Massachusetts Seeks to Revoke BD Registration Before Substantive Hearing
The Massachusetts Securities Division has filed an administrative complaint to suspend and ultimately revoke the BD registration of a firm with alleged tied to Madoff for failing to adequately testify and produce documents. Several officers of the Respondent, according to the Complaint, invoked their 5th Amendment rights against self-incrimination and asked for more time to prepare adequate defenses including lack of jurisdiction. The Complaint cites the Massachusetts law which allows the suspension of registration “after notice and opportunity for a hearing.” The Securities Division argues that suspension/revocation of the BD before a substantive hearing is necessary because the failure to testify and produce documents has created a “regulatory blind spot” with respect to the BD’s activities and “leaves investors vulnerable and unprotected from any ongoing securities activities.”
OUR TAKE: The regulators view registration as a privilege, not a right, subject to their discretion. Although respondents have a right to prepare a defense and invoke their constitutional rights against self-incrimination to avoid criminal prosecution, such defenses may not help when responding to regulatory actions. It will be interesting to see whether the Massachusetts courts ultimately allow the Securities Division to revoke registration without any hearing.