The Boca Raton BOM for NYC-based Axiom Capital Management agreed to settle SEC charges that he failed reasonably to supervise an RR who, among other things, made unsuitable investment recommendations, engaged in unauthorized transactions and churned customer accounts.  David Siegel, 52, was barred from association in a supervisory capacity with any broker, dealer, or investment adviser, will pay nearly $26K in fines and disgorgement, and be subject to any other disgorgement or arbitration awards related to his actions.

    Axiom, based principally in New York, has been registered with the SEC since June 1990 as a BD, and as an IA from June 2004 through October 2006.  Gary Gross, 57, of Boca Raton, FL, was the RR who supposedly committed the sales violations. 

    Chronology of the Problems.   Axiom hired Gross in December 2002 and established its first branch office in Boca Raton, FL, mainly for Gross’ use as an Axiom RR.  Gross, Siegel, and a sales assistant ultimately comprised the office staff.  In May 2003, Axiom hired Siegel to manage its Boca office and supervise Gross.  During the relevant period, Siegel’s compensation came from commissions he generated from his own customers and a 2% override he received of the branch office’s net commissions.

• Due to customer complaints about Gross from his work at previous firms, the State of Florida required, among other things, that Axiom place Gross on strict supervision - he remained subject to strict supervision until his termination in January 2007.
• From early 2004 through at least September 2006, Gross implemented several abusive sales practices, that included:  (i) unauthorized trading for customers;  (ii) churning customer investments;  and, (iii) making unsuitable investment recommendations to customers.
• From early 2005 through at least April 2006, Gross sold millions of dollars worth of private placements and private issuances of public entities - “PIPEs” - which were unsuitable recommendations for a portion of Gross’ customers, who were elderly, retired with limited annual income, and risk-averse.  Gross never disclosed the substantial risks - e.g., illiquid nature of investments in start-up ventures - and, instead, described the private placements as riskless investments offered by high-quality companies. 
  
• As Gross’ direct supervisor, Siegel allegedly failed to follow both Axiom’s WSP's and an internal memo entitled “Heightened Supervision of Gary Gross.”  Specific charges included failures: 

• to reasonably monitor RR's orders for unauthorized transactions; 
  
• to ensure that RR's customers’ margin use was suitable;
• to review RR's customers’ PP transactions and subsequent investments for suitability.