The SEC settled with Janney Montgomery Scott over charges that the Phila.-based broker-dealer failed to effectively prevent the misuse of material, nonpublic information.  Whether Janney failed to enforce its policies and procedures, or it failed to follow them as written, the firm created the risk that material, nonpublic information could be used for insider trading.

SEC Allegations in the Administrative Proceeding. For at least 4-1/2 years - January 2005 through July 2009 - the pols and procedures for Janney's Equity Capital Markets division, which encompassed its equity sales, trading, syndicate and research departments, were deficient in a number of ways.  Janney allegedly failed to adequately monitor trading in securities on its Watch List - i.e.,

Further allegations included:

• failed to maintain an adequate email “firewall” between investment bankers and research staff.

• failed to enforce pols and procedures prohibiting noncompliance personnel from chaperoning meetings between investment banking and research staff.

• failed to revise pols and procedures to address its use of analysts in multiple roles - e.g., helping bankers explore business opportunities and conferring with them on deals.

• failed to require its investment bankers to seek pre-clearance for personal trades.

• failed to enforce policy that all Janney employees receive approval to maintain outside brokerage accounts.

• failed to obtain annual questionnaires identifying employees with outside brokerage accounts.

• failed to review activity in such outside brokerage accounts.

Fines and Sanctions. In addition to agreeing to pay an $850K fine, Janney agreed to hire an independent compliance consultant to conduct a comprehensive review and make recommendations re: its policies, practices and procedures relating to Section 15(g) of the Exchange Act, including prevention of the misuse of material, nonpublic information.  The consultant will prepare written reports and certify in writing that Janney has established and continues to maintain policies, practices and procedures pursuant to Section 15(g) of the Exchange Act that are consistent with the findings of the Order. SEC Philadelphia Regional Office Staff Credits. Investigation conducted by Assistant Regional Director Colleen Lynch, Senior Counsel Lynn O’Connor, Investigator John Ryma. For further details, go to:   [SEC PR 11-144, 7/11/11]  and [SEC '34Act Release 64855, 7/11/11]