Richard A. Neaton,
Exchange Act Rel. 65598, October 20, 2011
FINRA barred Neaton for failing to disclose disciplinary
actions on his Form U4 application. The commission upheld the sanction on
FINRA sanctioned Neaton for failing to amend his U4 to
disclose two suspensions and the later revocation of his license to practice
law. The revocation was based on findings that Neaton had misappropriated
client funds held in his trust account. Form U4 specifically requires
disclosure of the suspension or revocation of the authority to act as an
The Commission found Neaton acted willfully. This conclusion was based on the
fact that he also falsely answered annual written inquiries from his firm
asking about any sanctions entered against him by any regulatory body. The
Commission noted that "willfully" under the securities laws requires
only that the actor intentionally committed the act that constitutes the
violation. There is no requirement that the person be subjectively aware that
he is violating the law.
Neaton claimed he relied on the advice of his supervisors in filling out the
U4. The Commission rejected this argument noting that individuals "must
take responsibility for compliance . . . ."
This is another case of the Commission employing the "grandmother
rule." This is a "test" frequently employed by the Commission in
these situations - would you want this person handling your grandmother's
Read more commentary on SEC administrative
opinions at SEC
Tea Party, a blog by Robert Fusfeld.
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