Second Circuit Won't Review Broker's Lifetime Bar From FINRA Firms
The U.S. Court of Appeals for the Second Circuit declined Wednesday to review a decision by the U.S. Securities and Exchange Commission to uphold the lifetime barring of former broker Talman Harris from the financial industry.
October 25, 2017 at 06:09 PM
6 minute read
The U.S. Court of Appeals for the Second Circuit declined Wednesday to review a decision by the U.S. Securities and Exchange Commission to uphold the lifetime barring of former broker Talman Harris from the financial industry.
The panel, composed of Judges Dennis Jacobs, Jose Cabranes and Raymond Lohier Jr., denied Harris' petition for review of a March 31, 2016, SEC decision that sustained the findings of the Financial Industry Regulatory Authority Inc.'s adjudication council. The industry oversight group found Harris and a business partner broke federal securities law, as well as FINRA rules, when they recommended customers purchase shares in a home appliance company, without disclosing that they had received a $350,000 “advisory fee” from the same company two months before.
This and “aggravating factors” lead to FINRA's permanent bar of the two from associating with any of the thousands of FINRA member firms.
On appeal, Harris argued that the payment was not a violation of his Exchange Act duties to disclose unless a “transactional nexus” was present. That is, only if the $350,000 was dependent on the sale of the company's securities, and the securities were purchased by customers to whom such a purchase was suggested.
The panel appeared disinclined to take on Harris' view, noting that he offered no precedent for a “transactional nexus” requirement.
“A broker who chooses which stocks to recommend to clients is required to disclose all material information that could affect his client's purchase decision,” the panel stated.
Harris went on to challenge the scienter requisite in the security violation charge, as he was acting in a gray area of the law. However, the SEC's decision was supported by “substantial evidence,” the panel said, adding that Harris was a “seasoned broker who should have known he had a duty to disclose this information.”
Harris' arguments that FINRA's permanent bar, and the SEC's upholding of that bar, were excessive and oppressive fared little better. The panel found that the SEC did properly consider mitigating factors under FINRA's sanction guidelines, as well as provide an adequate explanation for why the bar was needed and remedial.
Stradley Ronon Stevens & Young securities, litigation and enforcement practice co-chair Paula Shaffner led the firm's representation of Harris on appeal. She did not respond to a request for comment.
SEC senior counsel Benjamin Vetter represented the government. A spokesman for the commission did not return a request for comment.
The U.S. Court of Appeals for the Second Circuit declined Wednesday to review a decision by the U.S. Securities and Exchange Commission to uphold the lifetime barring of former broker Talman Harris from the financial industry.
The panel, composed of Judges Dennis Jacobs, Jose Cabranes and Raymond Lohier Jr., denied Harris' petition for review of a March 31, 2016, SEC decision that sustained the findings of the Financial Industry Regulatory Authority Inc.'s adjudication council. The industry oversight group found Harris and a business partner broke federal securities law, as well as FINRA rules, when they recommended customers purchase shares in a home appliance company, without disclosing that they had received a $350,000 “advisory fee” from the same company two months before.
This and “aggravating factors” lead to FINRA's permanent bar of the two from associating with any of the thousands of FINRA member firms.
On appeal, Harris argued that the payment was not a violation of his Exchange Act duties to disclose unless a “transactional nexus” was present. That is, only if the $350,000 was dependent on the sale of the company's securities, and the securities were purchased by customers to whom such a purchase was suggested.
The panel appeared disinclined to take on Harris' view, noting that he offered no precedent for a “transactional nexus” requirement.
“A broker who chooses which stocks to recommend to clients is required to disclose all material information that could affect his client's purchase decision,” the panel stated.
Harris went on to challenge the scienter requisite in the security violation charge, as he was acting in a gray area of the law. However, the SEC's decision was supported by “substantial evidence,” the panel said, adding that Harris was a “seasoned broker who should have known he had a duty to disclose this information.”
Harris' arguments that FINRA's permanent bar, and the SEC's upholding of that bar, were excessive and oppressive fared little better. The panel found that the SEC did properly consider mitigating factors under FINRA's sanction guidelines, as well as provide an adequate explanation for why the bar was needed and remedial.
SEC senior counsel Benjamin Vetter represented the government. A spokesman for the commission did not return a request for comment.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllDapper Labs $4M Settlement, $1.3M in Attorney Fees Reveal NFT Settlement Trend
4 minute readSyracuse Courtroom Dedicated to Trailblazing City Court Judge Langston McKinney
Ties Go in Favor of Voters: NY Court of Appeals Upholds 2021 Canvassing Law
Trending Stories
- 1Infant Formula Judge Sanctions Kirkland's Jim Hurst: 'Overtly Crossed the Lines'
- 2Abbott, Mead Johnson Win Defense Verdict Over Preemie Infant Formula
- 3Preparing Your Law Firm for 2025: Smart Ways to Embrace AI & Other Technologies
- 4Meet the Lawyers on Kamala Harris' Transition Team
- 5Trump Files $10B Suit Against CBS in Amarillo Federal Court
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250