SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Rel. No. 47142 / January 8, 2003
Admin. Proc. File No. 3-10530
OPINION OF THE COMMISSION
REGISTERED SECURITIES ASSOCIATION - REVIEW OF DISCIPLINARY PROCEEDINGS
Violation of Registration and Discretionary Trading Rules
Individual who served as president, chief operating officer, and principal of member firm violated NASD registration rule by permitting representatives who were not registered with his member firm to solicit and confirm indications of interest in an initial public offering of securities, and violated NASD discretionary trading rule by executing customer trades in aftermarket following instructions of representatives of another member firm, without customers' written authorization to act at the direction of such representatives. Held, Association's findings of violations, sanctions and hearing costs it imposed are sustained.
Jule M. Hannaford IV, Kelly Hannaford and Battles, PA, for Michael F. Flannigan.
Jeffrey S. Holik, Norman Sue, Jr., and Carla J. Carloni, for NASD Regulation, Inc.
Appeal filed: July 2, 2001
Michael F. Flannigan ("Flannigan"), former president, chief operating officer, and principal of Protective Group Securities Corporation ("Protective"), a former member of the National Association of Securities Dealers, Inc. ("NASD"), appeals from NASD disciplinary action. The NASD found that Flannigan (and Protective) violated NASD registration requirements by permitting individuals who were not registered with Protective to solicit and confirm customers' indications of interest in an initial public offering ("IPO"). 1 All of these individuals were employed by another member firm, AGS Financial Services, Inc. ("AGS"); some were registered with that firm. The NASD also found that Flannigan (and Protective) violated the NASD discretionary trading rule when Protective executed customer trades in the aftermarket following instructions of AGS representatives, without the customers' written authorization to act at the direction of these representatives. 2 The NASD fined Flannigan, jointly and severally with Protective $25,000, assessed hearing costs, and barred Flannigan in all supervisorycapacities. 3 We base our findings on an independent review of the record.
Flannigan entered the securities industry in 1983 and became a general securities principal at Protective in February 1989. 4During the period relevant to this matter, September through December 1996, Flannigan was president, chief operating officer and part owner of Protective. He left Protective in May 2001, and is registered with his current employer as a general securities representative and general securities and options principal.
During the relevant period, AGS was an NASD member firm and registered broker-dealer. 5 AGS was not associated with Protective, and Flannigan was neither associated with, nor employed by, AGS.
Room Plus, Inc. ("Room Plus") is a New York corporation with principal offices in New Jersey. Room Plus offered its securities for sale in an IPO ("Room Plus IPO") that went effective November 1, 1996.
AGS hoped to participate in the Room Plus IPO syndicate. For most of 1996, AGS had a $5,000 minimum net capital requirement. This requirement, coupled with the restriction letter governing AGS' NASD membership ("AGS Restriction Letter"), which precluded AGS' IPO participation, meant that AGS could not participate in the Room Plus IPO. 6 In August 1996, David H. Shapiro agreed to pay $150,000 into AGS and became part-owner of AGS. This infusion of cash relieved AGS of the net capital impediment to participation in the Room Plus IPO syndicate. On October 1, 1996, Adam Galas, president and majority owner of AGS, sent a letter to the NASD seeking to revise the AGS Restriction Letter to enable AGS to participate in the Room Plus IPO. Galas, however, did not succeed in obtaining a revision of the AGS Restriction Letter by the date the Room Plus IPO became effective.
B. The AGS-Protective Agreement
AGS and Protective used the same clearing firm, RPR Correspondent Services ("RPR"). AGS representatives discussed with RPR the firm's interest in participating in the Room Plus IPO and its inability to do so. Flannigan testified that Steve Brown ("Brown") at RPR contacted Protective on October 15, 1996 to determine whether Protective would be willing to take AGS' allocation in the Room Plus IPO. Shapiro, in contrast, testified that discussions about an agreement between AGS and Protective began much earlier, approximately the middle of September 1996. It is uncontested that, during the relevant discussions, Brown explained to Flannigan that AGS was currently not permitted to participate in the IPO, and asked Flannigan if Protective would act as AGS' "standby" in the Room Plus IPO. Flannigan, on behalf of Protective, agreed to do so.
According to Flannigan, the terms of the "standby" agreement with AGS (which was not reduced to writing), provided that Protective would "step in" and become a member of the Room Plus IPO syndicate in place of AGS, if AGS was not successful in negotiating an amendment to the AGS Restriction Letter before the Room Plus IPO effective date. Under the standby agreement, AGS representatives (none of whom were registered with Protective 7) would solicit indications of interest for the Rooms Plus IPO. Protective then would open accounts for those AGS customers who had expressed interest in Room Plus, and would execute the customers' orders for Room Plus securities. According to Flannigan, the two firms also agreed that (1) Protective would keep the profits of its IPO sales; (2) Protective would act as a market maker in Room Plus shares and would pay to AGS the commissions that Protective earned in the aftermarket, less Protective's expenses plus two cents per share; and (3) Protective ultimately would return the transferred accounts to AGS. According to Shapiro, the standby agreement also contemplated that AGS would assist Protective in aftermarket sales of Room Plus securities.
C. Participation of AGS and Protective in the Room Plus IPO
Shapiro testified that AGS representatives began soliciting from AGS customers indications of interest in the Room Plus IPO on October 15, 1996. John J. Flynn, an AGS trader, corroborated Shapiro's testimony. Once AGS concluded that it would not obtain a revision of the AGS Restriction Letter in time to participate in the Room Plus IPO, AGS sent form letters to AGS' customers post-dated October 31, 1996 ("AGS Letters"), informing them that the Room Plus IPO would be offered through Protective. 8 These letters were sent sometime before October 28, 1996. 9 The AGS Letters instructed customers to execute and return the letters to AGS to authorize both the opening of a brokerage account with Protective and the transfer of funds from their AGS accounts to Protective. 10
AGS sent facsimiles to Protective containing customer account information for each of the customers who returned the AGS Letter, so that Protective could open accounts for them. Based solely upon the information contained in the completed account forms, Flannigan opened 155 new Protective accounts specifically for the Room Plus IPO. He did nothing to verify the information AGS provided. Flannigan testified that, in some instances, he simply copied all of the information Flynn had sent. If information was missing, Flannigan attempted to contact the customer directly, but if he was unsuccessful he obtained the additional information from someone at AGS.
After Protective opened new accounts for the customers, AGS continued to have exclusive contact with many of these customers concerning the Room Plus IPO. AGS representatives solicited additional indications of interest, confirmed earlier indications of interest, sent the customers prospectuses, and accepted their orders for Room Plus shares after the November 1 effective date. Flannigan admitted that, in most cases, no one from Protective had contact with the customers who ultimately purchased Room Plus shares. Rather, Flannigan relied on AGS' contacts with these customers. 11 A number of AGS representatives corroborated this reliance. Shapiro testified that AGS representatives called customers in the 48 to 72 hours after the Room Plus effective date to confirm their indications of interest. Greg Keller ("Keller"), an AGS representative, testified that he confirmed customers' indications of interest on or near the effective date. Andrew Eisnetz ("Eisnetz"), AGS' operations manager, testified that five or six AGS brokers who worked out of AGS' New York office temporarily relocated to AGS' Chicago office to solicit and confirm sales in the Room Plus IPO. Flynn and Keller corroborated Eisnetz's testimony in this regard.
Flannigan's testimony supports the facts that AGS was in contact with customers to induce their IPO purchases after it was determined that Protective, not AGS, would be offering the IPO shares, and that AGS confirmed customers' indications of interest. Flannigan testified that AGS, not Protective, determined the allocation of Room Plus IPO shares and warrants. He explained that Shapiro at AGS provided him with a list specifying the number of Room Plus shares and/or warrants that were to be allocated to each customer. Flannigan stated that,when he sought payment from the Room Plus underwriter, he certified that Protective had sold its allotment of Room Plus shares and warrants, basing his certification on the allocation list Shapiro had provided to him. Flannigan conceded that he did nothing to corroborate independently the information contained in this list. Flannigan thus essentially acknowledged that Protective served as a conduit for AGS, and had no contact with most of the customers who received shares in the Room Plus IPO until it sent them written confirmations of the completed transactions. 12
D. Aftermarket Trading
On and after November 1, 1996, the Room Plus IPO effective date, Protective became a market maker for Room Plus stock. Flannigan conceded before the NASD that, except in a very few instances, it was AGS representatives who received unsolicited and solicited customer orders for the numerous trades in Room Plus securities that Protective effected in the aftermarket. Shapiro testified that AGS representatives not only solicited customer trades in the Room Plus aftermarket, but also completed the order tickets for Protective. The testimony established that customer orders were routed from AGS representatives to Shapiro, then to Flynn, and then on to Protective.
Flannigan acknowledged that, with respect to these aftermarket trades, he relied almost exclusively on instructions from AGS, and did little to ensure that the instructions were consistent with the customers' directives. Flannigan admitted that neither he nor Protective had obtained written authorization from any Protective customer to accept an order from AGS representatives. 13 He conceded that, although he tried to contact some customers before executing aftermarket trades, he made many trades based solely on communications from AGS, without contacting the customers. He also testified that in those cases where he tried to contact customers before a trade, if he was unsuccessful, he made the trade anyway. Flannigan admitted that he did not know who at AGS had solicited the customers or had accepted their orders, and did not know what representations these AGS representatives made to these customers. There were numerous customers who complained, ultimately, that trades Protective executed in their accounts were not authorized.
A. Violation of NASD Registration Requirements
Under the NASD's registration rule, Membership and Registration Rule 1031, persons engaged in the investment banking or securities business of a member firm must be registered with that firm. We have found that "the NASD's registration requirement 'provides an important safeguard in protecting public investors' and 'strict adherence' to that requirement is 'essential,'" because it "serves a significant purpose in the policing of the securities markets" and "in the protection of the public interest..." 14 There is Commission precedent for the NASD's finding that Flannigan, a principal of a member firm, directly violated registration requirements, 15and Flannigan does not challenge the applicability to his conduct of Membership and Registration Rule 1031 and Conduct Rule 2110.
Here, as the NASD found, Flannigan executed IPO transactions on behalf of Protective customers based on indications of interest that were solicited and confirmed by AGS personnel, and Flannigan negotiated the arrangement whereby AGS representatives not registered with Protective engaged in Protective's securities business. 16 In relying upon and facilitating AGS'representatives' activities for his firm, Flannigan violated NASD Membership and Registration Rule 1031, and thereby NASD Conduct Rule 2110. 17
Flannigan claims that he did not commit an NASD Rule 1031 violation. Under his version of the facts, AGS representatives solicited indications of interest in the Room Plus IPO only on behalf of AGS. He states that there is no record evidence that AGS representatives solicited any indications of interest after October 28, 1996, -- when AGS "flipped" its accounts to Protective. Flannigan is mistaken. He also claims that there is no record evidence that AGS representatives confirmed indications of interest on behalf of Protective. 18 This position is incorrect. The record evidence that AGS confirmed indications of interest for Protective 19and otherwise engaged in Protective's securities business is substantial. It includes, as recited in the factual portion of this opinion, documentary evidence and testimony of both AGS and Protective employees, including that of Flannigan himself, as well as concessions from Flannigan. Theevidence demonstrates that Protective in effect acted only as AGS' conduit -- AGS representatives, on behalf of Protective, not only confirmed indications of interest in the Room Plus IPO, but also, among other activities that require registration under Rule 1031, sent prospectuses to customers, accepted their orders for Room Plus shares after the IPO effective date, and determined final allotments of Room Plus stock and warrants.
Further, Flannigan would have us construe Rule 1031 and our decision in The Cambridge Group, Inc. ("Cambridge Group") 20/narrowly so as to exclude his conduct. We will not do so. In Cambridge Group, an individual, pursuant to a "finder's agreement" with a member firm, solicited investors on behalf of the firm even though the individual was not registered with the firm -- conduct that the firm's principals permitted in violation of Rule 1031. Flannigan contends that Cambridge Group requires that, in order to be found liable for a Rule 1031 violation, an unregistered person must solicit securities business on behalf of a firm pursuant to a specific agreement between the person and the firm, similar to the "finder's agreement" in Cambridge Group. Flannigan also would limit Cambridge Group to situations in which a firm relies on unregistered personnel to engage in initial solicitations of business, not confirmations of indications of interest. We do not agree with Flannigan's reading of Cambridge Group. Cambridge Group does not define the limits of Rule 1031; our decision determined only that the conduct at issue violated the rule. Further, by this attempt to distinguish Cambridge Group, Flannigan would have the Commission disregard the fact that he facilitated a range of conduct by AGS representatives, other than solicitation, that violated Rule 1031.
B. Unauthorized Exercise of Discretion
Under NASD Conduct Rule 2510, no member or registered representative may exercise discretion in a customer's account unless that member or representative has obtained the customer's prior written authorization. In addition, the rule requires that the member firm accept the account in writing as a discretionary account.
It is undisputed that neither Flannigan nor Protective obtained written authorization from the account holders for Flannigan, or anyone else at Protective, to follow the aftermarket trading instructions of AGS representatives, nor accepted the accounts in writing under such terms. We find that Flannigan, by allowing Protective to effect transactions in customers' accounts in the Rooms Plus aftermarket based on instructions from AGS representatives, not the customers themselves, violated Conduct Rule 2510(b). We further find that Flannigan, by violating Conduct Rule 2510(b), also violated Conduct Rule 2110.
Flannigan's defenses that his conduct was not fraudulent and that all he did was execute the customers' "exact orders" are unavailing. He was not charged with fraud and it is plain that he had no direct knowledge as to what his customers had "ordered" -- he relied exclusively on AGS' representatives in this regard. 21
Our review of the NASD's sanctions is governed by Section 19(e)(2) of the Exchange Act, 22which requires us to determine whether a self-regulatory organization's sanctions are excessive or oppressive or impose an unnecessary or inappropriate burden on competition. The appropriate sanctions depend on the facts and circumstances of each case. 23
Flannigan asserts that his sanction should be reduced because the NASD had advised AGS to "figure out a contingency plan" for the Room Plus IPO and that the NASD staff therefore was aware of the arrangement; that AGS' legal counsel prepared the account transfer letters; and that the violation was technical in nature and an isolated incident that will not be repeated.
We are not persuaded. Flannigan cannot shift his or his firm's responsibilities for compliance with NASD rules to the NASD, and has not established, in any event, that the NASD's staff knew the details of the AGS-Protective arrangement or approved that arrangement. 24 In addition, an assertion that AGS' legal counsel prepared the account transfer letters is unavailing. Flannigan has not provided any evidence that he either sought or obtained advice from independent counsel on the legality of the arrangement with AGS, or on his execution of that arrangement. 25 Further, violations of the registration and exercise of discretion requirements cannot be dismissed as "technical" violations. In addition, while Flannigan's misconduct involved only one offering, it encompassed 155 customer accounts and numerous IPO and aftermarket trades. Flannigan made little effort to ensure that his conduct did not violate NASD rules, and Flannigan exposed his Room Plus customers to significant risks by opening accounts and executing transactions for numerous customers without contacting them, discussing their financial situations and needs, or satisfying himself that they understood the investments and affirmatively wanted to proceed with the trades.
Moreover, a number of factors are present that the NASD Sanction Guidelines recognize as aggravating. 26 Flannigan has a relevant disciplinary history, 27and his misconduct resulted in the potential for Flannigan's and Protective's monetary gain. 28 Flannigan also refuses to accept full responsibility for his and Protective's actions. 29
The fines imposed by the NASD are within the amounts suggested by the NASD Sanction Guidelines for violations of these rules. 30 Similarly, the Guidelines suggest that a bar (in contrast to the more limited supervisory bar imposed here) is appropriate in egregious cases of registration violations. 31We note that Flannigan remains free to act in a non-supervisory
capacity. In these circumstances, we conclude that the NASD's sanctions, including the assessment of hearing costs, were neither excessive, oppressive nor an unnecessary or inappropriate burden on competition.
An appropriate order will issue. 32
By the Commission (Chairman PITT and Commissioners GLASSMAN, ATKINS, and CAMPOS); Commissioner GOLDSCHMID not participating.
Jonathan G. Katz
UNITED STATES OF AMERICA
SECURITIES EXCHANGE ACT OF 1934
Rel. No. 47142 / January 8, 2003
Admin. Proc. File No. 3-10530
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 Michael F. Flannigan, and the NASD's assessment of costs, be, and they hereby are, sustained.
By the Commission.
Jonathan G. Katz
1 The NASD concluded that this conduct violated its Membership and Registration Rule 1031, and, accordingly, its Conduct Rule 2110. Rule 1031(a) states in pertinent part that "[a]ll persons engaged or to be engaged in the investment banking or securities business of a member who are to function as representatives shall be registered as such in the category of registration appropriate to the function to be performed . . . ." Section (b) of Rule 1031 defines "representative" as a person associated with a member, who is engaged in the investment banking or securities business for the member. Conduct Rule 2110 requires members and their associated persons, in the conduct of their business, to adhere to high standards of commercial honor and just and equitable principles of trade.
2 The NASD found that this conduct violated Conduct Rule 2510, and, accordingly, Conduct Rule 2110. Conduct Rule 2510 provides that "[n]o member or registered representative shall exercise discretionary power in a customer's account unless such customer has given prior written authorization to a stated individual or individuals," and the member has accepted the account, as a discretionary account, in writing.
3 Protective has not appealed the NASD's findings against it.
There were three additional respondents below, John J. Flynn ("Flynn"), Adam Galas ("Galas"), and David H. Shapiro ("Shapiro"). Flynn was registered with AGS as a general securities representative from October 1996 through June 1997. The NASD found that Flynn violated NASD rules by failing to create a record of instructions regarding trades in customers' accounts that he relayed to Protective. Flynn has not appealed the NASD's disciplinary action. The NASD ultimately dismissed, for lack of jurisdiction, its proceeding against Galas, who served as the president and a registered securities principal of AGS from January 1995 through December 1996, and as part-owner of AGS. Shapiro, a part-owner with Galas of AGS during the relevant period, who also served as a general securities representative of AGS, settled the NASD's action against him. With his consent, the NASD found that Shapiro, among other misconduct, received payment on behalf of AGS for the purchase of interests in the IPO at issue before the IPO effective date; failed to ensure that AGS personnel were registered with that firm before allowing them to engage in AGS' securities business; and participated in a course of conduct that allowed Flannigan, on behalf of Protective, to execute orders to purchase and sell securities in accounts opened at Protective for AGS customers, without written customer authorization.
4 Protective became an NASD member firm in April 1983. According to Flannigan, in March 2001, Protective ceased doing securities or any other type of business. The Commission terminated Protective's broker-dealer registration in May 2001.
5 A Form BDW was filed on behalf of AGS in April 1997; the Commission terminated AGS' broker-dealer registration in September 1998. The NASD canceled AGS' membership in June 1997.
6 See Securities Exchange Act Rule 15c3-1, 17 C.F.R. § 240.15c3-1.
7 Many of the AGS representatives in fact were not registered with AGS during the relevant period; a majority of the unregistered representatives were awaiting NASD approval of their registrations.
8 Shapiro testified that AGS' counsel prepared these letters.
9 Flynn testified that the AGS Letters were mailed in the middle of October; Flannigan concedes in his appeal brief that they were sent sometime before October 28, 1996.
10 The form letters stated that the customers had not been solicited for the Room Plus IPO. The testimony of AGS representatives establishes that solicitation in fact occurred.
11 In his brief to the NASD's National Adjudicatory Council ("NAC"), Flannigan acknowledged that "[d]uring the three-day period following the effective date of the public offering, AGS representatives assisted Protective Group in confirming prior indications of interest."
12 Indeed, Flanniqan conceded in his brief to the NAC (but now disputes in this appeal) that his (and Protective's) "reliance on representatives registered with AGS was misplaced, and result[ed] in a violation of [NASD] Rules 1031 and 2510."
13 Similarly, there is no record of Protective's written acceptance of any discretionary accounts.
14 Patricia H. Smith, 52 S.E.C. 346, 348-49 & n.9 (1995), quoting in part First Capital Funding, Inc., 50 S.E.C. 1026, 1029-30 (1992). See also L.B. Securities Corp., 42 S.E.C. 885, 889 (1966).
15 The Cambridge Group, Inc., 50 S.E.C. 752 (1991), modified sub nom., Hately v. SEC, 8 F.3d 653 (9th Cir. 1993) (president and executive vice president of NASD member firm violated NASD registration requirements by permitting unregistered person to solicit securities business). See generally First Capital Funding, Inc., 50 S.E.C. 1026 (1992) (president of NASD member firm found to have directly violated NASD requirement that no NASD member firm permit an unregistered person to engage in the firm's securities business); Gary D. Cohee, 48 S.E.C. 917 (1987) (upholding NASD finding that principal of NASD member firm improperly permitted unregistered person to engage in the securities business of firm).
16 Compare Michael Brian Kormos, 52 S.E.C. 303 (1995) (registration required to solicit and effect, or cause to be effected, securities transactions); see also First Capital Funding, 50 S.E.C. at 1029 (registration required to solicit investors in private offering and to distribute pre qualification forms); Voss & Co., Inc., 47 S.E.C. 626 (1981) (firm registration required to take orders from firm customers for corporate securities).
17 See Clinton Hugh Holland, Jr., 52 S.E.C. 562, 566 n.20 (1995) (violation of other NASD conduct rules constitutes violation of NASD Conduct Rule 2110, because such rule violations establish that the violator has engaged in unethical conduct), aff'd, 105 F.3d 665 (9th Cir. 1997) (Table).
18 Flannigan did not raise to the NAC the matter of evidentiary sufficiency. Instead, he asserted that his "appeal [was] not about the facts, but rather, about the sanctions that were imposed." Given our de novo review obligation, wedecline the NASD's suggestion that we disregard Flannigan's arguments about factual sufficiency in his application for review, and conclude that he has not waived his right to dispute the findings. We nonetheless take this opportunity to urge respondents and their counsel in self-regulatory organization ("SRO") disciplinary proceedings to make timely sufficiency-of-the-evidence arguments before the SRO.
19 Confirming or "firming up" indications of interest after the registration statement becomes effective is a integral part of the sale of an IPO security. Armstrong, Jones and Company, 43 S.E.C. 888, 899, n.28 (1968), aff'd sub nom Armstrong Jones and Company v. SEC, 421 F.2d 359 (6th Cir. 1970).
20 50 S.E.C. 752 (1991).
21 Flannigan also attempts to excuse his reliance upon the instructions of AGS' representatives for aftermarket trades by analogizing to a practice in the securities industry called the "institutional pot." This practice refers to an IPO allocation mechanism utilized by institutional customers
to assist institutions whose size requirements could not be met by any one underwriter and who were often forced to call all of the underwriters in the account and process multiple trade allocations . . . . The pot provides a mechanism whereby institutions may call the lead manager and attempt to fulfill their needs with minimal processing requirements.
Capital Markets Handbook, Securities Industry Association, Section 5.08 (Bruce S. Foerster ed., 1999). Flannigan's analogy is misplaced: in "institutional pot" situations, no allocations are made by the lead manager without that entity's direct contact with the institutional customer and approval from that customer. In the case before us, Flannigan executed trades in customers' accounts based solely on instructions of a non-authorized third party, without contacting the customers or obtaining from those customers prior written authorization to rely on those instructions.
22 15 U.S.C. 78s(e)(2).
23 Donald R. Gates, Exchange Act Rel. No. 41777 (Aug. 23, 1999), 70 SEC Docket 1228, 1236 and cases cited there. Accordingly, we reject Flannigan's attempt to parse another disciplinary matter, Cambridge Group, with a view todemonstrating that those assertedly "much more severe facts" resulted in a lesser fine, and to have us compare the bar here with the sanctions imposed in two other matters -- a Commission administrative proceeding finding a failure to supervise, and a NASD registration violation case.
24 Stephen J. Gluckman, Exchange Act Rel. No. 41628 (July 20, 1999), 70 SEC Docket 418, 427 and cases cited there.
25 We have previously found that a respondent's reliance on the advice of counsel may mitigate sanctions. See Joseph G. Chiulli, Exchange Act Rel. No. 42359 (January 28, 2000), 71 SEC Docket 1544, 1554 n.26. However, a cognizable claim of reliance on advice of counsel requires a showing that the party claiming it made a complete disclosure to independent counsel, sought advice as to the legality of his conduct, and relied on that advice in good faith. See, e.g., Markowski v. SEC, 34 F.3d 99, 104-05 (2d Cir. 1994); Arthur Lipper Corp. v. SEC, 547 F.2d 171, 181-82 (2d Cir. 1976).
26 See NASD Sanction Guidelines (1998 ed.) at 8-9 (Principal Considerations in Determining Sanctions).
27 The NAC related that Flannigan previously was censured and fined on at least two separate occasions: in 1994, for charging excess commissions, and in 1996, for offering and selling unregistered securities, and violating the net capital rule and rules governing "part or none" securities offerings, and the deposit of investor funds in an escrow account during a contingency period.
28 Flannigan testified that one of the reasons he agreed to the arrangement was because he expected to generate a profit for Protective.
29 In reaching this conclusion we have taken into account Flannigan's appeal statement that "he [has] learned that relying on the accuracy of information provided by AGS was unjustified."
30 See NASD Sanction Guidelines at 41-43, 78 (range recommended for violations of Rules 1031 and 2110 is between $2,000 and $50,000; range for violations of Rules 2510 and 2110 is $2,000 to $10,000). We reject Flannigan's contention that, since Protective no longer exists, it is unfair to require that he pay the fine imposed jointly and severally on him and the firm. The NASD chose to fashion the fine as a joint and several fine, and we see no basis for finding that it is excessive or oppressive simply because Protective no longer can contribute a share.
31 See NASD Sanction Guidelines at 41-43, 78 (bar recommended for individuals or a bar for a supervisory principal, particularly where associated person knowingly violates the NASD's registration requirements; suspension of 10 to 30 business days recommended for egregious violations of exercise of discretion rule).
32 We reject as without any record support Flannigan's claim that the sanctions here reflect that he is being penalized for contesting and appealing the NASD's action. The sanctions imposed are appropriately remedial.
We have considered all of the parties' contentions. We reject or sustain these contentions to the extent that they are inconsistent or in accord with the views we express here.