(a) Preliminary note. This section governs applications to the Commission by certain persons, barred by Commission order from association with brokers, dealers, municipal securities dealers, government securities brokers, government securities dealers, investment advisers, investment companies or transfer agents, for consent to become so associated. Applications made pursuant to this section must show that the proposed association would be consistent with the public interest. In addition to the information specifically required by the section, applications should be supplemented, where appropriate, by written statements of individuals (other than the applicant) who are competent to attest to the applicant's character, employment performance, and other relevant information. Intentional misstatements or omissions of fact may constitute criminal violations of 18 U.S.C. 1001 et seq. and other provisions of law.
(1) The nature of the supervision that an applicant will receive or exercise as an associated person with a registered entity is an important matter bearing upon the public interest. In meeting the burden of showing that the proposed association is consistent with the public interest, the application and supporting documentation must demonstrate that the proposed supervision, procedures, or terms and conditions of employment are reasonably designed to prevent a recurrence of the conduct that led to imposition of the bar. As an associated person, the applicant will be limited to association in a specified capacity with a particular registered entity and may also be subject to specific terms and conditions.
(2) Normally, the applicant's burden of demonstrating that the proposed association is consistent with the public interest will be difficult to meet where the applicant is to be supervised by, or is to supervise, another barred individual. In addition, where an applicant wishes to become the sole proprietor of a registered entity and thus is seeking Commission consent notwithstanding an absence of supervision, the applicant's burden will be difficult to meet.
(3) In addition to the factors set forth in paragraph (d) of this section, the Commission will consider the nature of the findings that resulted in the bar when making its determination as to whether the proposed association is consistent with the public interest. In this regard, attention is directed to § 202.5(e) of the Commission's Rules on Informal and Other Procedures, 17 CFR 202.5(e). Among other things, § 202.5(e) sets forth the Commission's policy “not to permit a * * * respondent [in an administrative proceeding] to consent to * * * [an] order that imposes a sanction while denying the allegations in the * * * order for proceedings.” Consistent with the rationale underlying that policy, and in order to avoid the appearance that an application made pursuant to this section was granted on the basis of such denial, the Commission will not consider any application that attempts to reargue or collaterally attack the findings that resulted in the Commission's bar order.
(b) Scope of rule. Applications for Commission consent to associate, or to change the terms and conditions of association, with a registered broker, dealer, municipal securities dealer, government securities broker, government securities dealer, investment adviser, investment company or transfer agent may be made pursuant to this section where a Commission order bars the individual from association with a registered entity and:
(1) Such barred individual seeks to become associated with an entity that is not a member of a self-regulatory organization; or
(2) The order contains a proviso that application may be made to the Commission after a specified period of time.
(c) Form of application. Each application shall be supported by an affidavit, signed by the applicant, that addresses the factors set forth in paragraph (d) of this section. The application shall be filed pursuant to §§ 201.151, 152 and 153. Each application shall include as exhibits:
(1) A copy of the Commission order imposing the bar;
(2) An undertaking by the applicant to notify immediately the Commission in writing if any information submitted in support of the application becomes materially false or misleading while the application is pending;
(3) The following forms, as appropriate:
(i) A copy of a completed Form U-4, where the applicant's proposed association is with a broker-dealer or municipal securities dealer;
(ii) A copy of a completed Form MSD-4, where the applicant's proposed association is with a bank municipal securities dealer;
(iii) The information required by Form ADV, 17 CFR 279.1, with respect to the applicant, where the applicant's proposed association is with an investment adviser;
(iv) The information required by Form TA-1, 17 CFR 249b.100, with respect to the applicant, where the applicant's proposed association is with a transfer agent; and
(4) A written statement by the proposed employer that describes:
(i) The terms and conditions of employment and supervision to be exercised over such applicant and, where applicable, by such applicant;
(ii) The qualifications, experience, and disciplinary records of the proposed supervisor(s) of the applicant;
(iii) The compliance and disciplinary history, during the two years preceding the filing of the application, of the office in which the applicant will be employed; and
(iv) The names of any other associated persons in the same office who have previously been barred by the Commission, and whether they are to be supervised by the applicant.
(d) Required showing. The applicant shall make a showing satisfactory to the Commission that the proposed association would be consistent with the public interest.
(e) Factors to be addressed. The affidavit required by paragraph (b) of this section shall address each of the following:
(1) The time period since the imposition of the bar;
(2) Any restitution or similar action taken by the applicant to recompense any person injured by the misconduct that resulted in the bar;
(3) The applicant's compliance with the order imposing the bar;
(4) The applicant's employment during the period subsequent to imposition of the bar;
(5) The capacity or position in which the applicant proposes to be associated;
(6) The manner and extent of supervision to be exercised over such applicant and, where applicable, by such applicant;
(7) Any relevant courses, seminars, examinations or other actions completed by the applicant subsequent to imposition of the bar to prepare for his or her return to the securities business; and
(8) Any other information material to the application.
(f) Notification to applicant and written statement. In the event an adverse recommendation is proposed by the staff with respect to an application made pursuant to this section, the applicant shall be so advised and provided with a written statement of the reasons for such recommendation. The applicant shall then have 30 days to submit a written statement in response.
(g) Concurrent applications. The Commission will not consider any application submitted pursuant to this section if any other application for consent to associate concerning the same applicant is pending before any self-regulatory organization.
[47 FR 610, Jan. 6, 1982, as amended at 85 FR 86478, Dec. 30, 2020]