to do so in the future. We view Fitzpatrick's argument that these sanctions are excessive or oppressive as particularly troublesome in light of the fact that his conduct occurred while he was SFI's Compliance Officer. Fitzpatrick's conduct fell egregiously short of the standard the NASD and the Commission should reasonably expect from those responsible for assisting a firm to meet its compliance responsibilities. We believe that, given these factors and Fitzpatrick's unresponsive and dilatory reaction to the NASD's requests, the censure, $2,500 fine, and five business-day suspension imposed on Fitzpatrick are neither oppressive nor excessive.

An appropriate order will issue.39

By the Commission (Chairman PITT and Commissioners HUNT and UNGER).

Jonathan G. Katz
Secretary


SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.

SECURITIES EXCHANGE ACT OF 1934
Rel. No. 44956 / October 19, 2001

Admin. Proc. File No. 3-9932r



In the Matter of the Application of
 
ROBERT FITZPATRICK
c/o Merit Capital Associates
1221 Post Road East
Westport, Connecticut 06611
 
For Review of Action Taken by the
 
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.


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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., ("NASD") against Robert Fitzpatrick, and the NASD's assessment of costs, be, and they hereby are, sustained.

By the Commission.

Jonathan G. Katz
Secretary

Endnotes

1 In the NASD's original complaint, Fitzpatrick was one of several respondents. The NASD Hearing Officer severed the charges against Fitzpatrick.

2 The NASD's initial information requests stated that they were authorized by Article IV, Section 5, of the NASD Rules of Fair Practice. During the events at issue, the NASD revised and renumbered its rules. Article IV, Section 5 became Procedural Rule 8210. At that time, there was no substantive change in the rule. Vladislav Steven Zubkis, 53 S.E.C. 794, 795 n.1 (1998). At the time, Rule 8210 provided as follows: "No such member or person shall fail to make any report as required in this Section, or fail to permit any inspection of books, records and accounts as may be validly called for under this Rule." NASD Procedural Rule 8210(b) (July 1996).

NASD Conduct Rule 2110 (formerly Article III Section 1) governing Fitzpatrick's conduct provides as follows: "A member, in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade." NASD Conduct Rule 2110 (July 1996).

3 At the relevant time, Fitzpatrick held NASD registrations as a General Securities Representative, General Securities Principal, Financial and Operations Principal ("FINOP"), Registered Options Principal, and Municipal Securities Principal. The NASD also assessed costs against Fitzpatrick.

4 The term "sales ticket" commonly describes the document prepared by a sales person to place a trade for an account. The NASD request did not define - and Fitzpatrick was not familiar with - the term "sales memoranda."

5 In a telephone conference on or about March 12, 1996, among Fitzpatrick, Mathies, and SFI's outside counsel to discuss the information requests, the parties did not succeed in narrowing the requests.

6 For example, Fitzpatrick stated that sales-activity records were not indexed by the representative's name, so all firm sales-activity records had to be searched to comply with the NASD request.

7 Before April 9, the NASD sought "sales memoranda." See n.4 supra, and accompanying text. Fitzpatrick testified that in a telephone conversation that occurred after Fitzpatrick received the February 14, 1996, request, Fitzpatrick told Mathies that he did not understand what "sales memoranda" were. Fitzpatrick claims he asked Mathies if Mathies wanted sales confirmations. Mathies responded that he did not want confirmations, he wanted "sales memoranda." The record does not supply a date for this conversation.

8 Mathies testified that, contrary to Fitzpatrick's statement, SFI had not provided all the other requested documents.

9 The May 1 NASD letter acknowledged the receipt of some requested information.

10 Michael David Borth, 51 S.E.C. 178, 180 (1992).

11 "We have previously held that, if an associated person cannot provide the information sought by the NASD, the associated person has the obligation 'to explain the deficiencies in his responses as completely as he [is] able.'" Joseph Patrick Hannan, 53 S.E.C. 859, 860 (1998) (quoting Robert A. Quiel, 53 S.E.C. 165, 168 (1997)).

12 Richard J. Rouse, 51 S.E.C. 581, 585 (1993); see n.11 supra.

13 Id. Fitzpatrick misplaces his reliance on the NASD's former Schedule C, Part II Section 2(b)(ii) of the NASD's By Laws (now Membership and Registration Rule 1022(b)(2)). That provision assigns the FINOP responsibility for maintenance and custody of financial records, but does not specify whois responsible for producing them pursuant to an information request from the NASD. "The duty to respond is in no way dependent upon one's status or title within [] a firm. . .." Id.; cf., Robert A. Grunburg, 52 S.E.C. 398, 402 (1995) (misconduct of supervisor does not excuse failure to comply with regulatory requirements).

14 Michael Markowski, 51 S.E.C. 553, 557-58 (1993), aff'd, 34 F.3d 99 (2d Cir. 1994); Borth, 51 S.E.C. at 181 n.10.

15 Fitzpatrick's case is distinguishable from Rouse, 51 S.E.C. at 581, on which Fitzpatrick relies. Rouse was utterly overwhelmed by the demands of keeping a failing firm afloat while responding to multiple NASD requests for information. Fitzpatrick has adduced no evidence that he was in a comparably overloaded situation when the NASD tendered its request. In any event, we found that Rouse failed to comply with the NASD's requests in a timely fashion and thereby violated Article IV, Section 5 [now Conduct Rule 8210].

16 Borth, 51 S.E.C. at 182 (recipient of information request cannot dictate the conditions under which information will be furnished). Fitzpatrick's contention that the NASD sought unnecessary information is without merit. Nor is the NASD required to justify its information requests. Hannan, 53 S.E.C. at 860.

17 The April 18 offer was also untimely, coming more than seven weeks after the initial deadline and a day after the deadline established by the April 9 follow-up letter.

18 Fitzpatrick maintains that he has not violated Procedural Rule 8210 because he "responded" to the information requests, which is all that the rule requires. Of course, Fitzpatrick did not respond at all to the first two requests. His April 18, 1996, response attempted to put the burden of finding and identifying the requested records on the NASD. Fitzpatrick's actions did not satisfy Procedural Rule 8210.

Fitzpatrick's complaint that there was a difficult relationship between Mathies and the NASD on one side and Fitzpatrick and SFI is irrelevant. Hannan, 53 S.E.C. at 860 (personality clashes do not excuse failure to cooperate with information requests).

19 See nn.4, 7 supra and accompanying text.

20 Hannan, 53 S.E.C. at 859.

21 See Larry Ira Klein, 52 S.E.C. 1030, 1039 n.36 (1996).

22 15 U.S.C. § 78o-3(b)(8).

23 Fitzpatrick and counsel for the NASD had never met in person, so neither recognized the other on sight.

24 NASD Procedural Rule 9143 entitled "Ex Parte Communications" provides in pertinent part as follows:

(a) Prohibited Communications

Unless on notice and opportunity for all parties to participate, or to the extent required for the disposition of ex parte matters as authorized by the Rule 9000 Series:

(1) No Party, or counsel to or representative of a Party, or Interested Association Staff shall make or knowingly cause to be made an ex parte communication relevant to the merits of a proceeding to an Adjudicator who is participating in a decision with respect to that proceeding, or to an Association employee who is participating or advising in the decision of an Adjudicator with respect to that proceeding; and

(2) No Adjudicator who is participating in a decision with respect to a proceeding, or no Association employee who is participating or advising in the decision of an Adjudicator with respect to a proceeding shall make or knowingly cause to be made to a Party, a counsel or representative to a Party, orInterested Association Staff an ex parte communication relevant to the merits of that proceeding.

NASD Procedural Rule 9143(a) (effective date Jan. 16, 1998).

25 Robert Fitzpatrick, Securities Exchange Act Rel. No. 42560 (Mar. 22, 2000), 71 SEC Docket 2754, 2756.

26 NAC Subcommittee Order of May 8, 2000. Fitzpatrick objected to any process other than a full evidentiary hearing and sought emergency relief from the Commission compelling the NAC to hold an evidentiary hearing on remand. The Commission declined such relief by letter of May 16, 2000.

27 Going forward, it would be better practice to exclude NASD counsel from the hearing room until all parties with business before the Hearing Panel can be present.

Our conclusion with respect to Fitzpatrick's assertion that there were ex parte communications underscores thedifficulties created when a party does not note a timely objection to colorably objectionable conduct during an adversarial proceeding. With the exception of the submissions of Fitzpatrick, counsel for NASD, the Hearing Officer, and the other Hearing Panel Members, the affidavits upon which the NASD chose to rely in complying with the Commission's March 22, 2000, remand order were conclusory and unhelpful. Their conclusory nature may arise from their creation almost two years after the events in question. Fitzpatrick's failure to object, which the NAC aggravated by its failure to discuss Fitzpatrick's objection when he did assert it before the NAC, has hampered our ability to evaluate what occurred before the hearing began. In the future, a situation may well arise in which affidavit evidence alone would not provide an adequate record on which the Commission can make a decision.

28 /Transcript of August 3, 1998, Hearing at 60-61.

29 We do not suggest that there is no circumstance under which a Hearing Officer may terminate a hearing. We do not believe, however, that this hearing presented that type of situation.

30 Because the record lacks such a transcript, we have not adopted what Fitzpatrick asserts in his brief is an exact quotation taken from what he asserts is a transcript of the conference he prepared. The NASD characterized this statement (attributed in its brief to a "Hearing Panel member" rather than the Hearing Officer) as an unobjectionable attempt "on the part of the Hearing Panel member to persuade both parties to move toward settlement."

31 Stephen Russell Boadt, 51 S.E.C. 683, 685 (1993); Ashvin R. Shah, 52 S.E.C. 1100, 1104 n.16 (1996), aff'd 132 F.3d 36 (7th Cir. 1997)(Table).

32 Shah, 52 S.E.C. at 1104 n.16; Boadt, 51 S.E.C. at 685.

33 Jay Houston Meadows, 52 S.E.C. 778, 787 (1996), aff'd, 119 F.3d 1219 (5th Cir. 1997).

34 Otto v. SEC, 253 F.3d 960, 966 (7th Cir. 2001), petition for cert. filed, No. 01-465 (Sept. 7, 2001); Dillon Securities, Inc. 51 S. E. C. 142, 150 (1992).

35 Moreover, the NASD dismissed the allegations regarding this alleged failure to produce.

36 As Fitzpatrick has acknowledged, the NAC considered Fitzpatrick's partial cooperation in reducing the sanctions imposed by the Hearing Panel.

37 See United States v. Huff, 959 F.2d 731, 735 (8th Cir.), cert. denied, 506 U.S. 855 (1992); Barry C. Wilson, 52 S.E.C. 1070, 1074 (1996).

38 The NASD Sanction Guidelines recommend a fine ranging from $2,500 to $25,000 and a suspension in any and all capacities for up to two years.

39 We have considered all of the contentions advanced by the parties. We reject or sustain them to the extent that they are inconsistent or in accord with the views expressed herein.

 

http://www.sec.gov/litigation/opinions/34-44956.htm


Modified: 10/19/2001