Former star technology banker Frank Quattrone has asked the Securities and Exchange Commission to reverse a decision by an industry watchdog banning him from the profession for life.
Lawyers for Quattrone, who has appealed his May conviction for obstruction of justice, sent the SEC written arguments dated Monday saying the ban by the National Association of Securities Dealers, for refusing to answer its questions, was unconstitutional.
They said their client properly exercised his Fifth Amendment right against being compelled to testify while under the threat of criminal prosecution and that "fundamental principles of fairness and justice" require the ban be lifted.
In legal papers signed by lawyer Jerome Falk Jr., the lawyers argued that it was important to overturn the ban because they expect to win an appeal of Quattrone's conviction and his 18-month sentence.
If he loses, they noted, NASD rules automatically disqualify him from the industry for 10 years, and the NASD would seek to bar him for life.
The NASD also could resume a proceeding accusing him of violating their rules, including those pertaining to research independence, allegations Quattrone vehemently denies, the lawyers said.
"In the end, if Quattrone is found to have committed any substantive wrongs — either in the criminal case or in NASD's substantive disciplinary action — he will be harshly sanctioned," the lawyers said.
If he is ultimately found innocent in all criminal and civil proceedings, he will still be barred from the industry for life unless the SEC overturns the NASD ruling, the lawyers said.
"That would be a shocking outcome," Falk said in the legal papers of Quattrone's exercise of his Fifth Amendment rights. "Quattrone will have been barred for invoking that right — reluctantly, and on the advice of skilled counsel — in order to preserve his defense against criminal charges."
Falk noted that Quattrone could have asserted his Fifth Amendment rights against questioning by the SEC or other federal investigative agencies.
"While NASD is a nominally private entity with many genuinely private functions, it can no longer pretend that its federally mandated disciplinary function is non-governmental and thereby avoid honoring the Constitution," he wrote.
He added that the SEC "should no longer allow NASD to continue to force securities industry professionals to choose between their profession and their fundamental rights."
When the NASD's National Adjudicatory Council barred Mr. Quattrone from the securities industry last year, it wrote in its ruling: "The courts have consistently rejected the theory that NASD is generally a state actor based on its regulatory responsibilities, its cooperation with the SEC or criminal authorities, or any other basis."
Herb Perone, a spokesman for NASD, said: "The constitutional issue raise by Mr. Quattrone was very thoughtfully addressed in the National Adjudicatory Council decision last November, and we stand by that decision. We will respond to his legal arguments in the proper forum."
John Heine, an SEC spokesman, said he had no comment.