Maine Supreme Court Affirms Revocation of Securities Licenses

In North Atlantic Securities, LLC et al. v. Office of Securities, 2014 ME 67, an individual, his son and entities under his control received more than $200,000 in loans from the individual’s mother-in-law, a former client. On at least three occasions, the individual copied and pasted a copy of his mother-in-law’s signature to authorize additional borrowing. During this time, written supervisory procedures were in effect which specifically provided that a Registered Representative may not “Lend[] to or borrow[] from a client” and that forgery “. . . will lead to severe disciplinary action against the employee.”

The Securities Administrator found the individual committed unlawful practices by: (1) borrowing from a client when written supervisory procedures did not permit such loans; (2) using loan proceeds for purposes other than the intended purpose; (3) creating authorization letters that bore forged, cut-and-pasted signatures; and (4) making false statements under oath to the Office of Securities during the disciplinary proceeding. The Administrator revoked the securities licenses of the individual and two related entities.

The Maine Supreme Court affirmed, finding no bias on the part of the Administrator. It also found the penalties imposed were not excessive. Interestingly, the Court afforded little weight to the fact that the individual’s mother-in-law did not object to the conduct or seek sanctions, because he “impermissibly placed his own interests ahead of his client.” The Court found lying under oath and submitting false documents “substantial justification” for harsh sanctions.

 

North Atlantic Securities demonstrates that conduct by a broker-agent in contravention of written supervisory procedures will inevitably result in disciplinary action. Equally interesting is the severity of the sanctions even in the face of the victim’s sentiment. Clearly, a broker-agent’s engagement in a course of misconduct on more than one occasion, resort to forgery and deception to avoid responsibility are factors likely to result in harsh penalties.