INITIAL DECISION RELEASE NO. 1388

ADMINISTRATIVE PROCEEDING

FILE NO. 3-18414

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

In the Matter of :

: INITIAL DECISION

EUGENE TERRACCIANO : October 22, 2019

APPEARANCES: Nicholas Margida and Daniel J. Maher for the

Division of Enforcement, Securities and Exchange Commission

Gregg J. Breitbart of Kaufman Dolowich & Voluck LLP, for

Respondent Eugene Terracciano

BEFORE: Carol Fox Foelak, Administrative Law Judge

SUMMARY

This Initial Decision (ID) suspends Respondent Eugene Terracciano from the securities 

industry for twelve months.

I. INTRODUCTION

A. Procedural Background

The Securities and Exchange Commission instituted this proceeding with an Order 

Instituting Proceedings on March 28, 2018, pursuant to Sections 15(b) and 21C of the Securities 

Exchange Act of 1934, 203(f) of the Investment Advisers Act of 1940, and 9(b) of the 

Investment Company Act of 1940. On July 6, 2018, pursuant to Terracciano’s offer of 

settlement, the Commission made various findings of fact and conclusions of law, imposed a 

cease-and-desist order and civil money penalty, and ordered additional proceedings to determine 

what, if any, “remedial action is appropriate in the public interest.” Eugene Terracciano, 

Exchange Act Release No. 83604, 2018 SEC LEXIS 1663, at *20 (Settlement Order). The 

procedures for the additional proceedings were set with the agreement of the parties. Eugene 

Terracciano, Admin. Proc. Release Nos. 6139, 2018 SEC LEXIS 2733 (A.L.J. Oct. 3, 2018); 

6343, 2018 SEC LEXIS 3261 (Nov. 19, 2018); 6458, 2019 SEC LEXIS 178 (A.L.J. Feb. 14, 

2019). Accordingly, the Division of Enforcement filed a motion for sanctions, Respondent filed an 

opposition, and the Division filed a reply. A hearing session, at which Respondent testified, 
2

exhibits were admitted into evidence, and the parties presented oral arguments, was held on March 

26, 2019.

1

 

The findings and conclusions in this ID are based on the record. Official notice pursuant 

to 17 C.F.R. § 201.323 is taken of the Commission’s public official records and of Financial 

Industry Regulatory Authority, Inc. (FINRA), records as well. See Joseph S. Amundsen, 

Exchange Act Release No. 69406, 2013 SEC LEXIS 1148, at *1 n.1 (Apr. 18, 2013), pet. denied, 

575 F. App’x 1 (D.C. Cir. 2014). Preponderance of the evidence was applied as the standard of 

proof. See Steadman v. SEC, 450 U.S. 91, 97-104 (1981). All arguments and proposed findings 

and conclusions that are inconsistent with this ID were considered and rejected.

B. Allegations and Arguments of the Parties

The Division argues that Terracciano should be barred from the securities industry with 

the right to reapply after two years. Terracciano urges that a lesser sanction, such as a 

supervisory suspension in the range of twelve months, would be more appropriate in the public 

interest. 

II. FINDINGS OF FACT 

For purposes of this ID and pursuant to the offer of settlement, the findings and facts set 

forth in the Settlement Order are deemed true and incorporated herein. As detailed in the Settlement 

Order, the proceeding involves anti-money laundering (AML) failures at Aegis Capital Corporation, 

a FINRA registered broker dealer and Commission registered investment adviser, by Terracciano, 

who was the firm’s AML Compliance Officer (AML CO) from September 2013 to approximately 

September 2015. Despite red flags and even despite alerts from Aegis’s clearing firm, Aegis failed 

to file Suspicious Activity Reports (SARs), as required by 31 C.F.R. § 1023.320, on hundreds of 

suspicious transactions during that period. At most, after being alerted by the clearing firm, 

Terracciano closed customer accounts after allowing their high-volume questionable transactions in 

low-priced securities to settle and after becoming aware that no one at Aegis was flagging such 

transactions despite their raising red flags spelled out in Aegis’s written supervisory procedures.

2

 

1 Citations to the transcript are noted as “Tr. __.” Citations to exhibits offered by the Division

and Respondent are noted as “Div. Ex. __” and “Resp. Ex. __,” respectively. 

2 The Settlement Order, 2018 SEC LEXIS 1663, at *708, noted that the written supervisory 

procedures specified these red flags:

i. There is a sudden spike in investor demand for, coupled with a rising price in, a 

thinly-traded or low-priced security; 

ii. The issuer has been through several recent name changes, business 

combinations or recapitalizations, or the company’s officers are also officers of 

numerous similar companies; 

iii. The issuer’s SEC filings are not current, are incomplete, or [are] nonexistent; 
3

Terracciano was employed in the securities industry in a capacity requiring FINRA (or 

predecessor) registration starting in 1988. Resp. Ex. 1; Eugene William Terracciano BrokerCheck 

Report, available at http://brokercheck.finra.org (last visited Oct. 11, 2019). His first 

compliance-related position started in 1995. Tr. 19; Resp. Ex. 1; Terracciano BrokerCheck 

Report. His last such employment was with Merrill Lynch, Pierce, Fenner & Smith, with which 

he was registered from November 2015 to January 2017. Tr. 41-45; Resp. Ex. 1; Terracciano 

BrokerCheck Report. He was let go by Merrill as a result of the investigation that led to this 

proceeding. Tr. 42-45. He has been unemployed since January 2017. Tr. 17, 50. Since then, he 

has sought, fruitlessly, employment in the securities industry. Tr. 46-47. None of the positions 

for which he applied related to AML compliance. Tr. 46. He realizes that if he were barred from 

the securities industry, even with a right to reapply after a specific time, his career in the 

securities industry would be over, due to the disincentive to any firm to sponsor him for reregistration.3

 Tr. 49. If he were suspended for a fixed period, he would attempt to reenter the 

industry as a compliance officer. Tr. 50. 

Terracciano initially joined Aegis as a director of compliance; when he was interviewed 

for the position, there was no mention of AML responsibilities. Tr. 22-23. Soon after his arrival 

at Aegis, he was asked by the Chief Compliance Officer to be AML CO, which he was reluctant 

to accept. Tr. 23-24. Eventually he yielded to the importunity of the Chief Compliance Officer, 

 

iv. The customer appears to be acting as an agent for an undisclosed principal, but 

declines or is reluctant, without legitimate commercial reasons, to provide 

information or is otherwise evasive regarding that person or entity; 

v. The customer’s account has wire transfers that have no apparent business 

purpose to or from a country identified as a money laundering risk or a bank 

secrecy haven; and 

vi. The customer, for no apparent reason or in conjunction with other “red flags,” 

engages in transactions involving certain types of securities, such as penny stocks 

. . . which although legitimate, have been used in connection with fraudulent 

schemes and money laundering activity. 

3 The Commission has stated that when it “issues an order pursuant to an administrative 

proceeding which specifically provides that an application for re-entry may be made after a 

certain time, the applicant may apply directly to the Commission . . . [and] the Commission upon

a proper showing will generally act favorably upon the application.” Applications for Relief 

from Disqualification, Exchange Act Release No. 11267, 1975 SEC LEXIS 2166, at *4-5 (Feb. 

26, 1975); see also 17 C.F.R. §§ 201.193(a)(2), 200.30-4(a)(5). The application must include 

supporting exhibits, including a written statement by the applicant’s proposed employer with 

descriptions of the compliance and disciplinary history of the office and plan for supervising the 

applicant. 17 C.F.R. § 201.193(b)(4). Commission decisions describe the conditions in granting 

or denying such applications. See, e.g,, Brett Thomas Graham, Exchange Act Release No. 

84526, 2018 SEC LEXIS 3056 (Nov. 2, 2018); Michael L. Silver, Advisers Act Release No. 

4691, 2017 SEC LEXIS 1246 (Apr. 26, 2017); Matthew D. Sample, Exchange Act Release No. 

75893, 2015 SEC LEXIS 3793 (Sept. 10, 2015).
4

who promised support and training, which never materialized. Tr. 24-26, 31-32, 35-36. 

Terracciano knew that low-price securities, such as those for which SARs should have been 

filed, might be used in questionable ways. Tr. 53. Terracciano now realizes that actions that he 

thought sufficient at the time – closing accounts to stop the activity – were insufficient and not a 

substitute for filing SARs. Tr. 40. He would not now seek or accept a position with AML 

reporting responsibilities. Tr. 50. In view of the consequences that he experienced from 

unwillingly accepting the AML responsibilities at Aegis, his representation that he would not do 

so again is credible.

III. VIOLATIONS

As stated in the Settlement Order, Terracciano willfully aided and abetted and caused 

violations by Aegis of Section 17(a) of the Exchange Act and Rule 17a-8 thereunder. Rule 17a-8 

requires broker-dealers to comply with the reporting, recordkeeping, and record retention 

requirements of the Bank Secrecy Act, which include filing SARs, as required by 31 C.F.R. § 

1023.320. 17 C.F.R. § 240.17a-8. Failing to file SARs, as required by 31 C.F.R. § 1023.320, is a 

violation of Exchange Act 17(a) and Rule 17a-8.

IV. SANCTION

The Division requests that Terracciano be barred from the securities industry with the 

right to reapply after two years, while Terracciano urges a lesser sanction, such as a twelvemonth supervisory suspension. A collateral suspension for a period of twelve months will be 

ordered.

4

A. Sanction Considerations

The Commission determines sanctions pursuant to a public interest standard. See 15 

U.S.C. §§ 78o(b)(4)(E), 6(A)(i); 80a-9(b)(3); 80b-3(e)(6), (f). The Commission considers 

factors including:

the egregiousness of the defendant’s actions, the isolated or recurrent nature of the 

infraction, the degree of scienter involved, the sincerity of the defendant’s 

assurances against future violations, the defendant’s recognition of the wrongful 

nature of his conduct, and the likelihood that the defendant’s occupation will 

present opportunities for future violations.

 

4 The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which became 

effective on July 22, 2010, provided collateral bars in each of the several statutes regulating 

different aspects of the securities industry. The conduct that led to the case against Respondents 

occurred after July 22, 2010. See Bartko v. SEC, 845 F.3d 1217 (D.C. Cir. 2017) (holding that a 

collateral bar cannot be imposed when the violative conduct on which a follow-on proceeding 

was based ended before the July 22, 2010, effective date of the Dodd-Frank Act). The same 

reasoning applies to suspensions. 
5

Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir. 1979) (quoting SEC v. Blatt, 583 F.2d 1325, 

1334 n.29 (5th Cir. 1978)), aff’d on other grounds, 450 U.S. 91 (1981). The Commission also 

considers the age of the violation and the degree of harm to investors and the marketplace 

resulting from the violation. Marshall E. Melton, Advisers Act Release No. 2151, 2003 SEC 

LEXIS 1767, at *5 (July 25, 2003). Additionally, the Commission considers the extent to which 

the sanction will have a deterrent effect. Schield Mgmt. Co., Exchange Act Release No. 53201, 

2006 SEC LEXIS 195, at *35 & n.46 (Jan. 31, 2006). 

B. Sanction

As shown by Terracciano’s consent to the Settlement Order as well as his testimony at 

the hearing, he has recognized the wrongful nature of his conduct. His conduct was recurrent 

over a period of two years. The egregiousness was somewhat mitigated by his eventually closing 

accounts that engaged in suspicious transactions. Scienter is not an element of violation of 

Exchange Act Section 17(a) and rules. However, Terracciano’s state of mind was at least

negligent, if not reckless. His most recent occupation as a compliance officer in the securities 

industry, if he were allowed to continue it in the future, would present opportunities for future 

violations. This factor is mitigated by his credible representation that he would not accept a 

position involving AML responsibilities. The violation is relatively recent, having ended four 

years ago. It is not possible to quantify the direct harm to the marketplace, but, as the 

Commission has often emphasized, the public interest determination extends beyond 

consideration of the particular investors affected by a respondent’s conduct to the public-at-large, 

the welfare of investors as a class, and standards of conduct in the securities business generally. 

See Christopher A. Lowry, Investment Company Act of 1940 Release No. 2052, 2002 SEC 

LEXIS 2346, at *20 (Aug. 30, 2002), aff’d, 340 F.3d 501 (8th Cir. 2003); Arthur Lipper Corp., 

Exchange Act Release No. 11773, 1975 SEC LEXIS 527, at *52 (Oct. 24, 1975). 5 Weighing 

these factors in conjunction with the sanctions ordered in the Settlement Order, the sanction 

requested by the Division is too severe, but a limited supervisory suspension would not suffice.

A limited supervisory suspension would permit Terracciano to work at a regulated entity 

under supervision and is insufficient as a sanction and as a deterrent. A “collateral” suspension 

from the industry is appropriate because record-keeping and reporting provisions apply in all 

elements of the securities industry, even if the violative conduct is limited to the professional 

capacity in which Terracciano was acting. See John W. Lawton, Advisers Act Release No. 3513, 

2012 SEC LEXIS 3855, at *42-43 (Dec. 13, 2012), vacated in part on other grounds, Advisers 

Act Release No. 4402, 2016 SEC LEXIS 1926 (May 27, 2016).

 

5 The violation did not involve fraud, for which a severe sanction is required because 

opportunities for dishonesty recur constantly in the securities business. See Vladimir Boris 

Bugarski, Exchange Act Release No. 66842, 2012 SEC LEXIS 1267, at *18 n.26 (Apr. 20, 

2012); Richard C. Spangler, Inc., Exchange Act Release No. 12104, 1976 SEC LEXIS 2418, at 

*34 (Feb. 12, 1976). 
6

V. RECORD CERTIFICATION

Pursuant to Rule 351(b) of the Commission’s Rules of Practice, 17 C.F.R. § 201.351(b), 

it is certified that the record includes the items set forth in the record index issued by the 

Secretary of the Commission on May 8, 2019.

VI. ORDER

IT IS ORDERED that, pursuant to Sections 15(b) of the Exchange Act and 203(f) of the 

Advisers Act, EUGENE TERRACCIANO IS SUSPENDED for a period of twelve months from 

associating with any broker, dealer, investment adviser, municipal securities dealer, municipal 

advisor, transfer agent, or nationally recognized statistical rating organization and from 

participating in an offering of penny stock.6

IT IS FURTHER ORDERED that, pursuant to Section 9(b) of the Investment Company 

Act OF 1940, EUGENE TERRACCIANO IS PROHIBITED for a period of twelve months from

serving or acting as an employee, officer, director, member of an advisory board, investment 

adviser or depositor of, or principal underwriter for, a registered investment company or 

affiliated person of such investment adviser, depositor, or principal underwriter.

This Initial Decision shall become effective in accordance with and subject to the 

provisions of Rule 360 of the Commission’s Rules of Practice, 17 C.F.R. § 201.360. Pursuant to 

that Rule, a party may file a petition for review of this Initial Decision within twenty-one days 

after service of the Initial Decision. A party may also file a motion to correct a manifest error of 

fact within ten days of the Initial Decision, pursuant to Rule 111(h) of the Commission’s Rules 

of Practice, 17 C.F.R. § 201.111(h). If a motion to correct a manifest error of fact is filed by a 

party, then a party shall have twenty-one days to file a petition for review from the date of the 

undersigned’s order resolving such motion to correct a manifest error of fact. The Initial 

Decision will not become final until the Commission enters an order of finality. The 

Commission will enter an order of finality unless a party files a petition for review or a motion to 

correct a manifest error of fact or the Commission determines on its own initiative to review the 

Initial Decision as to a party. If any of these events occur, the Initial Decision shall not become 

final as to that party.

____________________________

Carol Fox Foelak

Administrative Law Judge

 

6 Thus, Terracciano will be suspended from acting as promoter, finder, consultant, or agent; or 

otherwise engaging in activities with a broker, dealer, or issuer for purposes of the issuance or

trading in any penny stock, or inducing or attempting to induce the purchase or sale of any penny 

stock, pursuant to Exchange Act Section 15(b)(6)(A), (C).