State Securities Regulator Heath Abshure Disputes Ethics Complaint by Stephens Inc.

by Gwen Moritz  on Monday, Dec. 2, 2013 12:00 am  

Heath Abshure, shown in a file photo from 2011, has been commissioner of the Arkansas Securities Department for six years. (Photo by Jason Burt)

“What they called retaliation is not retaliation,” Abshure said. “It’s a recognition that Stephens lied to me.”

Nor, he said, was there an agreement as to the maximum size of the fine at the end of the Aug. 8 meeting.

“We didn’t have an agreement. There was absolutely no agreement. So when I went back and looked, I said, No. 1, they lied to me — these aren’t the same facts as Morgan Keegan. And, two, we’re giving them a whale of a deal.”

Morgan Keegan, he said, had one rogue financial adviser who was selling the problematic ETFs in violation of written guidance provided by his supervisors. Stephens, he said, gave its advisers “absolutely nothing” to guide them in appropriate selling of the ETFs.

Eventually, Abshure said, Stephens established a written compliance policy and set up a computer program to enforce the policy. Unfortunately, he said, the program “didn’t work. And they knew it didn’t work. But rather than suspend [sales], they just kept going. These two are totally different.”

Although this email isn’t quoted in Stephens’ written complaint, the ASD provided Arkansas Business with a copy of Freydl’s Aug. 16 email that accompanied the proposed consent order. In it, Freydl explained why the commissioner had set the fine amount at $25,000:

“1. The Morgan Keegan order, which you referred to during our meeting, required Morgan Keegan to pay a fine of $15,000 and restitution of over $44,000.

“2. The Morgan Keegan order only covered the failure of Morgan Keegan to supervise one agent’s handling of one client’s account. The Stephens order is not as narrowly worded.

“Hopefully, the fine amount will not prevent this settlement. Nevertheless, the Staff cannot agree to a lesser amount. I look forward to discussing this matter further.”

Knight, however, said he couldn’t accept Freydl’s explanation for the larger fine at face value.

“I’m sorry, I just don’t believe that,” Knight told Arkansas Business. “I think it was retaliation, and I’ll always think it was retaliation.”

When Stephens resisted, Freydl began playing hardball, suggesting that the only alternative to a $25,000 settlement was a full-blown investigation of all sales of inverse and leveraged ETFs.



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