The National Association of Securities Dealers today permanently barred former Credit Suisse First Boston investment banker Frank Quattrone from working in the securities industry for his refusal to testify in an NASD investigation surrounding his activities at the firm.

The association’s National Adjudicatory Council overruled an earlier hearing panel decision that fined Quattrone US$30,000 and suspended him for one year.

In ordering the permanent bar, the council called Quattrone’s conduct “egregious” and said it “impeded an NASD investigation and undermined the NASD’s ability to carry out its regulatory mandate.”

In 2002, the NASD’s enforcement department had investigations underway that centered on the practices and policies of Credit Suisse First Boston’s Global Technology Group headed by Quattrone. The investigations centered on IPO spinning and conflicts of interest between research analysts and investment bankers. On Feb. 3, 2003, CSFB issued a press release announcing that it had placed Quattrone on administrative leave because of questions about whether Quattrone was aware of pending criminal and regulatory investigations when he sent an email to certain CSFB employees regarding document retention issues.

That same afternoon, NASD Enforcement sent Quattrone’s attorneys a letter requesting that he appear for an on-the-record interview. At his attorneys’ request, the NASD agreed to postpone Quattrone’s testimony and to take that testimony near Quattrone’s home in San Francisco because of issues concerning Quattrone’s health. But ultimately, Quattrone’s attorneys informed NASD Enforcement that he declined to testify in any location, because of pending state and federal investigations into the same misconduct.

In March 2003, NASD Enforcement charged Quattrone with violating NASD conduct rules by refusing to testify. Quattrone answered the charges by denying any wrongdoing; arguing that because of ongoing criminal investigations into the same misconduct, the Fifth Amendment prevented NASD from compelling him to testify, and asserting that by trying to force him to waive his constitutional right against self-incrimination, NASD violated its statutory duty to provide him with a fair opportunity to defend himself.

In a ruling issued on Jan. 16, 2004, an NASD hearing panel found that Quattrone violated NASD rules by failing to provide on-the-record testimony to NASD. The NASD appealed the sanctions imposed by the hearing panel, arguing that the appropriate sanction was a permanent bar from the industry. Quatttrone cross-appealed the panel’s finding of liability.

“In view of the serious nature of Quattrone’s misconduct and the lack of mitigating facts, we conclude that a bar is necessary in this case to protect the integrity of NASD’s investigative responsibilities and its role as an SRO, serving the public interest,” the council said today in its ruling. “As a private entity without subpoena power, NASD must rely on (its procedural rules) to compel industry members to provide requested information about potential violations of the federal securities laws and NASD rules. Quattrone failed to meet his obligation to cooperate with Enforcement in its investigation, and therefore a bar is appropriately remedial … We find that Quattrone’s misconduct was egregious. Accordingly, we order that Quattrone be barred in all capacities.”

The council is a 14-person committee composed of seven industry and seven non-industry members that decides appeals from disciplinary, membership, and exemption decisions; rules on statutory disqualification applications; and advises on other policy matters. Council rulings can be appealed within 30 days to the Securities and Exchange Commission.