The Securities and Exchange Commission says that it will not grant Sky Capital LLC’s request that the agency review the NASD’s action against the firm. The commission says it lacks the proper jurisdiction.
Sky Capital became an NASD member in 2002 following initial denials by the NASD and appeals made to its National Adjudicatory Council. Sky Capital says staff members at the NASD used several delay tactics during the application process and were prejudiced against the firm’s CEO because he had problems in the past with both substance abuse and regulatory issues.
Sky Capital also says that NASD got in the way of plans to acquire assets belonging to The Thornwater Company, LLP. It says that NASD did this by placing restrictions on Thornwater and then later lifting those restrictions. And while it approved another Sky Capital acquisition-this time of a broker-dealer in Florida-it did so only after a significant delay.
Sky Capital says that over a three-year period, NASD examined the firm and its employees eight different times. One exam led to a “letter of caution” from NASD, as well as a “Minor Rule Violation” letter directed at Sky Capital’s CEO.
Four of the exams were completed without any action. One exam led to a settlement and two fines were paid. The last two exams are still ongoing, although the NASD hasn’t filed any complaints against Sky Capital. Sky Capital says it has complained to NASD’s Office of the Ombudsman regarding the “inappropriate treatment of its membership application and harassment through the examination process” but that no one seems to be listening.
Sky Capital says the actions by NASD’s staff violate the 1934 Securities Exchange Act’s fair process requirements and the constitutional requirements of due process. Also, Sky Capital says that NASD lacks an internal procedure for dealing with member complaints about the staff and that this could be considered a lack or denial of service, as well as a violation of NASD rules and the 1996 SEC report under the 1934 Act Section 21(a).
The SEC, however, says that Sky Capital agreed to the “letter of caution, the settlement reached following one exam, and the Minor Rule Violation Letter. It also says that Sky Capital did not satisfy any other jurisdictional requirements that would allow the SEC to intervene.
Shepherd Smith and Edwards is a securities litigation firm that is committed to helping investors who have lost money because of the wrongful actions of members of the securities industry. We continue to have a very high success rate of helping or clients recoup their losses. Contact Shepherd Smith and Edwards today.
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