UNITED STATES OF AMERICA
In the Matter of the Application of
GARY A. FOX
For Review of Disciplinary Action Taken by the
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.
ORDER DISMISSING PROCEEDING
On May 15, 2002, we received an application for review from Gary A. Fox. Fox appealed disciplinary action taken against him by the National Association of Securities Dealers, Inc. ("NASD"). On June 11, 2002, the Commission asked the parties to address the issues of whether Fox attempted to avail himself of the NASD's procedures and whether we have jurisdiction over this matter. On July 1, 2002, the NASD asked that we dismiss this proceeding. Fox did not respond.
Based on an independent review of the record, the facts are as follows. On March 16, 2001, the NASD staff sent a request to Fox pursuant to NASD Investigations and Sanctions Rule 8210 to provide information with respect to certain notes that Fox had sold while associated with Capital Brokerage Corporation. 1 Foxdid not respond to the March 16 request, except to ask that all future requests be sent to his attorney. On April 11 and May 3, 2001, the NASD staff reiterated its requests to Fox, addressed to his attorney with copies to Fox. Neither Fox nor his attorney provided materials responsive to the NASD's requests.
On October 12, 2001, the NASD sent Fox a Pre-Suspension Notice, warning Fox that he had twenty days to comply with the staff's previous requests for information or be suspended from association with any NASD member. 2 On November 2, 2001, the NASD notified Fox that, pursuant to NASD Code of Procedure Rule 9541(b), he was suspended immediately since he had failed to provide the requested information and take corrective action. The notice informed Fox that he could seek reinstatement with the NASD pursuant to Code of Procedure Rule 9544 within six months,but, if he failed to do so, he would automatically be barred. 3 On April 15, 2002, the NASD notified Fox that he was barred effective immediately. The NASD stated that Fox had failed both to provide information requested pursuant to NASD Rule 8210 and to move for reinstatement. Fox did not respond to any of these NASD communications. Fox's application to the Commission followed.
We previously have held that we are precluded from considering an applicant's application for review if that applicant failed to follow the NASD's procedures. In Datek Securities Corporation, 4we rejected an application for review where the applicants failed to file a timely appeal of a hearing panel decision to the NASD's appellate committee. In Royal Securities Corporation, we similarly dismissed the proceeding where applicants failed to make a timely request for review, observing, "It is clearly proper to require that a statutory right to review be exercised in an orderly fashion, and to specify procedural steps which must be observed as a condition to securing the review." 5
The NASD's actions below were in accordance with the 9540 Series of its Code of Procedure, which we have approved. 6While the NASD followed these procedures, Fox failed to avail himself of any of them. Fox failed to respond to NASD requests for information, failed to respond to the pre-notice and notice of his suspension, and failed to apply for reinstatement within the time required. In addition, Fox has not provided any evidence of extenuating circumstances that would explain his failure to comply with these procedures or mitigate against our applying precedent to the instant facts. Accordingly, we conclude as we did in Datek and Royal that we are precluded from considering Fox's application for review.
Accordingly, IT IS ORDERED that this proceeding be, and it hereby is, dismissed.
By the Commission.
Jonathan G. Katz
1 NASD Rule 8210(a) provides:
For the purpose of an investigation, complaint, examination, or proceeding authorized by the NASD By-Laws or the Rules of the Association, an Adjudicator or Association staff shall have the right to:
(1) require a member, person associated with a member, or person subject to the Association's jurisdiction to provide information orally, in writing, or electronically (if the requested information is, or isrequired to be, maintained in electronic form) and to testify at a location to be specified by Association staff, under oath or affirmation administered by a court reporter or a notary public if requested, with respect to any matter involved in the investigation, complaint, examination, or proceeding; and
(2) inspect and copy the books, records, and accounts of such member or person with respect to any matter involved in the investigation, complaint, examination, or proceeding.
NASD Rule 8210(c) further provides, "No member or person shall fail to provide information or testimony or to permit an inspection and copying of books, records, or accounts pursuant to this Rule."
2 Rule 9541(b) provides:
If a person associated with a member fails to provide any information, report, material, data, or testimony requested or required to be filed pursuant to the NASD By-Laws or the Rules of the Association, the Association staff may provide written notice to such person specifying the nature of the failure and stating that the failure to take corrective action within 20 days after service of the notice constitutes grounds for suspending the association of the person with the member.
3 Rule 9544 provides:
Respondents may file motions for reinstatement with the head of the department that issued the original pre-suspension notice under Rules 9541(a) or (b) within six months of the date of the original pre-suspension notice. If such a motion is filed, a Hearing Panel will be convened under Rule 9542, and the Hearing Panel may impose any fitting sanction. Respondents who are suspended pursuant to Rules 9541(a) or (b) and who fail to request hearing to challenge the suspensions within six months of receipt of the pre-suspension notice issued under Rules 9541(a) or (b) will automatically be barred or expelled.
4 Exchange Act Rel. No. 32306 (May 14, 1993), 54 SEC Docket 199.
5 36 S.E.C. 275, 277 (1955). Accord First Jersey Securities, Inc. v. Bergen, 605 F.2d 690, 696 (3rd Cir. 1979) (dismissing district court proceeding that attempted to enjoin NASD disciplinary action and stating, "The relevant statutes have established a comprehensive review procedure. The disciplinary proceeding begins with the [NASD hearing panel] and advances, if appealed, to the NASD [reviewpanel], to the SEC, and finally to the United States Court of Appeals. This structure allows the agency to gather evidence, exercise its discretion, and apply its expertise at more than one level.")
6 Self-Regulatory Organizations: Order Approving a Proposed Rule Change by the National Association of Securities Dealers, Inc. Relating to Amendments to the Code of Procedure and Other Provisions, Exchange Act Rel. No. 43102 (Aug. 1, 2000), 72 SEC Docket 2976, 2979-80.
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