Court Upholds Sanctions on Investment Director

(CN) - A Colorado investment director was properly banned for life from overseeing securities brokers after his subordinates violated securities laws, the D.C. Circuit ruled.

Stephen Horning asked the court to review the Securities and Exchange Commission's ban, as well as its prohibition on Horning having any contact with securities brokers for the next year.

Horning created Rocky Mountain Securities and Investments in 1980, and by 2003, the firm had 5,500 customers. The SEC instituted the ban after a 2001 investigation showed that the firm failed to submit trade tickets for more than $800,000 in stock purchases.

The irregularities stretched back to the early history of the company, as Rocky Mountain's auditor warned about weaknesses in the company's internal controls.

Judge Garland ruled that Horning did not do enough to control the activities of head trader Judy Clarke and head of operations Leslie Andrade.

"Although he later testified that the conduct of Andrade and Clarke had been 'basically dishonest,'" Garland wrote, "he declined to fire them, fine them, or restrict their activities."

Horning argued that the SEC did not consider his good character traits and imposed sanctions that were unnecessarily broad.

"Each of these arguments is fundamentally flawed," Garland ruled. "Each fixates on a minor, discrete piece of the record while disregarding the larger context."

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