Articles By Topic
By Topic: In-House Counsel
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From Vol. 5 No.5 (Feb. 2, 2012)
Scope of Supervisory Liability of Senior Legal and Compliance Professionals at Hedge Fund Managers Remains Uncertain after SEC Dismissal of Urban Action
On January 26, 2012, the SEC issued an order (Order) dismissing an enforcement action it instituted in 2009 against Theodore W. Urban, the general counsel of brokerage and investment advisory firm Ferris, Baker Watts, Inc. (FBW). See “SEC Administrative Law Judge Holds that a Broker-Dealer’s General Counsel Could Be Held Liable as a Supervisor of a Financial Adviser Over Whom He Had No Actual Supervisory Authority,” The Hedge Fund Law Report, Vol. 3, No. 42 (Oct. 29, 2010). Many practitioners may celebrate the issuance of the Order because it nullifies the precedential value of a prior SEC administrative law judge decision, which appeared to expand the scope of supervisory duties and liability of senior in-house legal and compliance professionals. However, the impact of the Order on the supervisory liability for in-house legal and compliance professionals at hedge fund managers still remains uncertain. This article discusses the ALJ decision and the Order dismissing the proceedings against Urban as well as the implications of the Order for hedge fund managers.
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From Vol. 3 No.42 (Oct. 29, 2010)
SEC Administrative Law Judge Holds that a Broker-Dealer’s General Counsel Could Be Held Liable as a Supervisor of a Financial Adviser Over Whom He Had No Actual Supervisory Authority
On September 8, 2010, Securities and Exchange Commission (SEC) Administrative Law Judge (ALJ) Brenda P. Murray held that Theodore W. Urban, as former general counsel of brokerage firm Ferris, Baker Watts, Inc. (FBW), had the requisite degree of responsibility, ability or authority to affect the conduct of a rogue broker at the firm, Thomas Glantz, for purposes of Section 15(b) of the Securities Exchange Act of 1934 (Exchange Act), notwithstanding that Urban lacked any authority normally associated with such supervision. The ALJ found, however, that as Glantz’s “supervisor,” Urban had acted reasonably in following up on warning signs and in relying on other executives at FBW who actively lied to or kept information from him. As a result, it dismissed the case brought by the SEC’s Enforcement Division against him. The ALJ’s conclusion that Urban acted as Glantz’s supervisor for purposes of federal securities laws is important, as it could expose in-house counsel at broker-dealers and potentially at hedge fund managers to such supervisory liability or analogous liability. We discuss the background of the SEC’s administrative proceeding against Urban and the ALJ’s legal analysis.
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