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Asset Theft at NASD BD?

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Aug 7, 2006 4:13 am

CEO & slightly over 50% owner of ABC, an NASD BD & parent company, moves software, hardware and other assets plus employees to another company XYZ he controls.  Value of assets "diverted" between $1.0 to 2.0 million.

He never got permission from shareholders or board members of ABC.  What laws did he violate?  Trade secrets too with software? Should the SEC and NASD be contacted?  Outside auditors?

He is trying to swap the assets back and is saying no harm no foul. He took more stock in the "transaction" to return the assets.  All done without any permission.  Outside counsel & former senior SEC attorney is backing the CEO's insane behavior???  

Aug 7, 2006 4:26 am

It seems to me that this  question would be appropriate addressed by hiring an attorney and discussing ALL the specific facts of the case, not by posting it on an  internet bulletin board…just my 2 cents…<!–
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Aug 8, 2006 3:06 am

Who made you the web cop? 

Aug 8, 2006 3:15 am


Who made you the web cop? 


ha.........self deputized, like all the others.

Aug 25, 2006 10:55 pm


Oddly, joedabrkr gave you very sound advice.


shocked speechless

Aug 26, 2006 2:45 am


Who made you the web cop? 


Hey Fred?  You there?

Good…BITE ME!!!
Aug 26, 2006 2:48 am


Seems that the actions you describe should have been authorized in the minutes of the company — or by some Board vote.  Given your sparse fact pattern, it seems that there may have been some conflict of interest requiring an independent consideration of the transaction.  Initially, this could be a shareholder’s derivative suit in which shareholders would sue to recover damages (if you can prove any) to the company.  Unfortunately, your description of the events is that of a layperson — I have no idea what you mean by the colloquial term “moved” assets or how such activity constituted a diversion.  Similarly, there will be different legal considerations depending upon whether the entity is, in fact, a corporation or a limited liability company or a partnership.

Finally, you should be careful about filing complaints with regulators.  If this is a public company, your efforts could result in a publicized investigation that could pound the stock's price into oblivion --- hurting all shareholders.  If this is a non-public company, your efforts could result in fines on the BD (failing to maintain proper books and records, Net Capital, etc.) which will be paid out of the firm's assets OR could even cause the expulsion of the member firm.

Oddly, joedabrkr gave you very sound advice.


It would be the "sparse fact pattern" that led me to suggest he seek counsel from an expert in the first place.  He needs to speak at lenght and confidentially with someone who knows the right questions to ask.  Needs to get the details spelled out precisely.

He also needs to consider his next steps carefully, because he may only get one chance to fix it before things are messed up beyond repair.

So I encouraged him to see an attorney with the right expertise.

Why then, Bill, do you find it necessary to pay me the backhanded compliment "oddly joe gave you some good advice"?  What's up with that?
Aug 26, 2006 6:17 am

Joe, don't you know you're not allowed to post in this section without a law degree?!!


Aug 26, 2006 12:57 pm

Fred, the NASD has an anonymous snitch line if you're concerned about this. I can get the number for you. Would snitch from a pay phone or else use phone card and call from a friend's house (no trace that way as to WHO you are).

You can also have send them a letter with NO return address or name (type it and don't do it from work or on a work laptop/pc) about this situation.