Initiated By
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Allegations
SEC ADMIN RELEASE 34-64502, MAY 16, 2011: THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION") DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS BE INSTITUTED PURSUANT TO SECTIONS 15(B), AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934 ("EXCHANGE ACT") AGAINST SALVATORE CARUSO ("CARUSO" OR "RESPONDENT").
THE COMMISSION FOUND THAT:
CARUSO CO-FOUNDED A BROKER DEALER REGISTERED WITH THE COMMISSION PURSUANT TO SECTION 15(B) OF THE EXCHANGE ACT IN 1998. CARUSO HAS SERVED AS ITS PRESIDENT AND CHIEF COMPLIANCE OFFICER, AMONG OTHER TITLES, AND AS A REGISTERED REPRESENTATIVE.
ON MARCH 24, 2009, COMMISSION STAFF WITH THE NEW YORK REGIONAL OFFICE'S BROKER DEALER INSPECTION PROGRAM ("BDIP STAFF") COMMENCED AN EXAMINATION OF CARUSO'S FIRM. IN CONNECTION WITH THE EXAMINATION, BDIP STAFF REQUESTED THAT CARUSO'S FIRM PROVIDE VARIOUS RECORDS, INCLUDING CERTAIN RECORDS CONCERNING LEGEND EMPLOYEES. CARUSO PRODUCED THE DOCUMENTS ON LEGEND'S BEHALF IN RESPONSE TO THE EXAMINATION STAFF'S REQUEST. THE RECORDS CARUSO PRODUCED DID NOT INCLUDE CERTAIN REQUESTED DOCUMENTS FOR ONE ASSOCIATED PERSON OF CARUSO' FIRM ("ASSOCIATED PERSON").
ON MAY 4, 2009, BDIP STAFF REQUESTED THE PERSONNEL FILE FOR THE ASSOCIATED PERSON. AFTER NOT RECEIVING ANY DOCUMENTS IN RESPONSE, BDIP STAFF REITERATED THIS REQUEST ON MULTIPLE OCCASIONS BETWEEN MAY 4 AND MAY 22, 2009.
ON MAY 26, 2009, CARUSO SENT THE ASSOCIATED PERSON AN ELECTRONIC MAIL MESSAGE IN WHICH HE WROTE:
I'M GOING THRU (SIC) MY EMPLOYEE FILES FOR THE SEC AUDIT AND REALIZED THAT I DON'T HAVE ALL OF THE OTHER EMPLOYMENT/REGISTRATION FORMS FOR YOU. I ONLY HAVE YOUR FORM U4. I HAVE ATTACHED THE FORMS THAT I NEED YOU TO COMPLETE, SIGN AND FAX BACK TO ME ASAP. PLEASE DATE THE FORMS 06-09-2008. IT'S VERY IMPORTANT.
ATTACHED TO THIS EMAIL MESSAGE WERE SEVEN DOCUMENTS RELATED TO THE ASSOCIATED PERSON'S RELATIONSHIP WITH CARUSO'S FIRM, INCLUDING HIS INDEPENDENT CONTRACTOR AGREEMENT, COMMISSION SCHEDULE, AND COMPLIANCE FORMS.
THE ASSOCIATED PERSON COMPLIED WITH CARUSO'S REQUEST. THE DATE THAT CARUSO DIRECTED THE ASSOCIATED PERSON TO USE WHEN SIGNING THE DOCUMENTS, JUNE 9, 2008, CORRESPONDED TO THE DATE THE ASSOCIATED PERSON BECAME A REGISTERED REPRESENTATIVE AT CARUSO'S FIRM.
ON JUNE 2, 2009, CARUSO PROVIDED THE ASSOCIATED PERSON'S PERSONNEL FILE, INCLUDING ALL THE DOCUMENTS THAT THE ASSOCIATED PERSON HAD SIGNED THE PREVIOUS WEEK, TO THE BDIP STAFF. CARUSO DID NOT DISCLOSE TO THE BDIP STAFF THE CIRCUMSTANCES SURROUNDING THE BACK-DATING OF THE DOCUMENTS.
CARUSO'S FIRM FAILED TO MAKE AND KEEP CURRENT, TRUE AND COMPLETE RECORDS OF ALL AGREEMENTS BETWEEN IT AND THE ASSOCIATED PERSON AND ALSO FAILED TO FURNISH PROMPTLY SUCH RECORDS WHEN REQUESTED TO DO SO BY THE BDIP STAFF.
CARUSO WILLFULLY AIDED AND ABETTED AND CAUSED VIOLATIONS OF SECTION 17(A) OF THE EXCHANGE ACT AND RULES 17A-3 AND 17A-4 THEREUNDER. SECTION 17(A) OF THE EXCHANGE ACT AND RULES 17A-3 AND 17A-4 THEREUNDER REQUIRE THAT BROKERS OR DEALERS MAKE AND KEEP CURRENT VARIOUS RECORDS RELATING TO ITS BUSINESS AND PRESERVE THOSE RECORDS FOR SPECIFIED PERIODS OF TIME.
Resolution
Order
Sanctions
Cease and Desist
Sanctions
Censure
Sanctions
Civil and Administrative Penalty(ies)/Fine(s)
Amount
$25,000.00
Broker Comment
IN ANTICIPATION OF THE INSTITUTION OF THE PROCEEDINGS, RESPONDENT SUBMITTED AN OFFER OF SETTLEMENT ("OFFERS"), WHICH THE COMMISSION HAS DETERMINED TO ACCEPT. SOLELY FOR THE PURPOSE OF THE PROCEEDINGS AND ANY OTHER PROCEEDINGS BROUGHT BY OR ON BEHALF OF THE COMMISSION, OR TO WHICH THE COMMISSION IS A PARTY, AND WITHOUT ADMITTING OR DENYING THE FINDINGS, EXCEPT AS TO THE COMMISSION'S JURISDICTION OVER HIM AND THE SUBJECT MATTER OF THE PROCEEDINGS, WHICH ARE ADMITTED, RESPONDENT CONSENTED TO THE ENTRY OF THE ORDER INSTITUTING ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTIONS 15(B) AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER ("ORDER"). THE COMMISSION FOUND THAT CARUSO WILLFULLY AIDED AND ABETTED AND CAUSED VIOLATIONS OF SECTION 17(A) OF THE EXCHANGE ACT AND RULES 17A-3 AND 17A-4 THEREUNDER. THE COMMISSION DEEMS IT APPROPRIATE, AND IN THE PUBLIC INTEREST TO IMPOSE THE SANCTIONS AGREED TO IN RESPONDENT CARUSO'S OFFER. PURSUANT TO SECTIONS 15(B) AND 21C OF THE EXCHANGE ACT, THE COMMISSION ORDERED THAT: A. RESPONDENT CARUSO CEASE AND DESIST FROM COMMITTING OR CAUSING ANY VIOLATIONS AND ANY FUTURE VIOLATIONS OF SECTION 17(A) OF THE EXCHANGE ACT AND RULES 17A-3 AND 17A-4 THEREUNDER; B. RESPONDENT CARUSO IS CENSURED. C. CARUSO SHALL PAY A CIVIL MONEY PENALTY OF $25,000 TO THE UNITED STATES TREASURY.