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00-3897Otto v. SEC

By: dmc-admin//June 18, 2001//

00-3897Otto v. SEC

By: dmc-admin//June 18, 2001//

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“[W]e need not decide the issue of whether the NASD is a state actor in this case because Otto admitted all of the facts necessary to establish his guilt, which dooms his due process arguments.”

“Given Otto’s admissions coupled with the incriminating documentation he sent throughout her investment, Otto’s claims that the proceedings were unfair and violated his due process rights must fail. Rule 2110 required Otto to ‘observe high standards of commercial honor and just and equitable principles of trade.’ Nothing in the record even remotely suggests that an error in the NASD proceedings infected the SEC’s review.”

“The sanction guidelines … are not rigid and mechanical and serve only as a starting point for determining the proper disciplinary action. In the Matter of Steven D. Goodman, 2001 WL 62607 (S.E.C.) at *5 (Jan. 26, 2001).

“Otto commingled Smith’s funds with his own for the sake of his own personal convenience and deprived her of the opportunity to invest those funds in a legitimate investment. Further, he concealed this use of funds from Smith. Although he did ultimately return the funds, he put her funds at risk for more than two years. When Smith asked Otto to return her money, he continued to lie to her, attempted to convince her to leave her money invested in the fictitious WBC account, and only returned her money after six months. Given the ongoing deception in the face of a request for the return of her funds and Otto’s refusal to accept responsibility for his misuse of Smith’s funds, we agree with the SEC’s decision to approve the NASD’s imposition of sanctions.”

Affirmed.

On Petition for Review of an Order of the Securities and Exchange Commission, Coffey, J.

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