BrokeAndBroker: A Man for One NASD Season

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 An irreverent Wall Street Blogby Bill Singer  http://www.brokeandbroker.com/index.php?a=blog&id=348Timothy P. Pedregon, Jr. (Pedregon) worked as an examiner with the self-regulatory organization National Association of Securities Dealers, Inc. (NASD) from April 2003 until November 2004. According to an NASD Memorandum (Probationary Memo), Pedregon was placed on probation by NASD in June 2004 because:Your overly aggressive approach has been brought to your attention in the past by your supervisor, your mentor, and at least one other co-worker . . . . The impact of your behavior has been considerable. By engaging in inappropriate and unprofessional conduct you have negatively impacted NASD's image as a fair and objective regulator. In addition, your conduct on the examination in question has provided the firm with the opportunity to complain about its treatment by NASD, causing resources to be diverted from investigating the serious apparent violations detected during the examination, to investigating and responding to the firm's allegations. The Probationary Memo further noted that Pedregon had "used an obscene and derogatory term in reference to the firm [under examination] in the presence of firm employees," and that "at times during the course of the examination you conducted yourself in an overly aggressive manner."    Bill Singer's CommentFrankly, NASD's response does not strike me as appropriate or professional.  Pedregon had been given three "friendly" warnings by his supervisor, mentor, and co-worker during his first year on the job. Some would suggest that an immediate termination for cause was the proper reaction, or, at a minimum, at least a suspension. It seems to me that the probation would simply result in Pedregon seething, stewing, and waiting to get even with those NASD colleagues who ratted him out, and, eventually with NASD member firms that would once again come within his cross-hairs.  Complaints against regulatory staff by the regulated community are often dismissed as the disgruntled pettifoggery of malcontents; notwithstanding that the history of such allegations and their common themes have long raised legitimate concerns – albeit, concerns that the regulatory community chose to denigrate and deny. While regulators should be determinedly dogged in their investigations of misconduct, such zeal must remain within the bounds of propriety.  Bullies tend to pick on defenseless little guys.  By encouraging an atmosphere of overly aggressive regulation, regulators unfairly single out the small fry as easy prey, while the big fish are left alone. We have recently seen the legacy of such misguided regulation involving Madoff, Stanford, Bear Stearns, and the whole Too-Big-To-Fail Gang.   From Bad to Worse   Approximately five months after being placed on probation, for reasons not provided, Pedregon’s employment with NASD ended in November 2004, . Following the cessation of his NASD employment, Pedregon's was employed as a compliance officer at a FINRA member firm, which was his first and only registered role.  For several months in fall 2005, Pedregon conducted online conversations with a fourteen-year-old young woman whom he had not met in person. On November 9, 2005, he went to a hotel where he had arranged to meet the young woman. When he arrived, he was arrested by police officers who had been told about the intended meeting by the young woman's mother. The following day, he was discharged by the FINRA member firm where he had been employed as a compliance officer since November 2004.    A Note from Bill Singer  Some thirty years on Wall Street and this case ranks among the more bizarre and compelling stories I have come across.  All compliance/legal/regulatory professionals should familiarize themselves with Pedregon.  Moreover, members of the FINRA Dissident Community should recognize a number of troubling themes reflected here.  To read my extensive analysis of this matter -- through FINRA and ultimately to the SEC, please visit http://www.brokeandbroker.com/index.php?a=blog&id=348 

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