Finra critic John Busacca has lost a court appeal of a disciplinary case that the regulator brought against him in 2006.
The 11th U.S. Circuit Court of Appeals yesterday upheld a finding by a district committee of the
Financial Industry Regulatory Authority Inc. that Mr. Busacca, as president of North American Clearing Inc., had failed to supervise the firm's compliance officer and respond to known operational problems.
Finra had fined Mr. Busacca $30,000 and gave him a six-month suspension from serving as a securities principal.
Mr. Busacca also lost earlier appeals to Finra's National Adjudicatory Council and the Securities and Exchange Commission.
In upholding the sanctions, the court said “the SEC appropriately gave significant weight to Busacca's failures to ensure that North American's chief compliance officer was properly registered and to adequately respond to known operational problems at the firm, which were not only numerous and protracted, but placed the security of customer accounts in jeopardy.”
“It's a big fine basically for failure to supervise [a] software conversion” that was done prior to his joining North American, said Mr. Busacca, who now runs the Broker Dealer Exchange LLC, a business broker.
He said he is considering whether to pay the fine, but has no plans to get registered again.
Finra spokeswoman Michelle Ong declined to comment.
Mr. Busacca disputed the evidence Finra used in the case, and claimed he was denied due process in not having access to records from North American. He also argued that the case was brought in retaliation for his role in backing dissident candidates for Finra district committees.
“[Mr.] Busacca has not presented any evidence that Finra's prosecution was based on a constitutionally impermissible motive, rather than the numerous customer complaints and operational violations uncovered during its investigation of North American,” the appeals court decision said.
Mr. Busacca said in an interview that the complaints came from one correspondent firm of North American that was upset with the operational glitches.
In a separate case, the founder of North American Clearing, Richard Goble, was found guilty by a federal judge last April of SEC charges that he had engaged in an improper customer reserve transaction in 2008, as part of an attempt to keep North American open.
Mr. Goble has appealed that ruling.
Mr. Busacca and Mr. Goble formerly ran a group called the Financial Industry Association, which fielded dissident candidates for the Finra board and committees. They were also outspoken opponents of the 2007 merger between NASD and the regulatory unit of the
New York Stock Exchange that created Finra.
