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Finra Bar For Failure To Promptly Provide Information Upheld

Joseph Ricupero, Exchange Act Rel. 34-62891, September 10, 2010

Time since appeal filed – 8 months 23 days
Time since last brief – 4 months 15 days

Ricupero was a principal and CEO of a broker-dealer. NASD found he violated Rules 2110 and 8210 by failing to promptly respond to NASD requests for information. It also found he failed to file three monthly Focus reports and an annual audit and failed to apply for approval to sell the firm's customer accounts to another firm. He was barred for the Rule 8210 violations (failure to provide information). No sanctions were entered for the other violations.

Ricupero claimed to have sent a letter to NASD providing some of the requested information, but the hearing panel did not believe his testimony. The appeal panel concluded that this claim was untrue and was a deliberate attempt to mislead. Unfortunately for Ricupero he had a history of NASD rule violations including free riding, net capital, and other offenses.

The Commission rarely overturns credibility findings by Finra (or its own ALJs) and this case was no different. It gives "considerable weight and deference" to credibility determinations of the initial fact finder. Ricupero's defense that he had provided most of the requested information, only not on a timely basis was rejected. The Commission noted that FInra should not have to file a disciplinary proceeding in order to prompt compliance with its information requests.

The Commission restated the long standing principle that the president of a firm is responsible for all compliance matters "unless and until he reasonably delegates a particular function to another person . . . and neither knows nor has reason to know that such person is not properly performing his duties."

In upholding the sanction the Commission noted that Finra sanction guidelines provide for a bar for violations of Rule 8210 as the standard sanction absent mitigating circumstances.

Violations of Rule 8210 are deemed particularly serious because Finra has no subpoena power and the rule is its primary tool for carrying out its enforcement obligations.