SEC Calls ‘Strike 3’ Against Veteran Chief Compliance Officer
The Securities and Exchange Commission has rejected a veteran compliance official’s appeal of findings that he willfully failed to disclose three federal tax liens on his Form U4 updates and annual firm compliance certifications.Allen B. Holeman, a 40-year industry veteran who is chief compliance officer of David Lerner Associates and a former CCO of Oppenheimer & Co., argued that Finra’s National Adjudicatory Council had no evidence to support its findings in May 2018 that he was “specious” and “illogical” in claiming that he was unaware of the liens. (He had also argued that the liens did not need to be disclosed because they were made against his properties rather than against him personally.)
Wednesday’s decision upholding the NAC’s finding was the third time Holeman failed to convince regulators of his contention that he was unaware of the liens until well after he was required to disclose them. Finra rules require registered persons to disclose tax liens within 30 days of notification.
In the latest instance, Holeman, 71, had asked the SEC to overturn the NAC’s four-month suspension and $20,000 fine as excessive and oppressive. The NAC made its findings after reviewing Holeman’s appeal of a 30-day suspension and $10,000 fine Finra enforcement officials imposed in May 2017. The industry-financed self-regulatory group had filed its enforcement action against him in June 2016.
On Wednesday, SEC Chairman Jay Clayton and the regulator’s four other commissioners ruled that the NAC’s escalated sanctions were “appropriately remedial.” They cast aside Holeman’s claims that they were based on wrongful conclusions and should be mitigated because he does not have customers, is not licensed to sell products and had no prior disciplinary history.
“Holeman has worked in the securities industry as a registered person and principal for forty years,” the SEC opinion said. “As a result, he must have been aware of the importance of accurate, current disclosures on Form U4 not only to his employer but also to firm customers and to the investing public…..[H]is violations harmed the investing public, his firm and regulators by denying them access to material information about his failure to pay his taxes and satisfy claims against him based on that failure. And, in any event, we have repeatedly held that a lack of customer harm is not mitigating.”
Holeman, who represented himself in the appeal to the SEC, said he was disappointed by the order.
“I disagree with the decision, and am exploring and considering my options,” he said on Friday.
He declined to elaborate, but lawyers said he could appeal the decision in federal court or, in a real long shot, ask the SEC to stay the sanctions so he could continue working.
Joseph Pickard, general counsel of Syosset, N.Y.-based David Lerner, did not return a request for comment on the decision or on who will lead the firm’s compliance office.
Finra fined David Lerner Associates’ eponymous founder $250,000 in 2012 and suspended him for making false claims to customers about returns on REITs. It also ordered the Long Island firm to restore $12 million to customers and to pay a $2.3 million fine for overpricing municipal and mortgage instruments.
Holeman joined David Lerner in November 2013. He previously served for a decade as Oppenheimer’s CCO, and also held senior compliance positions at E.F. Hutton, Bear Stearns and Tucker Anthony, according to his LinkedIn profile page.