Our blog post on February 12, 2015 detailed the SEC’s recent increase in use of administrative proceedings to seek civil monetary penalties against all individuals, even those who are not registered or associated with a registered entity. That post also highlighted the problems an individual can face in such proceedings, i.e., the speed at which one goes to hearing, and the limited discovery rights provided.
Under these circumstances, it is no surprise that challenges to the legality of these administrative proceedings have been coming at a furious pace from respondents and potential respondents to such proceedings.
For example, Laurie Bebo, the former CEO of Assisted Living Concepts, Inc., filed for a preliminary injunction in federal court to halt an SEC administrative proceeding against her on the grounds that the proceeding violated her equal protection and due process rights. In addition, at least three putative respondents to SEC action have filed preemptive lawsuits to prevent administrative proceedings from being initiated by the SEC.
Just last week, however, the court in the Bebo matter ruled that it had no jurisdiction to prevent the administrative proceeding from taking place, even though it found Bebo’s claims “compelling and meritorious”. The court reasoned that because the securities laws provide for judicial review of any SEC administrative decision, Bebo would have to go through that process in order to obtain relief rather than seeking preliminary relief with the district court.
The Bebo opinion also highlights the challenges these proceedings can impose on the individual litigant. The proceeding was instituted on December 3, 2014, and has already been scheduled for hearing on April 20, 2015, with witness lists and expert reports ordered exchanged by March 13, 2015.
With the increased use of administrative proceedings by the SEC, and the unique complications they bring, one can be certain there will be many more challenges to the legality of these proceedings in the future.
Jeffrey T. Petersen, Esq. Shustak Reynolds & Partners, P.C. Shustak Reynolds & Partners, with offices in California and New York, focuses on financial services law and represents broker dealers, investment advisors, registered representatives and high net worth investors. Jeff can be reached at 619.696.9500.
After aggressively courting advisors with large international clienteles over the past year or so, RBC Wealth Management has done an abrupt about face and is shutting down its International Advisory Group, leaving 40 brokers, based in San Diego and Miami, scrambling to find new homes. Late last November, RBC Wealth Management’s parent, Royal Bank of Canada said it was exiting the Latin American market as it realigned to focus on “priority markets.”
At the same time, the approximately 40 advisers in the International Advisory Group, which consists of RBC brokers for whom international business represents the majority of their revenue, all of whom had been based in San Diego and Miami, were told they would have to leave RBC and join another firm by this Spring. In Mid-December, those same advisors were told they would no longer be able to open new accounts, and that a final deadline for transitioning their business would be announced later. That deadline is now the end of April.
According to Erwin Shustak, Esq. of Shustak Reynolds & Partners, P.C. in San Diego, a number of the brokers who now must leave RBC were aggressively recruited to join the firm less than a year ago with promises that RBC was committed to remaining in the international space. “Many of those brokers passed on other opportunities at other firms who are still in the international advisory field and have suffered substantial damages” said Shustak, who has represented advisors and financial services clients for over 38 years. “They have seen their books of business decimated twice – once when they transitioned into RBC and now, less than a year later, when they are forced to leave RBC and join other firms”, Shustak added.
According to published reports in the Wall Street Journal and elsewhere, RBC has had serious anti-money laundering problems in Latin America, France and elsewhere, all of which have allegedly led the firm to quickly exit the international client area, although RBC has denied that was the cause. RBC first leased and built out new offices in San Diego in 2012 and began actively recruiting brokers from other brokerage firms in 2013. A year later, RBC announced it was exiting the international business.
Shustak Reynolds & Partners, P.C., with offices in California and New York, represents financial and investment advisors, broker-dealers and others in the financial services industry. For more information contact: Erwin J. Shustak, Esq., Managing Partner, 619.696.9500
