The Securities and Exchange Commission has dismissed its case against a lawyer who supervised a broker who was found guilty of securities fraud.
The SEC was evenly divided on whether allegations against Theodore W. Urban, former general counsel of Ferris Baker Watts Inc., a broker-dealer and registered investment advisor, had been established and dismissed the case on appeal.
In October 2009, the SEC started administrative proceedings against Urban, alleging that FBW registered representative Stephen Glantz committed fraud and that Urban failed to supervise him.
The SEC claimed that Urban ignored or failed to adequately follow up on numerous red flags in connection with the training of various company registered representatives.
Chief Administrative Law Judge Brenda P. Murray on Sept. 8, 2010, found that Glantz engaged in securities laws violations and that Urban was his supervisor. However, she dismissed the SEC proceedings against Urban, claiming he should not be sanctioned under the Securities Exchange Act, and also found that he had not failed to reasonably exercise his role as supervisor.
"I find that the SEC has failed to prove the allegation in its order instituting administrative proceedings and that it is not in the public interest to impose the recommended sanctions on Urban,'' Murray said.
The SEC appealed the court's decision, arguing Murray had "departed from applicable precedent" in finding that Urban's supervision was "reasonable'' and that Urban had failed to respond, despite regularly receiving warnings about Gantz's behavior.
On Thursday, the SEC issued an "Order Dismissing Proceeding'' declaring the SEC was evenly divided over whether the SEC allegations had been established. "Accordingly, it is ordered that the proceeding instituted against Theodore W. Urban be, and it hereby is, dismissed," the order stated.