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Lifetime Bar Affirmed for Failure to Supervise

Peter D. Fetzer
Foley & Lardner LLP - Milwaukee Office

Terry D. Nelson
Foley & Lardner LLP - Madison Office

June 6, 2014

Previously published on May 30, 2014

Carl M. Birkelbach, the founder and president of Birkelbach Investment Securities lost his appeal of a lifetime bar from the securities industry imposed by FINRA for failure to supervise over the trading activities of an associate at his firm. Primarily, Birkelbach based his appeal on the fact that the lifetime bar by FINRA was excessive.

A Seventh Circuit panel denied Birkelbach’s appeal in spite of Birkelbach’s arguments that FINRA’s bar was excessive which included a lifetime bar, six month suspension and $25,000 fine. The underlying conduct by the associate, who was directly supervised by Birkelbach, included trading without authorization in two customer accounts over a period of six years. During the period, FINRA ordered Birkelbach to place the associate under heightened supervision but he failed to do so. The conduct by the associate continued until 2008 when FINRA barred the associate for life from the industry and ordered him to pay disgorgement of nearly $600,000.

Birkelbach did not contest the charges of failure to supervise but argued that the lifetime bar was excessive as the punishment was not tailored to the offense. The panel disagreed citing that Birkelbach’s conduct was sufficiently egregious and that the sanction guidelines to the relevant rules contemplate a lifetime bar in all capacities in the industry.


The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

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