Notice, Pursuant to Exchange By-Law 18-2, of Disciplinary
Action Against Quad Capital, LLC, Member Organization
To:Members, Member Organizations, Participants and Participant Organizations

From:

John C. Pickford, Enforcement Counsel, NASDAQ OMX PHLXSM

DATE:December 29, 2011

FINRA Matter No. 20110288367
Enforcement No. 2011-09
On December 21, 2011, the Business Conduct Committee (the “Committee”) issued adisciplinary decision against Quad Capital, LLC (“Quad” or the “Firm”), a member
organization of the Exchange. In response to a Statement of Charges issued in thisaction, Quad submitted an Offer of Settlement, Stipulation of Facts and Consent toSanctions (“Offer”). Solely to settle this proceeding, and without admitting or denying thecharges, Quad consented to findings that during the period between May 1, 2010 and July
31, 2010 (the “Relevant Period”), it had violated Section 17 of the Securities Exchange Actof 1934, as amended (“Exchange Act”), Rules 17a-3, 17a-4(b)(7), and 17a-5 promulgatedunder the Exchange Act, and Exchange Rules 605, 703, 748(e)(1), 748(g), 757, 760, and761 by, among other things: (i) failing to keep accurate books and records; (ii) filing an
inaccurate Financial and Operational Combined Uniform Single Report with the Exchange;(iii) failing to preserve a written record to reflect its expense sharing arrangement with anaffiliated entity; (iv) failing to obtain Exchange pre-approval for a press release it had
published on the internet and a recruitment advertisement for proprietary traders it had
published on its website; (v) failing to provide evidence that an associated person of theFirm had attended its 2010 annual compliance meeting; (vi) failing to: (a) ensure, or
provide evidence that, an associated person of the Firm had attended the Firm’s 2010
anti-money laundering (“AML”) training program; and (b) conduct a timely independent
review of its AML Program; and (vii) failing to maintain accurate records of, or properly
dated, Insider Trading and Securities Fraud Enforcement Act of 1988 (“ITSFEA”) Accounts
Lists and/or brokerage account disclosures for several associated persons of the Firm.
The Firm also consented, without admitting or denying the charges, to findings by theCommittee that Quad had not adequately established, maintained and enforced written
supervisory procedures (“WSPs”), and a system for applying such procedures, that
resulted in supervisory deficiencies regarding: (i) the Firm’s Joint Back Officearrangements with its clearing firm and the minimum equity and other requirements towhich the Firm was required to adhere; (ii) the restriction on, and the requirement toprovide the Commission and the Exchange with, written notification regarding thewithdrawal of equity capital, advances, or loans; (iii) the requirement that financial
reports, such as the Annual Audit and FOCUS Reports, and all requests for extensions tofile such reports, be made through the WebFOCUS financial application; (iv) advertisingrequirements; (v) the requirement under Rule 17a-11(d) promulgated under theExchange Act to notify the Commission whenever it fails to make and keep current books

and records; (vi) the documentation and verification of attendance, and retention of aroster of attendees, at the Firm’s annual compliance meeting; (vii) the submission of theannual audit to SROs (PHLX) and the extensions of time to file the audit; and (viii) withrespect to its AML Program, procedures regarding: (a) notification to the Exchange ofchanges in the Firm’s business model; (b) amendments to its AML procedures; (c) thefiling of Currency Transaction Reports; and (d) the transmission and/or re-transmittal ofwire transfers.
Finally, the Firm also consented, without admitting or denying the charges, to findings bythe Committee that it had failed to comply, or enforce compliance with, the requirementsof its WSPs. Notably, Quad’s WSPs required that the Firm prepare and maintain amemorandum or inspection report evidencing its inspection of its branch office located inFlorida, including the participants in and date of such inspection. Quad had failed to doso.
Quad’s Offer was accepted by the Committee and was the basis of its Decision. TheCommittee found that Quad had violated Section 17 of the Exchange Act, Rules 17a-3,17a-4(b)(7), and 17a-5 promulgated under the Exchange Act, and Exchange Rules 605,703, 748(e)(1), 748(g), 757, 760, and 761, concurred in the sanctions consented to by
it, and ordered the imposition of the following sanctions:(i)a censure;(ii)

a $8,500 fine; and(iii)

an undertaking, within 60 days of the issuance of a Decision by theCommittee, to:(a) correct the deficiencies identified by FINRA’s Risk Oversight andOperational Regulation Department (“ROOR”) during the 2010
examination;(b) revise its WSPs to address the deficiencies identified by ROOR; and(c) submit to William Bunting, FINRA Financial Regulation Department,
1900 Market Street, Eighth Floor, Philadelphia, PA 19103, a signed,
dated letter providing the following:(1) a reference to this matter;(2) a representation that Respondent has revised its WSPs toaddress the deficiencies identified by ROOR;(3) the date the revised WSPs were implemented; and2

(4) a Corrective Action Statement detailing what specific actions
Respondent has taken to correct and prevent future recurrence ofthe deficiencies identified by ROOR during its examination ofRespondent.
For more information, contact:
John C. Pickford, Enforcement Counsel, NASDAQ OMX PHLX, at +1 215 496 5273

 Copyright 2009 The NASDAQ OMX Group, Inc. All Rights Reserved.

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