Sunday, April 10, 2011
Former GunnAllen Officers Settle SEC Charges of Violating Privacy Rules on Confidential Customer Information
On April 7 the SEC charged three former brokerage executives of GunnAllen Financial Inc. for failing to protect confidential information about their customers. According to the SEC, while GunnAllen was winding down its business operations last year, former president Frederick O. Kraus and former national sales manager David C. Levine violated customer privacy rules by improperly transferring customer records to another firm. The SEC also found that former chief compliance officer Mark A. Ellis failed to ensure that the firm’s policies and procedures were reasonably designed to safeguard confidential customer information.
Kraus, Levine, and Ellis each agreed to settle the SEC’s charges against them. This is the first time that the SEC has assessed financial penalties against individuals charged solely with violations of Regulation S-P, an SEC rule that requires financial firms to protect confidential customer information from unauthorized release to unaffiliated third parties.
Without admitting or denying the SEC’s findings, Kraus, Levine, and Ellis each consented to the entry of an SEC order that censures them and requires them to cease and desist from committing or causing any violations or future violations of the provisions charged. Kraus and Levine have been ordered to pay penalties of $20,000 each, and Ellis has been ordered to pay a $15,000 penalty.