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OFFICE OF SECURITIES
121 STATE HOUSE STATION
AUGUSTA, ME 04333
INTENT TO CENSURE
Nos. 00-027, 00-044
Pruco Securities Corporation ("Pruco") has
been licensed to do business in
Timothy E. Grant, Sr. ("Grant") is listed as
a respondent in both Notices for his role as a local sales representative in
From approximately July 1999 to April 2000, Grant sold
the investments to at least seventeen (17)
6. From approximately April 1988 to March 2000, Grant was also a licensed sales representative of Pruco and sold the investment contracts to Pruco clients apparently without Pruco's actual knowledge and through means designed to hide the activity from Pruco.
7. Pruco terminated Grant's employment in March 2000 upon learning of his unauthorized sales of investment contracts. In September 2001, the National Association of Securities Dealers permanently barred Grant from associating with any member firm in any capacity.
At all relevant times, Grant's designated Pruco branch
office was located in
9. Grant kept his Pruco client files in two file cabinets in a room in his home. He kept his files relating to the investment contracts in the same room, in a small container located next to the two file cabinets and visible to anyone entering the room.
10. According to Grant's sworn testimony, no supervisor, compliance officer, or other Pruco official ever visited Grant's home or inspected his customer files.
11. Pruco is a member of the National Association of Securities Dealers ("NASD"), a self-regulatory organization to which certain regulatory responsibilities have been delegated pursuant to the Securities Exchange Act of 1934.
12. NASD Rule 3010(c) requires members to undertake regular inspections of every "unregistered office," which is defined as a location where a member conducts securities business and which is neither designated as an office of supervisory jurisdiction nor registered as a branch office.
13. Grant's home meets the definition of an unregistered office because it was a location -- indeed the only location -- at which he regularly conducted securities business for Pruco.
14. Pruco's failure to inspect Grant's home and files violates NASD Rule 3010(c).
15. Pruco's failure to inspect Grant's home and files also violated the policies and procedures set forth in Pruco's own compliance manual, which at all relevant times required at least annual inspections of unregistered offices.
16. By failing to inspect Grant's home and files, Pruco failed to reasonably supervise Grant.
17. If Pruco had reasonably supervised Grant, it might have discovered Grant's involvement in selling unregistered securities to Pruco clients.
18. Pursuant to 32 M.R.S.A. § 10313(1)(J), the Securities Administrator may, after notice and opportunity for hearing, issue an order censuring a broker-dealer that has "failed reasonably to supervise sales representatives."
Pursuant to 32 M.R.S.A. § 10708(6), notice is hereby given that the Securities Administrator intends to issue an Order to Censure Broker-Dealer, pursuant to 32 M.R.S.A. §10313(1)(J), against respondent, for failing to reasonably supervise one of its sales representatives.
Pursuant to 32 M.R.S.A. § 10708 (2), interested parties have thirty (30) calendar days from the entry of this Notice of Intent to file a written request for a hearing.
Christine A. Bruenn
Bonnie E. Russell
Supervisor of Enforcement
Michael W. Atleson
(licensed in NY and MA, pending in ME)