United States of America
In the Matter of the Application of
c/o Merit Capital Associates
1221 Post Road East
Westport, Connecticut 06611
For Review of Disciplinary Action Taken by the
National Association of Securities Dealers, Inc.
On October 19, 2001, the Commission issued an opinion sustaining disciplinary action by the National Association of Securities Dealers, Inc. ("NASD") against Robert Fitzpatrick who had been the Compliance Officer of SFI Investments, Inc. ("SFI"), a former NASD member firm. We found that Fitzpatrick violated NASD Conduct Rules by failing to respond timely to NASD staff requests that he produce documents relating to an ongoing investigation of SFI, which employed him as its Compliance Officer at that time. We sustained the sanctions the NASD assessed: a censure, $2500 fine, and a suspension in all capacities for five business days.1
Fitzpatrick now requests reconsideration of our decision. His motion raises many of the arguments that we previously considered and rejected. We believe that our opinion appropriately addressed the issues raised by Fitzpatrick. We see no reason to reconsider our earlier decision.
NASD staff first requested on February 14, 1996, that Fitzpatrick produce documents related to two SFI employees no later than February 29, 1996. Fitzpatrick did not produce all of the requested documents until July 29, 1996, a full five months after the deadline established in the initial request. Between February and July, NASD staff repeated the information request several times, warning that disciplinary action would result were production not forthcoming. In spite of the repeated requestsand the warnings of disciplinary proceedings, Fitzpatrick failed to produce the requested documents until July.
Fitzpatrick alleges that our opinion is in error regarding his responses to the information requests. As he did initially, Fitzpatrick asserts that he did respond to the requests by sending letters to and leaving telephone messages with NASD staff and by offering to permit the NASD staff to come to SFI and search for the documents themselves. Fitzpatrick does not deny, however, that he did not provide all the requested documents until five months later. Nor does Fitzpatrick deny that he was the appropriate recipient of those requests from the NASD or claim that he asked the NASD to direct information requests to any other person at SFI. The response that Fitzpatrick argues discharged his obligation under NASD conduct rules was no more than an exchange of correspondence, and was not the production of documents that the NASD had requested. That type of response fails to satisfy his obligation under the NASD rules. Similarly, Fitzpatrick's untimely offer to allow NASD staff to examine SFI's records and copy those that fulfilled the information request is not an appropriate response to an NASD request that SFI produce copies of documents. As we have stated before, NASD member firms may not set conditions on their compliance with NASD information requests.2
Fitzpatrick again objects to our refusal to reverse the Hearing Officer's decision to admit the investigatory testimony of Frank J. Fasano, SFI's President. Fasano identified Fitzpatrick as the individual responsible for responding to the NASD's requests to SFI for information. As we explained before, hearsay may be admitted in administrative proceedings.3 Moreover, Fitzpatrick has not been unfairly prejudiced by the admission of the hearsay. He has never denied that he was the point of contact for NASD information requests. Even if he were not the best person at SFI to receive such requests, as the addressee of the requests he had an obligation to respond, or to refer the request to someone who could respond to the request subject to his supervision, or to explain to the NASD why he was unable to respond.4
Fitzpatrick argues that we should have required the NASD to hold a full evidentiary hearing when we remanded the NASD decision for a determination whether improper ex parte contact occurred between NASD counsel and the Hearing Panel. Fitzpatrick further objects to the NASD's reliance, and ours as well, on the affidavits submitted by NASD counsel and staff regarding the events that occurred in the hearing room in Fitzpatrick's absence. Fitzpatrick characterizes those NASD individuals who submitted affidavits as "coconspirators" who have a substantial, common motive to falsify their evidence. Fitzpatrick's allegation of conspiracy is without any support in the record, and we reject it.
Fitzpatrick asserts that the Hearing Officer improperly admonished him regarding badgering an NASD witness. Our reading of the record including those excerpts quoted by Fitzpatrick in his motion finds justification for the Hearing Officer's admonition and her threat to terminate Fitzpatrick's cross-examination of the witness. Our opinion also stated that the Hearing Officer overreacted by threatening to terminate the hearing, but that overreaction did not vitiate the fairness of the proceeding. We reiterate that Fitzpatrick did not object to that admonishment at the time it was made, nor did he object to any of the Hearing Officer's rulings thereafter. Fitzgerald availed himself of his procedural rights to adduce documentary and testimonial evidence throughout the hearing, and we find no indication that the hearing was procedurally defective.
We have considered the additional arguments raised by Applicant and find them equally lacking in merit. Accordingly,
IT IS ORDERED that the motion for reconsideration filed by Robert Fitzpatrick be, and it hereby is, denied.
By the Commission.
Jonathan G. Katz
1 Robert Fitzpatrick, Securities Exchange Act Release No. 44956 (Oct. 19, 2001), __ SEC Docket ____.
2 Michael David Borth, 51 S.E.C. 178, 182 (1992).
3 Otto v. SEC, 253 F.3d 960, 966 (7th Cir. 2001), cert. denied, 2001 U.S. LEXIS 10378 (Nov. 13, 2001); Dillon Securities, Inc. 51 S.E.C. 142, 150 (1992).
4 Richard J. Rouse, 51 S.E.C. 581, 585 (1993) (duty of addressee to respond or refer with supervision); Joseph Patrick Hannan, 53 S.E.C. 859, 860 (1998) (quoting Robert A. Quiel, 53 S.E.C. 165, 168 (1997)) (duty to explain deficiencies of response, if any).
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