The Eleventh Circuit upheld a National Association of Securities Dealers (NASD) administrative decision holding that the defendant securities dealer violated NASD rules when he refused to answer questions and respond to written requests for tax records in the course of an on-the-record interview with NASD officials investigating a complaint. The defendant, proceeding pro se in the Eleventh Circuit, had previously refused to answer based on the advice of counsel. After NASD officials informed the defendant that disciplinary action would be recommended based on his failure to respond, the defendant produced the requested records under protest.
After a hearing, the NASD Hearing Panel issued a decision barring the defendant from practice for failing to respond to the NASD’s requests until being notified that disciplinary charges would be filed. The defendant administratively appealed, and the sanction was reduced to a one-year suspension. The defendant then appealed to the Securities and Exchange Commission, which affirmed the findings and sanction after an independent review. The defendant appealed the SEC’s determination to the Eleventh Circuit Court of Appeals.
In denying the defendant’s petition and upholding the SEC’s ruling, the court held, among other things, that substantial evidence existed to support the SEC’s rejection of the defendant’s defense of reliance on contrary advice from counsel. Specifically, the court found the defendant cited no authority “to the SEC to show that advice of counsel [to withhold the requested documents] constituted a legal defense, and . . . the SEC relied on prior agency determinations to the contrary, and this reliance is entitled to deference.” (Erenstein v. SEC, 2008 WL 4216552 (11th Cir. Sept. 16, 2008))