ATLANTA (January 31, 2000) – In a decision with important implications for future SEC cases, an administrative law judge has dismissed in full Securities and Exchange Commission charges against Kirk Montgomery, the former Chief Legal and Compliance Officer of FSC Securities Corporation, for failing to reasonably supervise a registered representative's sales of mutual funds to customers.
According to Peter J. Anderson, Sutherland Asbill & Brennan LLP partner and lead counsel for Montgomery, "The SEC Staff on more than one occasion said that this case would set the standard for failure to supervise cases involving chief compliance officers. Judge Foelak not only rejected the Staff's expansive view; she gave comfort to chief compliance officers that a system of supervision need not be flawless but only reasonable in light of available resources and personnel. You will get credit for trying." The case was well-publicized by the SEC, which had highlighted Montgomery in a campaign to name individual compliance personnel of independent contractor broker/dealer firms in supervision cases.
Montgomery, who was Chief Compliance Officer for FSC Corporation from 1991 to 1995, strived to keep FSC's supervisory system compliant with the increasingly strict expectations imposed on independent broker/dealers. Notwithstanding his efforts, the SEC charged Montgomery with a supervisory violation, based in large part upon Montgomery's role in FSC's compliance department.
In an order issued January 27, Administrative Law Judge Carol Fox Foelak of the Securities and Exchange Commission found that charges against Montgomery completely lacked a basis in law or in fact. The judge found for Mr. Montgomery in every respect, holding (1) that he did not have direct supervisory responsibility for the representative, (2) that the supervisory system he created was reasonable, and (3) that there was no securities violation. Charges against the registered representative also were dismissed.
Sutherland Asbill & Brennan LLP is a national law firm with offices in Atlanta, Austin, New York, Tallahassee and Washington, D.C, and has extensive experience in securities litigation.
For further information, contact Ashli Quesinberry.