The Securities and Exchange Commission (SEC) has overturned investment banker Frank Quattrone’s lifetime ban from the securities industry. This comes on the heels of a federal appeals court decision overturning his 2004 conviction on obstruction of justice charges. The SEC ruled that the National Association of Securities Dealers (NASD), a separate market regulator, had violated its own rules by barring Quattrone from the industry in November 2004.
These are welcome developments in restoring some fairness and justice to securities law. Quattrone was initially convicted of instructing employees to follow his company’s document destruction policies (a perfectly legal action). The conviction was overturned because the prosecution failed to show that Quattrone intended to obstruct an investigation, or that he knew of any investigation to obstruct. As with Martha Stewart and other recent cases, Quattrone was never charged with an underlying crime — only the vague and open-ended “obstruction.”
However, the New York Times notes that “He became a target for prosecutors who wanted to send Wall Street executives a message that they would aggressively pursue anyone whom they believed was trying to obstruct an investigation..” Quattrone’s alleged crime at the NASD was taking the Fifth Amendment rather than answer questions about IPO allocation practices while his criminal case was still pending.
After two failed prosecutions, the first resulting in a mistrial and the second in a reversal on appeal, a U.S. attorney is now considering whether to try Quattrone a third time.
