LexisNexis Corporate & Securities Law Community 2011 Top 50 Blogs

Bon mots

"You can observe a lot just by watching." Yogi Berra

"We do not distain to borrow wit or wisdom from any man who is capable of lending us either." Henry Fielding, Tom Jones

"In our complex society the accountant's certificate and the lawyer's opinion can be instruments for inflicting pecuniary loss more potent than the chisel or the crowbar." United States v. Benjamin, 328 F.2d 854, 862 (2d Cir. 1964)

Enjoined Investment Adviser Barred With Right To Reapply In Five Years - No Explanation Provided

Robert Radano, IA Act Rel. 2750 (June 30, 2008)

Time since appeal filed - 2 years, 2 months, 16 days
Time since last brief filed - 1 year, 11 months, 27 days
Time since oral argument - 1 month, 25 days
Pages - 18
Footnote - 82


Rodano was the managing director and sole owner of an investment adviser registered with Connecticut. The ALJ barred him based on a previous injunction prohibiting anti-fraud violations. Rodano was enjoined because he knowingly allowed Steven Bolla, a barred individual to associate with the advisory firm and failed to disclose Bolla’s bar to clients. The D.C. Circuit upheld the injunction, but remanded to the district court after finding the injunctive order overly broad.

The district court found that Radano’s violations were “flagrant, deliberate, and part of a pattern.”

The Commission noted that in assisting clients in choosing investment managers and advised clients about asset allocations, Radano’s firm met the statutory definition of an investment adviser. Because Rodano managed and owned the firm and advised clients, he was an associated person of an adviser.

Rodano argued that his fraud was not so egregious as to justify a lifetime bar. It also found that Rodano betrayed the trust of his clients despite an adviser’s duty of “utmost good faith.” The Commission also rejected Rodano’s argument that because no investor funds were lost, the sanction should be lessened, finding that the quality of investment advice provided was not a relevant issue in the case. Despite noting that Rodano’s violations were egregious and demonstrated “a high degree of scienter” and demonstrated a “troubling lack of integrity” the Commission modified the lifetime bar to one permitting Rodano to reapply in five years.

After many pages of similarly stern rhetoric the Commission’s conclusion that a permanent bar is not appropriate is surprising to say the least. The Commission concludes that a bar with a right to reapply in five years will impress upon Rodano the seriousness of his misconduct and reduce the likelihood of recurrrence. It further concluded that removing him from the industry for a substantial period of time will “help to ensure his compliance.” No explanations for these conclusions is provided.


Can you say ipse dixit? The Commission prefaces its conclusions with literally pages of inconsistent rhetoric about the egregious nature of Rodano’s violations. The utter lack of explanation for the conclusion that less than a permanent bar is appropriate will inspire future litigation by other enjoined individuals and discourage ALJs from entering orders without holding hearings. The Commission owes some duty to explain its reasoning. This type of unexplained arbitrary decision making is disgraceful. Picking a number from a hat is simply not acceptable. Why five years and not four or three or two? If the word egregious has any meaning at all, why less than a permanent bar? Last, what explains the Commission’s scheduling oral argument a full ten months after the last brief was received?