NEXT may face cease-and-desist order

The SEC has filed a complaint that may lead to a cease-and-desist order for NEXT Financial Group.
The regulator is alleging the Houston-based firm violated Regulation S-P while it recruited registered representatives.
The complaint, issued Friday, lists 22 “facts” or instances when clients’ private information was mishandled, buttressing the SEC’s allegations of five potential violation of Regulation S-P.
The complaint states that NEXT “received nonpublic personal customer information from a recruit, only to have the recruit decide not to join NEXT.”
The firm did not destroy that information, according to the SEC, but it “was retained on the NEXT computer system.”
Also, until May 2006, the firm’s “database in which customer information was stored could be accessed by anyone at the NEXT home office,” according to the complaint.
NEXT, which opened in 1999, has about 700 affiliated registered representatives and was one of the fastest growing independent-contractor broker-dealers of recent years.
The complaint is the first step that will lead to a hearing by an SEC-appointed administrative judge.
Gordon D’Angelo, the Virginia Beach, Va.-based chairman and CEO of NEXT Financial Group Holding Co., would not comment about the specific allegation in the SEC complaint.
He did, however, defend the company’s position.
“In general, we feel that the SEC had not notified the industry about their concerns over Reg S-P,” he said this morning.
“I’m not arguing the letter of the law, but there’s no customer complaint, no corporate complaint,” he said.
“We haven’t decided our strategy yet, but we feel it’s important to defend the independent firms,” Mr. D’Angelo said.
Yesterday’s headline on this story, “NEXT hit with cease and desist order,” was incorrect. The Securities and Exchange Commission’s order was the first step, not a final order, in a potential cease-and-desist order concerning NEXT Financial’s alleged violation of Regulation S-P.

Related Topics: Securities and Exchange Commission