Appeals Court affirm SEC Finding that Broker Acted “Willfully” When Keeping Tax Liens Information from FINRA

The U.S. Court of Appeals for the Second Circuit says that the Securities and Exchange Commission did not abuse its discretion when it determined that broker Scott Mathis “willfully” withheld information from the Financial Industry Regulatory Authority about tax liens. Mathis had submitted a petition seeking for the court to review the SEC order. However, the court, denying the request, found that there was “substantial evidence” backing up the SEC’s findings that he did, in fact, hold back information in a willful manner.

Between 1985 and 2002, Mathis was a principal or broker at numerous financial firms. He had submitted three Form U-4 registrations with FINRA. It was after 1996 that the IRS put in five tax liens against him. The federal agency accused him of not paying his personal income taxes over a several-year period. Mathis is accused of not noting the liens in filings with FINRA even though he is purported to have known about them.

According to the court, in 2003 FINRA asked Mathis to explain why he didn’t reveal the liens. He told the SRO he wasn’t aware that they existed or that he had an obligation to note them down on his Form U-4. FINRA then began proceedings against the broker, ultimately holding that he acted “willfully” in failing to report the tax liens. He was suspended for three months and fined $10,000.

Mathis turned to the SEC for review of the matter. The Commission determined that the broker “voluntarily” lied on his filings with FINRA and it then proceeded to bar him from the industry.

Mathis went to the Second Circuit, contending that the 1934 Securities Exchange Act does not support the way the SEC interpreted “willful” in his case. He pressed his argument that a “willfulness” finding needed the determination that he knew he was violating a specific regulation or rule.

法院拒绝了他的论点，并发现，如果马蒂斯故意在申请中转交申请，以在Finra成员中注册，同时知道该表格持有实质性错误的信息，那么他将受到法定资格的丧失资格。法院指出了SEC的裁定，它说，这是因为Mathis没有指出国家证券年度认证的留置权。bob200体育此外，U-4表格包括提醒和警告，即必须使用新信息更新文件。直到Finra开始询问后，这些表格才进行了修订。

In rejecting Mathis’s challenge of the materiality of information regarding the tax liens, the court said it was not difficult to support the SEC’s determination that by leaving out the info about the tax liens, the broker had “significantly altered” the information available to FINRA, employers, regulators, and investors.

Shepherd Smith Edwards and Kantas, LTD, LLPis asecurities fraud law firmthat represents investors throughout the US.

2nd Cir. Affirms SEC’s Finding That Broker ‘Willfully’ Withheld IRS Lien Info From FINRA, BNA, February 14, 2012

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