William J. Gallagher

SECURITIES EXCHANGE ACT OF 1934
Rel. No. 47501 / March 14, 2003

Admin. Proc. File No. 3-10749

ORDER DISMISSING APPEAL OF ACTION TAKEN BY REGISTERED SECURITIES ASSOCIATION

On the basis of the Commission's opinion issued this day, it is

ORDERED that the appeal filed by William J. Gallagher be, and it hereby is, dismissed.

By the Commission.

Jonathan G. Katz
Secretary

Footnotes

¹ This other party has since filed a petition in bankruptcy.

² The court subsequently issued a Notice of Entry of Judgment on July 20, 2001.

³ Tony R. Smith, Exchange Act Rel. No. 43748 (Dec. 20, 2000), 73 SEC Docket 3806, 3809 n.6; See also Frank R. Rubba, 53 S.E.C. 670, 673 (1998); Richard T. Sullivan, 53 S.E.C. 998, 1003 (1998).

⁴ 15 U.S.C. § 78s(f).

⁵ The Commission previously has held that Section 19(f) governs its review of SRO action imposing an indefinite suspension, where that suspension is contingent on the fulfillment of a condition, such as the payment of an arbitration award. See Smith, 73 SEC Docket at 3809; Rubba, 53 S.E.C. at 673.

Gallagher misconstrues the applicable review standard when he argues that the NASD's sanction is "excessive and oppressive" and that the NASD's indefinite suspension order is inconsistent with the NASD Sanctions Guidelines, standards relevant in the Commission's review of NASD disciplinary proceedings under Section 19(e) of the Exchange Act, 15 U.S.C. § 78s(e).

⁶ Gallagher does not claim, and we see no basis for concluding, that his suspension imposes an unnecessary or inappropriate burden on competition.

⁷ Gallagher paid approximately $3,000 to the arbitration claimants as a result of their garnishment of a portion of his earnings under an August 31, 2001 garnishment order issued by the Los Angeles County Sheriff's Department.

⁸ Gallagher expressly agreed with the Hearing Officer's assessment that "[t]he note is just a piece of paper."

⁹ Article VI, Section 3 of the NASD By-Laws permits the NASD, after 15 days written notice, to suspend the registration of any person for failure to comply with a written and executed arbitration award obtained in connection with an arbitration or mediation submitted for disposition pursuant to the rules of the Association.

¹⁰ Gallagher refers in his brief to his rights under the "due process clause." To the extent he is referring to the due process clauses of the Fifth and Fourteenth Amendments to the U.S. Constitution, we note that many courts and this Commission have determined that self-regulatory organizations such as the NASD are not subject to these and other constitutional limitations applicable to governmentagencies. See, e.g., D.L. Cromwell Investments, Inc. v. NASD Regulation, Inc., 279 F.3d 155, 162 (2d Cir.), cert. denied __ U.S. ___, 123 S.Ct. 580 (2002) ("It has been found, repeatedly, that the NASD itself is not a government functionary."); Herbert Garrett Frey, 53 S.E.C. 146, 153 n. 17 (1997) (NASD is not a government actor for purposes of the Fifth and Fourteenth Amendments and Supremacy Clause of the U.S. Constitution).

While SROs, such as the NASD, are not subject to the due process provisions of the U.S. Constitution, Exchange Act Section 15A(b)(8) requires that SROs provide "fair procedures." 15 U.S.C. § 78o-3(b)(8). See Robert Fitzpatrick, Exchange Act Rel. No. 44956 (Oct. 19, 2001), 76 SEC Docket 252, 258; Sundra Escott-Russell, Exchange Act Rel. No. 43363 (Sept. 27, 2000), 73 SEC Docket 1265, 1271.

¹¹ Herbert Garrett Frey, 53 S.E.C. at 151; Daniel Joseph Avant, 52 S.E.C. 442, 446 (1995); Bruce M. Zipper, 51 S.E.C. 928, 931 (1993). As we have stated, "[b]ecause the scope of [the respondent's] assets is peculiarly within [respondent's] knowledge, we think [respondent] should properly bear the burden of adducing evidence with respect to those assets." Zipper, 51 S.E.C. at 931.

¹² Zipper, 51 S.E.C. at 931.

¹³ During cross-examination, Gallagher acknowledged the following inaccuracies:

a. The Statement of Financial Condition failed to include the amount of his wife's income and net worth but included expenses attributable to her;

b. The Statement of Financial Condition failed to include the approximately $19,000 per year that Gallagher received from the Social Security Administration; and

c. Gallagher falsely reported that his checking, savings and money market accounts had no value when, in fact, he had a checking account that had a balance of $2,000 to $3,000.

¹⁴ In his reply brief to the Commission, Gallagher attached an unauthenticated Los Angeles County property tax bill which he claims shows that he has not been the owner of the property since November 7, 2000. The NASD has moved to strike this exhibit arguing, among other things, that it is inadmissible under Rule 452 of the Commission's Rules of Practice, 17 C.F.R. § 201.452. Rule 452 provides that the Commission may allow the submission of additional evidence upon a motion by a party that shows with particularity that such additional evidence is material and that there were reasonable grounds for failure to adduce such evidence previously. Gallagher failed to file the requisite motion. Moreover, Gallagher has not made the requisite showing of reasonable grounds for his failure to previously adduce the document. See, e.g., Joseph G. Chiulli, Exchange Act Rel. No. 42359 (Jan. 28, 2000), 71 SEC Docket 1544, 1554 n.24. Accordingly, we have not considered the tax bill which, in any event, does not on its face make clear that Gallagher no longer owns the property.

¹⁵ See John G. Pearce, 52 S.E.C. 796, 797-99 (1996) (Commission found respondent's inability to pay argument not credible where respondent failed to submit financial statements or tax returns to the NASD or the Commission and had testified that he had made no attempt to secure a line of credit or obtain a loan to satisfy the arbitration award).

¹⁶ By its terms, Gallagher's suspension will terminate if Gallagher submits proof that the arbitration award has been vacated or modified on appeal.

¹⁷ Smith, 73 SEC Docket at 3812.

¹⁸ We have considered all of the contentions advanced by the parties. We reject or sustain them to the extent that they are inconsistent or in accord with the views expressed herein.