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Finra Denial of Association Based on Criminal Conviction Upheld

Timothy P. Pedgregon, Jr., Exchange Act Rel. 61791

Time since appeal–6 months 24 days
Time since last brief–3 months 19 days

A Finra member firm sought a ruling from Finra that it could employ Pedgregon as a principal and compliance officer and still remain a member. Pedgregon is statutorily disqualified due to a felony conviction for two counts of online solicitation of a minor for sexual contact. As a result Pedgregon is subject to the 10 year statutory disqualification. He is not permitted to associate with a Finra member without permission. Likewise, under Finra rules a firm is not permitted to allow a disqualified person to associate with it without Finra permission. Finra denied the application. Under Exchange Act Section 19(f) the Commission must dismiss appeals of such Finra actions if it finds that Finra's action was: 1) based on existing facts; 2) the action was in compliance with Finra rules; and 3) the rules were applied in a manner consistent with the purposes of the Exchange Act. The Commission therefore dismissed the appeal.

The Commission rejected Pedgegon's argument that Finra's action was unlawful because his felony did not involve securities related conduct. In doing so it noted that Congress in 1990 specifically amended the statutory bar language to give Finra discretion to base an exclusion order on any felony not otherwise specified in the statute.