SEC throws out Quattrone lifetime ban by NASD
By Jonathan Stempel
NEW YORK (Reuters) – The U.S. Securities and Exchange
Commission on Friday threw out a lifetime securities industry
ban by industry regulator NASD against former star investment
banker Frank Quattrone, four days after his 2004 criminal
conviction on obstruction and witness tampering charges was
In a 13-page decision, the SEC said the NASD “did not act
in accordance with its own rules” in issuing the ban in
November 2004, six months after Quattrone’s conviction.
The ban had resulted from what the NASD called Quattrone’s
“egregious” misconduct in refusing to testify in its probe into
his activities while he worked at Credit Suisse Group Inc.’s
Credit Suisse First Boston.
An NASD hearing panel in January 2004 had suspended
Quattrone for one year and fined him $30,000. The regulator
appealed to its 14-person National Adjudicatory Council, which
handed down the lifetime ban.
Quattrone’s criminal case had centered on an e-mail he
forwarded in December 2000, urging colleagues to “clean up
those files,” while Credit Suisse was facing probes into its
allocation of shares in hot initial public offerings.
In a statement, Jerome Falk, a lawyer for Quattrone, said
the SEC decision “corrects the NASD’s gross injustice.”
Quattrone had exercised his Fifth Amendment right against
self-incrimination in declining to testify before the NASD
while his criminal case was pending.
According to the SEC, the NASD erred in denying Quattrone a
chance to show why he was entitled to invoke that right, given
the involvement of the SEC, a federal agency, in the NASD
“Quattrone should have been allowed to present evidence to
support his claim that the requisite degree of coordination
between NASD and the Commission existed,” the SEC said.
The SEC said Quattrone did testify before the NASD in July
and October 2004, after his conviction.
Calls to the NASD were not immediately returned.
On Monday, a unanimous three-judge panel of the U.S. Second
Circuit Court of Appeals granted Quattrone a new trial, citing
erroneous jury instructions by trial judge Richard Owen. It
ordered that the case be assigned to a new judge.
Quattrone had been sentenced to 18 months in prison, but
remained free during his appeal. An earlier trial, which Owen
also presided over, had ended in a hung jury. Prosecutors have
not said if they plan to try Quattrone a third time.