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 appeal.
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 attorney.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 money?
