Notice of Disciplinary Action against Joseph Constantine Montein his capacity as the former CEO, and former co-founding
owner/control person and associated person of Quad Capital,LLC, a former Member Organization
To:Members, Member Organizations, Participants and Participant Organizations

From:

John C. Pickford, Enforcement Counsel, NASDAQ OMX PHLXSM

DATE:

November 23, 2015

Enforcement No. 2015-11
FINRA Matter No. 20100221850-01 (incl. 20110284443) 1
On November 20, 2015, the Business Conduct Committee (the “Committee”) issued adisciplinary decision against Joseph Constantine Monte (“Monte”) in his capacity as theformer Chief Executive Officer, and as a former co-founding owner, control person andassociated person of Quad Capital, LLC (“Quad Capital” or the “Firm”), a former member
organization of the NASDAQ OMX PHLX LLC (“PHLX” or the “Exchange”), prior to Monte’s
voluntary resignation from the Firm, effective March 21, 2011. In connection with aStatement of Charges issued in this action, Monte submitted an Offer of Settlement,
Stipulation of Facts and Consent to Sanctions (“Offer”). Solely to settle these proceedings,and without admitting or denying the charges, Monte consented to findings that during theperiod from December 1, 2009 to March 21, 2011 (the “Relevant Period”), he violated
Exchange Rules 748 and 707 by failing to ensure the Firm had adequate supervisory
procedures and controls reasonably designed to ensure compliance with Rule 105 ofRegulation M of the Securities Exchange Act of 1934 (“Rule 105”). Prior to his departurefrom the Firm, and pursuant to Exchange Rule 748, Monte was designated as the Firm’s
principal executive officer with overall authority and responsibility for supervision andcontrol at the Firm, including providing for appropriate written procedures of supervisory
and control. In such capacity, he was required to establish a system of follow-up andreview to determine whether any supervisory responsibilities he delegated were being
properly exercised, including those responsibilities he delegated to the Firm’s ChiefCompliance Officer.
The decision found, among other things, that during the Relevant Period, Monte failed toconduct sufficient supervisory oversight to ensure the Firm and its Chief Compliance Officer
did not misapply the bona fide purchase exception in Rule 105. Further, Monte providedinadequate supervisory oversight to ensure the Firm’s trading properly complied with theseparate accounts provision in Rule 105, from on or about May 20, 2010 (when the Firm
unsuccessfully sought to move to a separate account structure for Rule 105 purposes) until
his departure from the Firm. Additionally, Monte engaged in conduct that contributed to theFirm’s ineligibility to claim the separate accounts exception by enabling at least certain
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Concurrent Notices of Disciplinary Action in this Matter also separately have been posted concerning: (i) the Firm’sformer CCO, and (ii) Quad Capital, as well as three other former co-founding owners, control persons andassociated persons of the Firm.

traders to routinely share information about their trading strategies and positions and toview other traders’ positions. Further, Monte failed to conduct sufficient supervisory
oversight, both before and after the Firm sought to move to a separate account structure,
to ensure the Firm did not sell short stock during the restricted period and obtain related
offering stock, without otherwise qualifying for a Rule 105 exception. During the Relevant
Period, the Firm could not provide any documentary evidence of ongoing reviews forcompliance with Rule 105, beyond the provision of sporadically maintained offering sheetsthat generally only evidenced certain traders’ specified participation interest levels inparticular offerings; and the Firm’s written supervisory procedures lacked any express
supervisory reviews for compliance with Rule 105.
The Offer submitted by Monte was accepted by the Committee and was the basis of itsDecision. The Committee concurred in the sanctions consented to by Monte, and ordered
the imposition of the following sanctions: Monte is censured, fined $250,000 andsuspended from serving in a supervisory capacity with any member organization for aperiod of two months.
For more information, contact:•John C. Pickford, Assistant General Counsel, NASDAQ OMX PHLX, at +1 215 496 5273

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

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