Securities Law Prof Blog

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

Friday, January 30, 2009

SEC Sustains NASD Disciplinary Action for Failure to Respond to NASD Requests for Information

The SEC sustained NASD disciplinary action against CMG Institutional Trading, LLC, a former NASD member firm, and Shawn D. Baldwin, the firm's president and chief executive officer. The Commission also sustained NASD's imposition of two-year suspensions on CMG and Baldwin for their misconduct and a $25,000 joint-and-several fine.  The SEC found that CMG and Baldwin failed to respond completely and timely to NASD requests for information regarding the adequacy of CMG's net capital. In sustaining NASD's sanctions, the Commission stressed the importance of member firms' and their associated persons' obligation to provide NASD with information pursuant to a request under Rule 8210, noting that NASD relies on such requests "to obtain information from its members necessary to carry out its investigations and fulfill its regulatory mandate." The Commission found that CMG's and Baldwin's "untimely and incomplete responses" to NASD information requests "put investors at risk because NASD was unable to determine timely if CMG had adequate capital to protect investors from the possibility of the firm's failure." According to the Commission, the sanctions imposed will encourage CMG and Baldwin, "as well as encourage others already in the industry, to respond to NASD information requests completely and in a timely manner."

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