Securities and Exchange Commission
In the Matter of the Application of
DAVID I. CASSUTO
For Review of Disciplinary Action Taken by the NASD
OPINION OF THE COMMISSION
REGISTERED SECURITIES ASSOCIATION -- REVIEW OF DISCIPLINARY PROCEEDINGS
Jurisdiction to Review Action of Association
Former registered representative of member firm of registered securities association who failed to respond to repeated requests for information appealed association's sanction on grounds that he never received the association's notices. Held, the application for review is dismissed.
Liam O'Brien, of Theodore A. Krebsbach & Associates, P.C., for David I. Cassuto.
Nancy C. Libin, for NASD Regulation, Inc.
Appeal filed: November 12, 2002
Last brief received: February 28, 2003
David I. Cassuto, formerly a registered representative associated with a member firm of the National Association of Securities Dealers, Inc. ("NASD"), seeks review of disciplinary action taken against him by the NASD. The NASD found that Cassuto failed to provide information requested by the NASD as required by NASD Procedural Rule 8210. 1 The NASD barred Cassuto fromassociation in any capacity with a member firm. We base our findings on an independent review of the record.
From July 1995 until December 1999, Cassuto was employed as a registered representative at Continental Broker-Dealer Corporation ("Continental"). At Continental, he was the subject of several customer complaints alleging, among other things, unauthorized trading and churning. After leaving Continental, Cassuto worked at Institutional Equity Corporation from December 1999 until May 2000, whereupon he left the securities industry.
On March 8, 2002, an NASD compliance examiner sent a letter requesting pursuant to NASD Procedural Rule 8210 that Cassuto appear on March 26, 2002, for an on-the-record interview. 2 The letter was sent by first class mail, certified mail, and Airborne Express to Cassuto at mailing addresses in Lido Beach, New York, Long Beach, New York, and Kew Gardens, New York, 3 with a copy to Cassuto's attorney. 4 Cassuto did not respond to the letter and failed to appear at the interview.
On March 26, 2002, the examiner sent a second letter by first class and certified mail to Cassuto at the Lido Beach, Long Beach, and Kew Gardens addresses, again requesting Cassuto's appearance, which was rescheduled for April 10, 2002. The letter warned Cassuto that his failure to appear might result in disciplinary action and the imposition of sanctions against him.
The next day, March 27, 2002, an NASD paralegal sent a third letter that was nearly identical to the second letter, by first class and certified mail, to Cassuto. This letter was addressed toa residence in Massapequa, New York. 5 Cassuto again failed to appear at the interview.
On April 22, 2002, the NASD sent a Pre-Suspension Notice by first class mail, certified mail, and Airborne Express to Cassuto at the Lido Beach, Long Beach, Kew Gardens, and Massapequa addresses. Pursuant to NASD Procedural Rule 9541(b), 6 the letter warned Cassuto that, unless he complied with the NASD's March 8, 2002, March 26, 2002, and March 27, 2002 requests to appear and provide information, within 20 days of the service of the Pre-Suspension Notice, Cassuto would be suspended from association with any NASD member firm. The Pre-Suspension Notice also advised Cassuto that he could request a hearing. Moreover, if he was suspended, he could move for reinstatement within certain prescribed time limits. The Pre-Suspension Notice further informed Cassuto that, if he failed to challenge his suspension within six months of his receipt of the Pre-Suspension Notice, he would be barred automatically from association. Cassuto did not respond to the Pre-Suspension Notice.
On May 14, 2002, the NASD sent a Suspension Notice by Federal Express priority overnight, certified mail, and first class mail to Cassuto at the Lido Beach, Long Beach, Kew Gardens and Massapequa addresses. The Suspension Notice that was sent by Federal Express to the Massapequa address was delivered successfully on May 20,2002, on the third attempt. 7 Nonetheless, Cassuto failed to respond to the Suspension Notice.
On October 24, 2002, the NASD, pursuant to NASD Procedural Rule 9544, 8 sent a Notice of Bar by Federal Express overnight, certified mail, and first class mail to Cassuto at all four addresses. The NASD notified Cassuto that "effective immediately," he was barred from association with any NASD member firm because he failed to provide the information requested by the NASD and failed to move for reinstatement within six months of the service of the Pre-Suspension Notice. Cassuto received the Federal Express and the certified mail deliveries of the Notice of Bar that were sent to the Massapequa address.
On November 12, 2002, Cassuto appealed the bar and offered to cooperate with the NASD investigation "provided that the SEC and the NASD agree to withdraw their suspension."
Section 19(f) of the Securities Exchange Act of 1934 9 governs our consideration of Cassuto's application for review of the NASD's action. If we find that: (1) the specific grounds on which theNASD based its action exist in fact; (2) the NASD's action is in accordance with its rules; and (3) the NASD rules are, and were applied, in accordance with the purposes of the Exchange Act, we must dismiss the appeal.
Cassuto does not dispute the basis of the NASD's actions -- that he did not respond to the NASD's correspondence. Cassuto challenges the NASD's process, asserting that, except for the Notice of Bar, he never received the NASD's requests for information, the Pre-Suspension Notice, or the Suspension Notice. Cassuto states that he purchased a residence at the Massapequa address in October or November 2001 but did not occupy the home between February 2002 and June 2002 because it was under construction. During this period, Cassuto was living with his sister in Franklin Square, New York.
The NASD, however, followed its rules. NASD Procedural Rule 8210(d) provides that a notice is deemed received when it is mailed to the last known residential address of the person to whom it is directed, as reflected in the Central Registration Depository ("CRD"). In the event that the NASD staff knows that the address is outdated, notice is to be served at the CRD address and "any other more current address."
The NASD staff was diligent in identifying the various addresses at which Cassuto could have been located during the past eight years and mailing additional notices to those addresses. 10 Cassuto admits he lived at the Kew Gardens address until 1994, and at the Lido Beach and Long Beach addresses until as recently as September 2001. When the NASD staff learned of Cassuto's Massapequa address, they attempted to contact Cassuto at that address as well. It appears that the Suspension Notice was successfully delivered to that address.
Moreover, even if we concluded that Cassuto did not receive any of these various communications, that failure is due to Cassuto. It was Cassuto's responsibility to maintain a current address in the CRD. 11 Otherwise, an applicant could thwart an NASD investigation by moving without leaving a forwarding address. 12 However, Cassuto failed to provide his current address to the NASD, and he does not describe any efforts that he made to have his mail forwarded.
We have previously held that we are precluded from considering an application for review if the applicant failed to follow NASDprocedures. 13 In Gary A. Fox, respondent Fox (apart from asking the NASD to forward all information requests to his attorney), failed to respond to repeated requests by the NASD, pursuant to NASD Procedural Rule 8210, for information. 14 The NASD then sent a pre-suspension notice, a notice of suspension and finally, a notice of bar. 15 Fox failed to respond to any of the NASD communications and failed to apply for reinstatement within the prescribed time period. 16 As a result of his failure to exhaust the NASD's procedures, we held that we were precluded from considering Fox's application for review. 17 As we observed in Gary A. Fox, "'[i]t 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.'" 18
Cassuto failed to keep his address current, failed to respond to the requests for information pursuant to NASD Procedural Rule 8210, and failed to take corrective action. He further failed to respond to the NASD's notices of this action, failed to ask for a hearing, and, after his suspension, failed to move for reinstatement. In contrast, the NASD's actions were consistent with NASD Procedural Rules 8210 and 9541-47. 19
Cassuto asks that we strike the NASD's brief in opposition to his petition for review and impose sanctions on the NASD. Cassuto complains that he received a copy of the NASD's brief that was not signed by the NASD's counsel of record.20
The NASD acknowledges that it inadvertently delivered an unsigned copy of its brief to Cassuto's attorney as the result of a photocopying error. As soon as the NASD discovered the error, it notified Cassuto's counsel and both faxed and mailed a signed copy of its brief to counsel on February 13, 2003. Given the NASD's prompt cure and the de minimis nature of the filing defect, we decline to strike the NASD's brief in opposition or impose sanctions upon the NASD. 21
Accordingly, we dismiss Cassuto's application for review.
An appropriate order will issue. 22
By the Commission (Chairman DONALDSON and Commissioners GLASSMAN and CAMPOS); Commissioners GOLDSCHMID and ATKINS, not participating.
Jonathan G. Katz
In the Matter of the Application of
DAVID I. CASSUTO
For Review of Disciplinary Action Taken by the NASD
ORDER DISMISSING APPLICATION FOR REVIEW OF DISCIPLINARY PROCEEDINGS OF REGISTERED SECURITIES ASSOCIATION
On the basis of the Commission's opinion issued this day, it is
ORDERED that the appeal of disciplinary proceedings undertaken by the National Association of Securities Dealers, Inc. be, and it hereby is, dismissed.
By the Commission.
Jonathan G. Katz
1 NASD Procedural Rule 8210 requires registered persons to respond to NASD requests for information.
2 Article V, Section 4 of the NASD By-Laws generally provides that a person who is terminated and no longer associated with any NASD member continues to be subject to NASD membership for two years after the effective date of the termination.
3 Cassuto represents that the Lido Beach and Long Beach addresses are for the same residence. The record does not specify how the NASD obtained the Lido Beach, Long Beach, and Kew Gardens addresses.
4 Cassuto's attorney was copied on the March 8, 2002 letter but not on subsequent NASD correspondence addressed to Cassuto. Cassuto does not state whether counsel received this copy. Cassuto has not objected to the fact that his attorney was not copied on subsequent correspondence from the NASD.
5 The record does not state how the NASD identified the Massapequa address.
6 NASD Procedural Rule 9541(b) authorizes the NASD to issue to any person who fails to provide information requested by the NASD written notice specifying the nature of that person's noncompliance and stating that the failure to take corrective action within 20 days after service of such written notice constitutes grounds for suspending that person's association with the NASD member.
7 Although no signature was required for delivery, Federal Express attempted to deliver this package on two previous occasions but was unable to do so successfully because the "[c]ustomer" was "not available" or the premises were "closed."
The Suspension Notice that was sent to the Massapequa address by certified mail was returned with the address crossed out after several attempts at delivery. The Federal Express packages that were sent to the Lido Beach, Long Beach, and Kew Gardens< addresses were returned as undeliverable. Similarly, the Suspension Notices that were sent by certified mail to the Long Beach and Kew Gardens addresses were returned as undeliverable. The Suspension Notice sent by certified mail to the Lido Beach address was signed for by somebody other than Cassuto. The Suspension Notice sent by first class mail to the Kew Gardens address was returned as undeliverable. None of the remaining mailings was returned.
8 As relevant here, NASD Procedural Rule 9544 provides that respondents who are suspended pursuant to NASD Rule 9541(b) and who fail to request a hearing to challenge the suspension within six months of receipt of a pre-suspension notice will be barred or expelled automatically.
9 15 U.S.C. § 78s(f).
10 See Warren B. Minton, Jr., Securities Exchange Act Rel. No. 46709 (Oct. 23, 2002), 78 SEC Docket 2369, 2374.
11 Id.; see also Ashton Noshir Gowadia, 53 S.E.C. 786, 790 (1998).
12 See Nazmi C. Hassanieh, 52 S.E.C. 87, 91 (1993).
13 See, e.g., Gary A. Fox, Exchange Act Rel. No. 46511 (Sep. 18, 2002), 78 SEC Docket 1533 (concluding that the Commission was precluded from considering respondent's application for review where respondent failed to respond to NASD requests for information, failed to respond to notices and failed to apply for reinstatement within the prescribed time limit); Royal Securities Corp., 36 S.E.C. 275 (1955); Datek Securities Corp., Exchange Act Rel. No. 32306 (May 14, 1993), 54 SEC Docket 199.
14 Gary A. Fox, 78 SEC Docket 1533.
18 Gary A. Fox, 78 SEC Docket at 1535 (quoting Royal Securities Corp., 36 S.E.C. 275, 277 (1955)).
19 On December 10, 2002, counsel for Cassuto sent a settlement offer addressed to both the Commission and the NASD. Cassuto again offered to cooperate with the NASD on the condition that his "suspension" be withdrawn. We have no basis to consider Cassuto's offer to cooperate with the NASD investigation. That is a matter strictly between Cassuto and the NASD.
20 Rule of Practice 153(a), 17 C.F.R. § 201.153(a), requires every filing of a party represented by counsel to be signed by at least one counsel of record.
21 In any event, Rule of Practice 180(b), 17 C.F.R. § 201.180(b), authorizes the Commission to permit a party to cure any deficiencies and resubmit a filing within a fixed time period.
Cassuto asserts that his appeal has been hampered by his inability to obtain copies of the documents comprising the Certified Record. In a letter dated December 27, 2002, the Commission specifically informed Cassuto's attorney that he could request from the Commission's Public Reference Room copies of any documents in the Certified Record that he did not already possess. We note that the record, which is less than 100 pages, consists of the correspondence from the NASD to Cassuto, records of attempts to deliver that correspondence, and Cassuto's CRD record.
23 We have considered all of the parties' contentions. We have rejected or sustained them to the extent that they are inconsistent or in accord with the views expressed in this opinion.
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