Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Friday, February 13, 2009

SEC Fines SG Americas Securities for Failure to Supervise Former Managing Director

In the Matter of SG Americas Securities, LLC and Francois O. Barthelemy:

On February 13, the SEC issued an Order Imposing Remedial Sanctions (Order) against SG Americas Securities, LLC (SGAS) and Francois O. Barthelemy (Barthelemy). The Order finds that SGAS and Barthelemy failed reasonably to supervise Guillaume Pollet (Pollet), a former managing director who violated the antifraud provisions of the federal securities laws by selling short the publicly traded securities of PIPE issuers prior to the close of the PIPE transaction in which he was contemplating investing the capital of SGAS's parent, Société Générale. In certain instances, Pollet's short-selling was contrary to specific representations in Securities Purchase Agreements (SPAs), and also constituted unlawful insider trading. In 2007, Pollet settled with the Commission by consenting to a final judgment, pursuant to which Pollet was permanently enjoined from violating the antifraud provisions and ordered to pay a civil penalty in the amount of $150,000.

SGAS failed to have a reasonable system to implement its compliance and supervisory policies to prevent and detect Pollet's unlawful trading, and its Control Room staff failed to adequately investigate suspicious trading by Pollet. Also, SGAS did not have a reasonable system to implement its policies or procedures concerning the proper retention of outside counsel, or the vetting of legal advice received from outside counsel. Barthelemy was Pollet's direct supervisor, and failed reasonably to supervise Pollet because he failed to follow up on the red flags indicating that Pollet's trading was questionable. Barthelemy was aware that Pollet's trading could present legal and regulatory concerns and he directed Pollet to obtain legal advice from counsel, but Barthelemy did not take steps to find out what the advice was or whether it was being appropriately followed. In addition, while Pollet was on vacation, Barthelemy signed two SPAs that contained false representations and failed to follow up with Pollet regarding the accuracy of those representations.

Based on the above, the Order censures SGAS pursuant to Section 15(b)(4)(E) of the Exchange Act and orders SGAS to pay disgorgement of $5,756,086.03 and prejudgment interest of $2,628,846.40. The Order suspends Barthelemy from acting in a supervisory capacity for any broker or dealer for a period of three months and orders him to pay a civil money penalty in the amount of $50,000. SGAS and Barthelemy consented to the issuance of the Order without admitting or denying any of the findings in the Order. (Rel. 34-59401; File No. 3-13372)

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