Jon G. Symon (Symon) was the president and owner of Braveheart, LLC (BLLC), which applied for NASD membership in July 1997. BLLC's application proposed Symon as its General Securities Principal (GSP) and Financial and Operations Principal (FINOP). Previously, Symon was registered in both capacities at CKS Securities, Inc. (BD1) but left that firm in August 1994.

From November 1994 through July 1995 Symon became associated with D.E. Frye & Company, Inc. (BD2). However, BD2 only submitted paperwork to register Symon as a General Securities Representative (RR). BD2 did not "transfer" Symon's GSP or FINOP registrations from BD1. Consequently, Symon was not registered as a GSP or FINOP upon his termination from BD1 in August 1994.

BLLC APPLIES FOR NASD MEMBERSHIP

Upon reviewing BLLC's application for NASD membership, the NASD Staff discovered that Symon, the firm's proposed GSP and FINOP, had not been registered in those capacities for nearly three years.

Consequently, under Rule 1021(c) the Staff found that Symon's GSP and FINOP registrations had lapsed effective August 1996. Accordingly, the NASD terminated BLLC's application because the firm lacked a qualified principal. On September 25, 1997, Symon requested a waiver of the examinations pursuant to NASD Rule 1021: (e).

Symon claimed that BD2 had mistakenly failed to transfer his GSP and FINOP registrations from BD1. In support of his contention, Symon attached a letter from BD2's Director of Compliance stating that the firm had inadvertently failed to register Symon as a GSP and FINOP. The Staff then contacted BD2 and requested a statement acknowledging that Symon had actually functioned as a GSP and FINOP at BD2.

WAIVERS DENIED

On October 21, 1997, the Staff declined to grant Symon the requested examination waivers. Shortly thereafter, on November 13, 1997, the Staff informed Symon that BD2's explanation of an inadvertent failure to register conflicted with the registration documents Symon had actually submitted, which indicated that upon association with BD2 he would only function as an RR, and not as a GSP or FINOP. On November 18, 1997, Symon appealed the Staff's denial of waivers to the NASD's National Adjudicatory Council (NAC).

At the NAC hearing, the Staff introduced a letter from BD2 stating that Symon "was not assigned any supervisory functions during his affiliation . . .was never responsible for the preparation of . . . financial records or financial reporting requirements." The Staff also presented a new account form signed by Symon's supervisor at BD2 (apparently to demonstrate that Symon was not a GSP capable of signing such documents) and an organization chart showing that he was only functioning as a RR. The NAC affirmed the Staff's denial of the requested waivers. On May 22, 1998, Symon appealed to the SEC.

SEC APPEAL

Initially the NASD challenged the SEC's jurisdiction over Symon's appeal, arguing that the waiver denial did not result in a denial of association with the NASD and, thus, was not a final decision capable of appeal. Rejecting the NASD's position, the SEC stated that the denial of the waiver of examination effectively barred Symon from associating as a GSP or FINOP with any NASD member. Consequently, the SEC dismissed the NASD's contention that because Symon could still associate with any member as a RR, he was not denied association. The SEC pointedly disagreed, saying that "[a]llowing association in another capacity does not diminish the fact that Symon has been denied association as a FINOP or a principal."

WAIVER GUIDELINES

UNCONDITIONAL WAIVERS

The NASD occasionally grants an unconditional waiver, but usually limited to individuals

• with substantial industry experience who also have some equivalent qualification such as being a Chartered Financial Analyst or completing a similar rigorous professional program, or
• with significant experience at an industry regulator, or
• with public stature whose registrations lapsed.

The NASD, if it is to grant a waiver, is more apt to grant a conditionalone. For example, the RR examination might be waived but the GSP would be required, or an applicant would have to take continuing education courses. Normally conditional waivers are limited to applicants demonstrating prior, substantial investment-related experience or previous registration that lapsed (but the applicant remained in a securities-related field). A common situation in which conditional waivers are granted is to individuals entering into management of a member firm.