The Securities and Exchange Commission is investigating a managing director at Stifel, an investment banking company, for failing to reasonably supervise a registered representative.
Jon Walker, a managing director at Stifel, is being investigated by the SEC, according to a disclosure on
The investigation was disclosed on Nov. 15, according to the site. The registered representative was associated with Alabama-based financial services firm Sterne, Agee & Leach Inc. in 2014 or 2015.
Walker was a senior managing director at Sterne, Agee & Leach Inc. from 2011 to 2015, according to his
While both Stifel and the SEC declined to comment, the disclosed investigation appears likely to be connected to Deborah Kelley, a broker who worked with Walker at Sterne, Agee and Stifel until her termination in 2015. Kelley
Walker was a senior managing director at Sterne Agee around the same time when Kelley was there as a managing director from 2012 to 2015. During that time, Kelley was
Walker would have been a managing director at the same time Kelley was providing bribes to Kang, lining up with the SEC’s investigation for failing to supervise a representative in 2014 or 2015.
Kelley along with Gregg Schonhorn, a broker for Memphis-based FTN Financial Securities Corp. at the time, and Kang pleaded guilty to the criminal charges. Kang was sentenced to 21 months in prison.
Kelley has been barred
The SEC has probably already conducted a Matter Under Inquiry or MUI, according to a securities lawyer who asked not to be identified. The lawyer is not involved in the case. An MUI means the SEC staff conducts a preliminary analysis to determine if federal securities laws were violated.
Since the investigation was posted on BrokerCheck it means that Walker disclosed the investigation on his Form U4, said Dave Sanchez, senior counsel at Norton Rose Fulbright US LLP. He is not directly involved with the case.
Form U4 is a required document from FINRA that requires broker-dealers, investment advisers or issuers to become formally registered and a part of that is disclosing investigations and/or pending actions.
Walker may have already been sent a Wells notice — a letter saying that the SEC plans to bring enforcement action. Walker may have sent in a response to the SEC in an effort to convince the SEC to not bring charges. The response to the SEC triggers a disclosure of the investigation, Sanchez said.
Disclosing an investigation per Form U4 also means that the SEC is close to the end of its investigation, he said.
“In response to the Wells notice, you can potentially convince the SEC not to recommend charges to the Commission, although the odds are more likely than not that they will,” Sanchez said.
The response to the Wells notice is the “last-ditch effort” to convince the SEC otherwise, Sanchez added.
The next step is up to the SEC staff. It has the option to not bring charges. The staff could decide to bring charges, though the commission could vote not to bring them. However, the commission generally takes the staff’s recommendation, Sanchez said.
FINRA may have been involved in initial findings and then kicked up the case to the SEC, said Sanchez, adding that it is unlikely that FINRA would bring separate charges at this point.
The SEC will make its decision to bring charges in the next few months, Sanchez said.
The securities lawyer who spoke on background also said FINRA may have been involved.
“There have been instances where the SEC starts an investigation and then turns it over to FINRA,” the securities lawyer said. “There are others where the SEC or FINRA starts an investigation and they may share the matter with the SEC and there could be a parallel investigation that takes over.”
The timing of the SEC’s investigation is unusual in connection with cases brought against Kang, Kelley and Schonhorn, said Kathleen Marcus, shareholder at Stradling law firm. She was not involved in the case.
“The timing is a bit unusual because of the maturity of the related investigation,” Marcus said. “It may because of the high-profile nature of the related investigations that this ancillary piece related to the failure to supervise is just being resolved now.”
The case against the trio was closed last week when a federal judge
Marcus said it was unclear why the SEC didn’t resolve its investigation with Walker at the same time as Kelley, Kang and Schonhorn.
The two brokers pleaded guilty to providing Kang with bribes of “at least $180,000” in various benefits between 2014 and 2016 including travel and entertainment in exchange for his influence in awarding fixed-income business to their firms. The trio has already paid hundreds of thousands of dollars in fines and restitution, and Kang was also forced to surrender a luxury watch valued at $17,000.
