This week, after a long battle with the SEC, former American Stock Exchange chairman and chief executive Salvatore F. Sodano consented to SEC findings that he failed to supervise the exchange's oversight of its order-handling and record-keeping rules from 1999 through June 2004.
This week, after a long battle with the SEC, former American Stock Exchange chairman and chief executive Salvatore F. Sodano consented to SEC findings that he failed to supervise the exchange's oversight of its order-handling and record-keeping rules from 1999 through June 2004.
Mr. Sodano, 54, was not fined, nor did he admit to any wrongdoing.
The Securities and Exchange Commission case, which dates from March 2007, revealed a surprising oddity in securities law: The only punishment the SEC can bring against an allegedly wayward officer or director of a self-regulatory organization is removal from office or a censure.
What's more, as became apparent in the Sodano case, the SEC apparently can't take any action at all against a former SRO official.
In August 2007, an SEC administrative law judge ruled that the SEC had authority only over current SRO officials. “By omitting reference to former officers or directors, in comparison to wording in other parts of the securities laws, the intent of Congress is clear that [the relevant law] applies only to those who currently hold the position,” wrote the administrative judge, Robert G. Mahony.
The full commission later overruled that finding, and before the case was re-heard, Mr. Sodano settled.
The minimal risks for SRO officials contrasts sharply with the fines and suspensions that are routinely given to branch managers and compliance officials for failure to supervise, said Bill Singer, a securities lawyer with Stark & Stark, who's been following the case.
“For a registered representative, there's a 24-month window after you've left" the industry when SROs and the SEC still have jurisdiction, Mr. Singer added. “Why not the same for an SRO official?”
Mr. Singer said he was not aware of any proposal to change the law and ensure SRO officials can be punished.
An SEC spokesman did not respond to a request for comment today.
Mr. Sodano "is obviously happy to have this behind him," said his attorney, William Baker, a partner at Latham & Watkins LLP.
Mr. Sodano resigned as chief executive of the Amex in April 2005, and a year later was named dean of the Frank G. Zarb School of Business at Hofstra University in New York, where he remains.
