RRBDLAW.COM

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NOTE: Offers of Settlement (OS) and Letters of Acceptance, Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions and to the entry of findings.

2003
NASD CASES OF NOTE 

 

Michael Frederick Flannigan (OS/Co4030024/December 2003) Acting on behalf of his BD, Flannigan employed an improperly registered person as an RR and for purposes of assuming functions of a general securities principal.  Flannigan failed to maintain an adequate system of RR and associated person supervision for purposes of obtaining customer account information.  He failed to obtain suitability information and transcribe same on new account forms relating to an offering.  Finally, he failed to comply with the terms of the Penny Stock Rule in an offering of a penny stock. Michael Frederick Flannigan

No fine because of financial status; Suspended in all capacities for 5 business days; Barred in any principal/supervisory capacity

Alan Steven Cohen (AWC/C1003008/December 2003) Cohen represented to a public customer that he and at least one other broker would act as representatives on the account but then failed to trade and monitor the account (and did not disclose such failures to the customer).  Further, Cohen failed to adequately advise public customers that their account would be traded pursuant to a day-trading strategy and the risks associated with day trading. In addition, he improperly told a public customer that he need not be concerned about activities in the account, and gave assurances concerning the account when he did not know all the material facts.

Alan Steven Cohen

No fine because of financial status; Suspended 60 days in all capacities.

 

Thomas Steven Canecchia (AWC/C10030094/December 2003) Principal Canecchia allowed individuals to engage in a securities business for compensation while not properly registered. Thomas Steven Canecchia 

Fined $10,000; Suspended all capacities for 6 months.

Signator Investors, Inc. (AWC/ C11030038/December 2003) An RR of the firm misused and converted $260,000 of municipal employee funds by placing them into non-participant accounts and into his own account. The firm had inadequate written supervisory procedures relating to the supervision of accounts funded through employer payroll withholding. In addition supervisory system was not reasonably designed to prevent and detect diversion of funds by RRs responsible for the firm's employer salary withholding accounts. Further, the firm's supervisory system had inadequate checks and balances to confirm whether particular participants were entitled to certain allocations and whether individuals receiving funds were actually legitimate employee participants.

Signator Investors, Inc.

Censure; Fined $35,000

 

Metropolitan INvestment securities, Inc. (AWC/C3B030019/December 2003 Firm engaged in fraudulent and deceptive sales practices in connection with proprietary product sales.  Did not have an adequate basis for recommending such products to certain investors.  Certain sales unsuitable and used misleading advertising/sales literature.  Advertisements did not include adequate risk disclosure, failed to provide a sound basis for evaluating facts.  THe comparison of the proprietary product to bank products was unfair/unbalanced per NASD RUle 2210 (D)(2).  Firm disseminated to RRs sales scripts that were materially misleading by emphasizing only positive features and omitting principal risks.  Also utilized form letters that were materially misleading.  Supervisory system and procedures were inadequate to deter and detect above issues.  Pointedly failed to specify how RRs would be monitored to ensure fair and balanced sales presentations and suitable recommendations --- "completely silent regarding sales presentations regarding proprietary products; and, although many or most representatives sold primarily proprietary products to their customers, the firm did not provide adequate compliance training regarding sales presentations, and did not provide guidance concerning the risk level . . ." Metropolitan Investment Securities, Inc.

Censured; Fined $500,000; ordered to offer $2,882,010 in restitution; Complete a review/revision of supervisory systems relating to sales of all proprietary products to ensure adequate disclosure. suitability, and advertising/sales literature compliance.;Ordered to establish a Special Escrow Account.

baldwin & Clarke Capital Markets, Inc. and John Joseph Clarke, Jr. (AWC/C11030037/December 2003) While acting as placement agent for a private offering, firm failed to establish a proper escrow account at a bank.  Also, authorized the partial release of $280,000 to issuers when the $650,000 mini-contingency had not been reached. Further, because the expiration date had passed the escrowed funds should have been returned in investors.  

Additionally, permitted an individual to act as an RR when his registration was inactive per Regulatory Element requirements of Continuing Education requirement; and failed to have a written needs analysis and written training plan to comply with the Firm Element.

Baldwin & Clarke Capital Markets, Inc. and John Joseph Clarke, Jr.

Censured; Fined $15,000 (jt/several).

 

Newbridge securities corporation, scott howard goldstein, and james lee phelps (AWC/C07030069/December 2003) Firm acting through Goldstein and Phelps failed to supervise RRs adequately, and failed to detect trading irregularities and inconsistent trading recommendations by RRs.  Upon receipt of customer complaints against RRsdid not tale appropriate remedial measures to prevent high-pressure sales tactics, unauthorized trading, misrepresentations/omissions, and unwarranted price projections.  Finally, failed to record entry/execution times on order tickets. Newbridge Securities Corporation,

Censured, Fined $60,000; Must hire outside consultant to review/recommend sales practices and supervisory system.

 Scott Howard Goldstein

Fined $10,000, Suspended all capacities 30 days

James Lee Phelps

Fined $5,000, Suspended all capacities 30 days

Victor Glenn Tartaglia (AWC/C11030035/November 2003)
 He permitted a person subject to a statutory disqualification to be an associated person and to engage in the securities business without regulatory approval. 
Fined $5,000; Barred in principal capacity 		Victor Glenn Tartaglia

Fined $5,000; Barred in principal capacity

James Forrest Parker (C9B030021/November 2003) Parker cashed a $2,138 commission check, but the next day the member firm advised that the payment was issued erroneously and a stop payment requested.  The member indicated a second check would be issued in the same amount.  Parker failed to inform the member that he had already cashed the first check.  He then cashed the second check.  Despite several requests for repayment of the duplicate check, Parker failed to do so; although he eventually repaid $1,040 with a still unpaid balance of $1,098.

James Forrest Parker

Barred

Thomas Edward LaRossa (OS/C07030019/November 2003) Unnamed member firm acting through LaRossa falsely represented to public that it was an MSRB member.  LaRossa allowedc his firm to enter orders invovling optionss without a Registered Options Principal, failed to register two sales offices as Offices of Supervisory Jurisdiction and Branch Offices.  Larossa allowed firm to violate its membership agreement by changing its controlling interest/management, open branches, enter into options contracts, and accept customer funds/securities without prior written notice to and approval from NASD.  Further findings of inadequate supervisory system. Thomas Edward LaRossa

Fined $20,000; Suspended 75 days in all capacities

Steven Richard Jaloza and Salvatore Anthony Fradella (OS/CLI030003/November 2003) A member firm acting through Jaloza and Fradella issued preferred shares of the member in a private placement offering, but the offering memorandum failed to disclose that the firm provided funding to one of the business ventures.  Further, Jaloza failed to inform investors that there were fewer customer accounts active than asserted in the memorandum.  Jaloza and Fradella also failed to exercise reasonable care to ensure that there was a legitimate enterprise with a sound business plan.  Finally, Jaloza failed to ensure that the member made and preserved required books and records, and filed its quarterly FOCUS reports.

Steven Richard Jaloza

Fined $10,000; Suspended all capacities for 45 days

Salvatore Anthony Fradella

Fined $7,500; Suspended in a principal/supervisory capacity for 6 months.

 

Kenneth S. Friend (AWC/C04030053/November 2003) Friend created account statements for customers that falsely indicated the value of investments.  Failed to respond to NASD. Kenneth S. Friend
 Barred in all capacities
Carl Edward Cherasia (AWC/c9b030071/nOVEMBER 2003) Cherasia sent a public customer a "Position Report" that misrepresented the value of holdings in his account.  Cherasia alos failed to respond to NASD requests for information. Carl Edward Cherasia
 Barred in all capacities
Michelle Lynn Corradetti (AWC/CAF030049/November 2003)

 

 

 

 

Prudential Securities Incorporated (AWC/CAF030048/November 2003)

 

james robert laughton, jr. (awc/caf030050/november 2003)
Acting as an underwriter, Corradetti engaged in the sale of unregistered securities and failed to investigate whether the stock could be legally sold.  

 

 

 

 

Despite “red flags” indicating questions about the registered status of a stock, Prudential failed to undertake appropriate inquiry and engaged in sales of shares of the unregistered stock. Firm also failed to establish and maintain a supervisory system concerning said sales of unregistered securities.

Failed to supervise RR in the sale of unregistered stock even though warning signs were present.  He failed to respond to those signs and assess whether the stock was registered

 

Michelle Lynn Corradetti

Fined $20,000 ($12,337.89 in disgorgement of commissions); Suspended in all capacities for 15 business days.

Prudential Securities Incorporated

Fined $90,000 ($26,677 in disgorgement of unlawful commissions)

James Robert Laughton, Jr

Fined $12,500; suspended 15 business days in all principal capacity

MONY Securities Corporation (AWC/C02030057/November 2003) Firm failed to establish and maintain supervisory system pertaining to outside business activities and private securities transactions of RRs.  Firm failed to effectively respond to warning signals of such activities.  Firm failed to monitor incoming/outgoing correspondence.  Failed to report selling away violations to NASD.  See Private Securities Transactions and Outside Business Activities matrices for other cases. MONY Securities Corp

Censured; Fined $225,000

j.p. Turner and Company llc (AWC/C07030068/November 2003 Firm failed to obtain required information from investment partnerships, corporations and similar accounts prior to sales of hot issues to those accounts.  Firm accepted cash deposits from public customers for purchase of hot issue IPOs prior to effective date.  Firm filed inaccurate Free-Riding and Withholding Questionnaires that failed to disclose said purchases and acting through an undisclosed individual failed to establish and maintain supervisory system addressing hot issue sales. J.P. Turner and Company llc

Censured; Fined $20,000 ($7,500 jt/several with unnamed party)

GunnAllen Financial, Inc. (AWC/C07030066/November 2003) Firm acting through an unnamed individual failed to obtain NASD approval prior to effecting a material change in business operations by expanding the number of RRs and branches beyond those apparently limited in firm's Membership Agreement. GunnAllen Financial, Inc.

Censured, Fined $10,000 ($5,000 imposed jt/several with unnamed party)

Paragon Capital Markets, Inc./George Bernard Levine/Danny Jay Levine (OS/CAF030009/November 2003)

Paragon acting through G. Levine sold IPO common shares and warrants through the misrepresentation of the IPO’s structure and the use of an improper tie-in (RRs were instructed to solicit on a “unit only” basis but the Registration Statement provided for the separate purchase of shares/warrants).  Further, RRs did not firm-up IPO purchases with customers, thus constituting unauthorized trading.  Accordingly, inaccurate confirmations were prepared and forwarded.  Moreover, Paragon books and records were inaccurate as a result of entering on confirmations, cancellations, and statements a dummy “ADP” number for the non-existent unit; and for recording sales and cancellations for nonpayment of said illegitimate purchases.  

Paragon acting through D. Levine falsely placed IPOs in customer accounts to give the false impression that the offering was fully distributed.  Further, attempting to avoid significant losses when the after-market price for the IPO was below the POP, the firm failed to timely cancel and place said securities in its inventory.  Finally, a market for the IPO was created before completion of a bona fide distribution.

Paragon Capital Markets, Inc

Censured; Fined $50,000 (jt/several with G. Levine and D.Levine); agreed to refrain for 3 years from

·         participating as co/lead underwriter in IPOs;

·         maintaining and servicing more than 100 retail securities accounts; and

·         replacing any of said 100 accounts (if closed by customers during 3 year period) with new accounts.

George Bernard Levine

Fined $25,000; Suspended in all capacities for 60 days; Requalify as Series 24

Danny Jay Levine

Fined $40,000; Suspended in all capacities for 60 days; Requalify as Series 24

 

Joan Eileen Vaccaro
(AWC/C9B030064/Oct 2003)		 Vaccaro was suspended from a job as an accountant  for failing to inform her employer that she was employed by an NASD member firm. Vaccaro falsely claimed that she had lost wages from the accounting position as a result of the September 11, 2001, World Trade Center disaster when she applied for benefits from the Federal Emergency Management agency (FEMA). She also willfully failed to amend her Form U4 to disclose material facts.
  • Joan Eileen Vaccaro
    Barred
Michael Allyn Rose (OS/C3A030014/Oct 2003) Rose
  • made purchase recommendations and failed to disclose to public customers that his compensation would include a sales credit;
  • predicted the future price of a common stock in order to induce public customers to follow his recommendation; and
  • made certain representations to public customers concerning his personal ownership of stock in a company, his expected compensation for the recommended transactions, the business and business prospects of the company, the company’s financial circumstances and financing prospects, its expected news announcements, and the industry in which the company was a participant.

Rose did not have a reasonable basis for making these representations.

  • Michael Allyn Rose
    Disgorge $84,997 in commissions in partial restitution to public customers; Suspended for 2 years in all capacities.
     
George William Phillips  (awc/C10030069/Oct 2003) Phillips pled guilty to charges that he violated Title 18 ("Crimes and Criminal Procedure"), Section 1954 ("Offer, Acceptance, or Solicitation to Influence Operations of Employee Benefit Plan") of the United States Code (gave and offered and/or promised to give and offer fees, kickbacks, commissions, gifts, money, and/or things of value) in his dealings with a member of the board of trustees of two union pension funds while registered with NASD.
  • George William Phillips
    Barred
David Earl Peterson  (AWC/C02030051/Oct 2003) After learning of an RR’s selling away activities, Peterson failed to supervise when he
  • ignored red flag warnings that the representative continued to sell away,
  • consistently failed to monitor the representative’s incoming and outgoing correspondence as prescribed by firm procedures, and
  • failed to conduct required site inspections of “detached” representatives who worked out of their own offices.

The findings also stated that Peterson failed to implement heightened or other special supervision of the representative who continued to participate in the sale of unregistered securities.
  • David Earl Peterson
    Fined $5,000; Suspended 20 business days in principal capacity
     
Paul Douglas Maraman
(AWC/CO4030040/Oct 2003)		 Maraman submitted, or caused to be submitted, falsified brokerage account statements on his firm letterhead to a public customer, which reflected incorrect money balances and transactions. He also converted customer funds for his own use and benefit without their knowledge, authorization, or consent, and executed unauthorized transactions. Maraman failed to respond to NASD requests for information.
  • Paul Douglas Maraman
    Barred
Yakov (Jack) Shulm Koppel
(2448735/Oct 2003)		 Koppel solicited a public customer to purchase securities when no registration statement was in effect ("gun jumping") or had otherwise been approved by the SEC.
  • Yakov (Jack) Shulm Koppel
    Suspended 7 business days
Kent William Helgeson
(AWC/C04030042/Oct 2003)		 Helgeson submitted falsified receipts and expense reports to his member firm and received payment of $8,329.12 for his own personal use and benefit. He also failed to respond truthfully to NASD requests for documents and information.
  • Kent William Helgeson
    Barred
James Nelson Gould (AWC/C02030052/Oct 2003) Gould failed to supervise an individual engaged in fraudulent private securities transactions. Although the selling RR was apparently previously "requested" to stop selling away, three months later, Gould apparently only first sent a letter to the RR requesting the cessation.  Moreover, he sent the letter to a branch office other than the one at which the RR was based. Gould failed to ensure that there was meaningful follow-up after the letter was sent because the RR failed to initial and return the letter as requested, and, worse, continued to participate in fraudulent private securities transactions.
  • James Nelson Gould
    Fined $5,000; Suspended 20 business days in principal capacity
     
Leon FintZ
(AWC/C9B030062/Oct 2003) 		Fintz, acting on behalf of his member firm, employed an accountant to perform its annual audits who was not "independent" in accordance with SEC Regulation S-X (apparently he received a $500,000 loan from the firm issued by Fintz at the firm's direction). Fintz concealed the loan from the firm's auditor by posting inaccurate and misleading general ledger entries.  Fintz, on behalf of the firm, prepared and filed monthly FOCUS reports that contained inaccurate/misleading information and willfully misrepresented the firm's financial condition by including the subject $500,000 asset in the firm's financial statement. Further, Fintz filed his a materially misleading and inaccurate audited financial statement on SEC Form X-17- a in which he overstated the firm's net capital position by $500,000. 

Bill Singer's Comment

There appear to be some important issues raised in this decision, but the NASD has not done a decent job in drafting the report.  Frankly, it's unclear as to whether the firm extended a $500,000 loan to the accountant (although that fact seems a fairly simple inference).  Somehow the $500,000 is referenced as an "asset" on the firm's financial statement and as a "compromising" loan.  It would be helpful for the NASD to do a better job of spelling out exactly what happened here.  As best I can tell, the BD gave its accountant a $500,000 loan; apparently then tried to hide same from its auditor; and carried the "loan" as an asset on its books (quite a feat!).  Part of the utility of the monthly NASD disciplinary reports is that they should teach member firms how to spot misconduct.  In compiling this specific report a bit more detail would have been elucidating.  
 

 
  • Leon Fintz
    Barred

Rodney Douglas Bowman (AWC/CMS030194/Oct 2003)

In at least 44 instances, Bowman knowingly and intentionally entering priced limit orders in NASDAQ securities, with the intention that full price and size of such orders would be reflected in the public quotation system as the National Best Bid or Offer (NBBO). Subsequently, Bowman entered offsetting orders to buy or sell shares of such securities, knowing that said orders would be routed to market makers whose automated execution systems were programmed to buy or sell, and did buy or sell, at prices equal to the NBBO and in an amount greater than the NBBO.  Bowman would then buy (sell) shares of these securities at prices that were lower (higher) than he would otherwise have been able to obtain. Immediately following the executions of his orders, Bowman  canceled the priced limit orders that he had initially entered.  These transaction generated a profit to Bowman of   approximately $12,437.50.

An Example of Bowman's Activity

NBBid

$10.00

Doe enters Bid

$10.10

Doe's Bid becomes
NBBid

$10.10

Auto-Ex Mkt Mkrs now
ready to buy at $10.10

 

Doe sells shares at

$10.10

Doe cancels his
$10.10 Bid

 
  • Rodney Douglas Bowman 
     Fined $10,000,Restitution to customers of $12,437.50, plus interest Suspended 8 months in all capacities.
Robert Russel Aikens (AWC/C8A030069/Oct 2003) Aikens prepared and provided a forged diploma as proof that he had graduated from a university, when in fact he had not.

Bill Singer's Comment

I'd be less than candid if I didn't admit that this case --- and these types of cases --- bother me.  No, I'm not saying that forging any document and presenting it as authentic doesn't raise legitimate questions of integrity. What troubles me is when I see individuals committing violations of securities rules and regulations involving the loss of public customers' savings, and they get far lighter sentences than a bar.  Worse, is when major BDs are involved in highly-publicized fraud and their principals basically take a walk.  
 

 
  • Robert Russel Aikens
    Barred
Janssen Partners, Inc. and Peter William Janssen (AWC/C8A030066/Oct 2003) Janssen Partners, Inc., acting through Janssen, 
  • extended a private placement beyond the  offering memorandum term without disclosure to prior investors;
  • then sold shares in an extended offering of the private placement, thereby increasing the total number of shares sold and the total dollar amount raised (rendering as false the representations in the offering memorandum); and
  • failed to establish an escrow account, for which it was a party to the escrow agreement, for the deposit of investor funds. 
  • Janssen Partners, Inc. 
  • Peter William Janssen
    Censured, Fined $12,500

Freedom Financial Inc.  and Jon Patrick Pierce (AWC/C04030045/Oct 2003)

Freedom Financial, acting through Pierce, participated in private placement contingency offerings, and 
  • failed to promptly transmit investor funds to an appropriate escrow account, and 
  • before the minimum contingency was attained, transmitted funds received from investors to the offering (thus rendering false and misleading the  placement memorandum representation that investor funds would be returned if the minimum contingency was not attained).
  • Freedom Financial Inc. 
  •  Jon Patrick Pierce
    Fined $15,000, jointly and severally

Wells Investment Securities, Inc. and
Leo Fred Wells, III
(AWC/CAF030046/Oct 2003)

 

 

Wells Investment Securities and Wells, III provided non-cash
  • compensation over $100 to RRs whose guests attended firm conferences (invitees were selected based upon a predetermined sales goal). 
  • compensation in connection with conferences that did not qualify for any training and education expense exception to the per year/per individual $100 ceiling where such payment or gift is in relation to the business of the recipient’s firm. 
  • sales incentive items over the $100 ceiling in connection with offerings of registered, non-traded real estate investment trusts and direct participation partnerships sold through firms with which Wells Investment Securities has contractual relationships. 

Furthermore, Respondents failed to adhere to previous undertakings made not to engage in non-cash compensation activities.

  • Wells Investment Securities, Inc. Censured; Fined $150,000 (jointly and severally with Wells,III)
  •  Leo Fred Wells, III
    Fined $150,000 (jointly and severally with Wells Investment); Suspended 1 year in principal capacity
Christopher Joseph Cox
(AWC/C10030064/Sept 2003) 		Cox failed to establish, maintain, and enforce special telemarketing supervisory procedures for all firm RRs as required under the NASD's Taping Rule.  He allowed RRs to have control over the firm's taping system, which circumvented the requirement to record all telephone conversations between the RRs and potential customers.  Firm was only taping conversations of 3 RRs and not the remaining 6 others.  Further, Cox failed to ensure that recordings were retained for not less than 3 years,the first two of which are to be in an easily accessible place.  He also failed to catalogue the retained tapes by RR and date.

Bill Singer's Comment

I must be getting cranky in my old age.  The Taping Rule was supposedly heralded as a significant anti-fraud measure --- sort of a way to nip things in the bud.  So when someone fails to properly implement this fail-safe protocol they get a $10,000 fine with no suspension.  Okay . . . either great lawyering or the NASD's getting a heart.  But I still don't understand how you reconcile this sanction for these facts with  Weinert (six months for leaving a test center with a piece of paper); Milz (two years for accepting accounts from a non-registered day trading firm); and Zlatsin (one year for trying to avoid taking a midterm exam).
 

 

 
  • Christopher Joseph Cox
    Censured; Fined $10,000
NAME REDACTED AT SOLE DISCRETION OF RRBDLAW.COM
(AWC/C8A030058/Sept 2003) 		RESPONDENT signed a document that prohibited him from leaving the Series 7 testing center and from removing any materials from same  --- subject to disciplinary action.  During the exam, he left the center on two occasions and took at least one piece of scratch paper with him.

Bill Singer's Comment

And perhaps he shouldn't have been chewing gum in class either?  
 

 
  • RESPONDENT
    Fined $2,500; Suspended 6 months in all capacities; Requalification
Aqiyl Taariq Muhammed
(OS/C07030035/Sept 2003) 		Muhammed opened an investment club at his member firm and solicited customers to transfer $258,263.05 from their existing securities accounts at that firm to the club as a pooled investment.  He entered into a "limited joint venture agreement" which obligated the club to invest $350,000 without investigating the potential risks and without having conducted the requisite suitability inquiries.  Further, he failed to provide prior written notice to and obtain written approval from his firm.
  • Aqiyl Taariq Muhammed
    Suspended 120 days in all capacities; no fine because of financial status
Kelli O'Brien Milz
(OS/CAF020067/Sept 2003) 		Milz opened new accounts at her firm (she was listed as the RR) for individuals based upon new account forms provided by a non-registered day-trading firm.  Those customers traded electronically through software and trading platforms provided by the non-registered firm.  Further, Milz paid transaction-based compensation to the non-registered firm, which in turn made similar payments to other unregistered persons and entities.  NASD noted that Milz created a system that allowed an non-registered individual to track commissions due to non-registered firm.  Milz also assisted in the preparation of Web sites that promoted unregistered brokerage services.

Bill Singer's Comment

Is the NASD ever going to get over its issues with day trading?  I don't get the sanctions in this case at all.  A 2 years suspension for what?  All that I see happening here is that Milz opened customer accounts.  Okay, so maybe the info for the new account forms came from an unregistered person --- there's nothing in the decision indicating any customer complaints, unauthorized trading, or any sales practice fraud; and if there were such circumstances then the NASD should so state.  Compare this fact pattern to the Muhammed case and explain to me why the latter only got a 120 day (effectively 4 months) suspension.
 

  • Kelli O'Brien Milz
    Fined $20,000; Suspended 2 years in all capacities
Matthew Nguyen Littauer
(AWC/CAF030037/Sept 2003) 		Littauer  allowed a BD to open new customer accounts using his rep number for customers solicited by individuals not registered with the firm and who also gave instructions for transactions.  Firm did not have principal-approved written authorization from the customer and Littauer did not speak with the customer prior to accept the unregistered person's instructions.  Finally, the above actions caused the firm to create and maintain inaccurate books and records showing Littauer as to RR who solicited the accounts and transactions.
  • Matthew Nguyen Littauer
    Fined $20,000; Suspended 30 days in all capacities
Maurice Thomas Larrea
(AWC/C05030037/Sept 2003) 		Larrea provided a customer with a letter signed by him that falsely represented that his member firm guaranteed a balance in the amount of $410,000 in the customer's account. Further, he failed to obtain a principal's approval on the outgoing correspondence.
  • Maurice Thomas Larrea
    Barred
Samuel Shmuel Barmapov
(AWC/C3A030034/Sept 2003) 		Barmapov recommended and sold shares of two obscure, low-priced, highly speculative companies through misrepresentations of financial prospects and baseless price predictions.  He also failed to disclose risks and omitted material facts concerning financial conditions.  Finally, transactions were unsuitable.
  • Samuel Shmuel Barmapov
    Barred
Frank Joseph Argenziano
(OS/CAF030009/Sept 2003) 		Argenziano created an improper "tie-in" when he instructed the firm's brokers to solicit an IPO as a unit-only, notwithstanding the fact that the SEC Registration Statement provided for the separate sales of common shares and warrants.  Additionally, he caused purchases of the IPO to be inputted upon the effective time without first giving the brokers the required opportunity to confirm with their clients; thus, engaging in an unauthorized trade.  Further, Argenziano caused the clearing firm to create and mail inaccurate confirmations that only presented a unit transaction and not the component shares/warrants.  Finally, by entering a "dummy" automatic data processing security number for the fabricated "unit" on confirmations, cancellations, statements, etc., he caused his firm to maintain inaccurate books and records.

Bill Singer's Comment

Am I missing something here?  The allegations seem fairly serious and served to defraud investors as to the true nature of what they bought (or thought they could have bought) and further served to introduce unnecessary chaos into the clearing of those transactions.  And for all of that, only a 15 business day suspension?  Take a look at the Zlatsin case, in which an RR was fined $5,000 and suspended for a year because he fabricated a letter seeking to excuse himself from taking a college midterm!  Also, compare to the Milz case in which an individual was fined $20,000 and supsended two years for essentially opening accounts based upon forms submitted by non-registered persons.  Anyone have any idea how NASD reconciles these decisions?
 

 
  • Frank Joseph Argenziano
    Fined $25,000; suspended 15 business days in all capacities
Phillip Louis Trading, Incorporated
and
Johhny Philip Figliolini, Jr. (AWC/CAF030036/Sept 2003) 		While the firm was engaged in the distribution of stock to market makers and acted as a'33 Act (Section 2(11)) underwriter, an agent of the firm effected the sale of unregistered shares to market makers.  Firm also allowed individuals to exercise discretion in public accounts without prior written customer authorization.  Figlioni was found to have failed to supervise the an individual selling unregistered securities and failed to respond to red flags raising questions about the source of the stocks and the relationships between account holders.  Finally, firm failed to maintain an adequate supervisory system regarding restricted securities. 
  • Phillip Louis Trading, Incorporated
    Censured; Fined $44,000 (includes $14,036.31 disgorged commissions)
  • Johhny Philip Figliolini, Jr.
    Fined $10,000; Suspended 10 business days in all capacities; Requalify for Series 24 principal
Banyan Capital Markets, LLC
and
Barry Fredric Goldberg (CAF030035/Sept 2003) 		Official NASD report says that the "firm and Banyan" produced a research report --- I believe this is a typo and should read "firm and Goldberg."  The report, which evaluated a public company, was unbalanced, unwarranted, and contained material omissions.  Report failed to disclsoe that the company might be required to issue securities to satisfy current debt, thereby diluting issued shares.  Additionally, Goldberg failed to adequately supervise RR who prepared report.  Finally, report failed to disclose compensation agreement by which company paid firm for the services of the RR.
  • Banyan Capital Markets, LLC
    Censured; Fined $10,000 jointly and severally with Goldberg
  • Barry Fredric Goldberg
    Fined $20,000 ($10,000 jointly and severally with Banyan); Suspended 45 days in all capacities
Sfi Investments, Inc.
and
Frank Joseph Fasano (C10970176/Sept 2003) 		Firm, acting through traders and with Fasano's acquiescence and approval, improperly used public customer accounts as its de facto proprietary trading account for munies (not permitted in Membership Agreement).  Further, Firm, acting through Fasano, failed to satisfy Net Capital requirements and allowed individuals to function as General Securities Representatives without NASD registration or subject to reasonable supervision.  Finally, firm failed to timely respond to NASD requests for information.
  • SFI Investments, Inc.
    No monetary sanctions because of firm's expulsion; Expelled
  • Frank Joseph Fasano
    No monetary sanctions because of Fasaon's bar and his financial status; Barred in all capacities

liss financial services 
and
Jerome Edward Liss (AWC/CMS030167/Sept 2003)

Respondents engaged in a scheme whereby they served as statutory underwriters (in violation of Section 5 of the '33 Act) for an issuer by 

  • acquiring unregistered shares from the issuer and its control affiliates by means of a "gypsy swap" transaction;  

  • distributing those shares to the public without a valid registration or exemption; and

  • returning the proceeds of the distribution to the issuer.

A "gypsy swap" occurs when one party exchanges restricted shares for another party's freely exchangeable shares.  For example, a private purchaser ("Investor") may be asked to invest directly in an issuer through a scheme promising unrestricted securities.  In furtherance of this transaction, (usually through arrangements and understandings with the issuer) another stockholder ("Seller") with restricted securities currently eligible for sale (usually Rule 144) or unrestricted securities sells the shares to Investor.  At about the same time, the issuer sells an equivalent number of shares to the Seller.  The SEC does not necessarily deem the above Gypsy Swap to be legal and frequently finds the transaction in violation of Rule 144 or Section 5.

Additionally, respondents effected penny stock transactions for customers without providing the '34 Act Section 15g and Rule 15g disclosure documents.  Further, respondents failed to responde to NASD requests for documents and information.  Finally, the firm fialed to reasonably supervise.
  • Liss Financial Services 
    Expelled
  • Jerome Edward Liss
    Barred in all capacities
Padraig Conrad McGlynn (C8A030014/August 2003) McGlynn created on a computer a letterhead for a company unrelated to his member firm.  He then forwarded to a customer a letter on the fabricated letterhead that referenced an attached "Temporary Confirmation."  The Temporary Confirmation falsely represented that the customer had agreed to purchase stock and that said shares had been purchased --- despite the fact that the customer had not agreed to the transaction, McGlynn had not placed the order, and no such transaction had occurred.
  • Padraig Conrad McGlynn
    Barred in all capacities
Luann Laney (AWC/C06030012/August 2003) While Registered Principal Laney was auditing an offsite RR's branch office, she failed to review that office's checking account although such was set forth on her firm's office examination checklist.  NASD believes that said checking account review would have revealed a $2.6 million fraudulent Ponzi scheme by the RR.  Additionally, Laney allowed an RR to "voluntarily" resign without disclosing that the RR was under investigation for selling away, misappropriation of customer funds, and acting as a clearing firm.

Bill Singer's Comment
Once again, if you've set forth a written procedure for your BD, you better make sure that you're following the protocol.  Frankly I'm both puzzled and intrigued by this case.  Exactly how does an individual RR act as a clearing firm?   It might have been helpful for the NASD to provide some additional explanation on this issue.  Also, given how frequently firms wrestle with whether or not to issue a voluntary or permitted to resign or terminated for cause report, it's worthwhile to monitor upcoming disciplinary cases to see whether NASD's scrutiny of the non-disclosure of in-house investigations pertaining to terminations is a new hot item.
  • Luann Laney
    Fined $7,500; Suspended for 30 business days in principal/supervisory capacity
Robert Edwin McBride (AWC/C8A030051/August 2003)

ALSO SEE the Kowalski case

 A Designated Supervisory Employee (DSE) or branch manager was supposed to give prior approval for
  • the sale of restricted stock
  • associated persons to open an account with another member firm, and  
  • RRs to direct customers to investments not sponsored by the firm.

The person designated as the DSE was not functioning in that capacity (and McBride, who apparently was the de facto DSE, was not so identified in the firm's procedures).  McBride knew or should have known that 

  • an RR was participating in the sale of restricted stock without the prior approval of any supervisory principal  
  • RRs had opened accoutns at other member firms without prior written approval by a supervisory principal 
  • firm's procedures failed to define whas was meant by "directing customers" or "sponsored by the firm," 
  • RRs were directing customers to non-sponsored investment opportunities
  • RRs were participating  in private securities transactions without prior written approval by a supervisory principal.

Additionally, McBride failed to enforce his firm's written supervisory procedures regarding private securities transactions by permitting RRs to effect off-the-books/records transactions. Also, he failed to establish, maintain, and enforce a supervisory system and written supervisory procedures reasonably designed to be compliant in the areas noted.  

 
  • Robert Edwin McBride
    Barred in any principal or supervisory capacity
Kevin James Kowalski (AWC/C8A030052/August 2003)

 

ALSO SEE the McBride case

 A Designated Supervisory Employee (DSE) or branch manager was supposed to give prior approval for
  • the sale of restricted stock
  • associated persons to open an account with another member firm, and  
  • RRs to direct customers to investments not sponsored by the firm.

The person designated as the DSE was not functioning in that capacity (and Kowalski, who apparently was the de facto DSE, was not so identified in the firm's procedures).  Additional procedural deficiencies were noted in the sale of restricted stock, suitability, transactions for/by associated persons, and private securities transactions.  

Kowalski was found to have failed to establish, maintain, and enforce a supervisory system and written supervisory procedures reasonably designed to be compliant in the areas noted.  
  • Kevin James Kowalski
    Barred in any principal or supervisory capacity
Mark Elliot Kastan
and
Martin Baron Dropkin
(AWC/CAF030034/August 2003)		 Kastan and Dropkin wrote and published research reports that failed to disclose adequately risks regarding a company --- particularly that the company needed to raise in excess of $3 billion to achieve free cash flow positive status (and that the company might not be able to raise that sum).  Additionally, Kastan and Dropkin recommended the purchase of the company's common stock as a "strong buy" without a reasonable basis for the represented 12-month target price.
  • Mark Elliot Kastan
    Fined $50,000; Suspended 10 business days in all capacities
  • Martin Baron Dropkin
    Censured; Fined $25,000
kenneth lawrence gliwa
(AWC/CMS030148/August 2003)		 Gliwa failed to supervise reasonably a branch office's activities in that he allowed two unregistered persons to hire brokers and independently operate the office.  He also directed his firm's trading desk to follow the instructions of unregistered persons that resulted in three orders being routed to another company.  Further, he failed to conduct any meaningful suitability review and also permitted the firm to operate without any written supervisory procedures.
  • Kenneth Lawrence Gliwa
    Barred in all capacities
SCHNEIDER SECURITIES, INC.
(OS/CMS030001/August 2003)		 Firm transmitted to NASDAQ through Automated Confirmation Transaction Service (ACTsm)last-sale reports of fictitious transactions in a NASDAQ National Market (NNM) security, with the intent to wrongfully move the market higher.  Further, firm failed to establish, maintain, or enforce procedures reasonably designed to ensure that it reported only bona fide transactions in the last-sale reports.  Firm failed to have in place procedures to adequately review trades reported to ACT, or to ensure that its employee did not report fictitious trades.
  • Schneider Securities, Inc.
    Suspended from all trading activities for 2 years; no monetary sanctions because of firm's financial status
KEY WEST SECURITIES, INC. and AMR "TONY" ELGINDY
(CMS000015/August 2003)		 Elgindy posted artificially high bids that were designed to inflate a stock's price.  Firm and Elgindy also found to have entered high bids without intending to honor them.  Further, firm and Elgindy failed to disclose market making capacity, or its willingness to sell/buy from customers on a principal basis.  Matter adjudicated by National Adjudicatory Council following appeal of an Office of Hearing Officers decision.  Presently on appeal to SEC. 
  • Key West Securities, Inc.
    Fined $51,000 joint and several; Expelled
  • Amr "Tony" Elgindy
    Fined $51,000 joint and several; Barred in all capacities

     
MORGENTHAU & ASSOCIATES, INC. and ANTHONY REGINALD MORGENTHAU
(AWC/C07030039/August 2003)		 Firm acting through Morgenthau undertook a best-efforts underwriting, but after raising $2.5 million issued amendments changing the offering's terms by extending the termination date and raising maximum dollar amount of offering. Firm failed to
  • notify original investors of changes,
  • provide investors with copies of amendments, and
  • provide investors an opportunity to reaffirm or rescind purchases.
  • Moregenthau & Associates, Inc.
  • Anthony Reginald Morgenthau
    Censured; Fined $13,000 joint and several
YOUR DISCOUNT BROKERS, INC. and MICHAEL SILVERSTEIN
(AWC/CMS030135/August 2003)		 Silverstein recklessly and/or intentionally entered priced day orders to buy 100 shares of stock at prices that would improve the National Best Bid (NBB). Silverstein entered orders at prices that were higher than the previous NBB for the stock within 2 to 28 seconds before the trading day's close.  Each of the 29 priced orders became the closing bid, resulting in an aggregate $251,553.13 increase in Silverman's margin account.  Further, firm failed to establish a supervisory system reasonably designed to be compliant with quotation and trading activity conduct at or near the close of the trading day.
  • Your Discount Brokers, Inc.
    Censured; Fined $17,500
  • Michael Silverstein
    Fined $75,000; Suspended in all capacities for 2 months
PATTERSON TRAVIS, INC. and DAVID THOMAS TRAVIS
(C06020003/August 2003)		 Firm acting through Travis contravened SEC Penny Stock Rules 15g-2, -3, and -5.  Prior to effecting penny stock transactions, firm did not:
  • furnish to customers a penny stock transactions risk disclosure statement
  • obtain from customers a manually signed and dated written acknowledgment of receipt of disclosure statement
  • disclose to customers the inside bid/offer
  • disclose aggregate amount of cash compensation to associated persons in connection with those transactions.

Further, firm failed to obtain a written agreement setting forth the identity/quantity of penny stock to be purchased; and a signed/dated statement from each purchaser providing financial condition, investment experience, and investment objectives. Additionally, the firm (acting through Travis) failed to supervise properly sales of penny stocks.  Moreover, firm and Travis attempted to conceal their violations of the penny stock rules and to obstruct NASD investigation.  Finally, firm and Travis failed to comply with a prior Order of Settlement that involved, among other things, penny stock violations.
  • Patterson Travis, Inc.
    Fined $50,000; Expelled
  • David Thomas Travis
    Fined $50,000; Barred in all capacities
     
Simon Benjamin Bezer,
(AWC/C9B030026/July 2003)		 Bezer wrote a $15,287 personal check to his BD in an effort to meet a margin call in his personal account.  However, at the time he issued said check, Bezer knew that he had insufficient funds to cover the item.  Further, prior to the BD learning of the NSF check, Bezer sold the underlying shares.  The transaction resulted in a $3,000 profit.
  • Simon Benjamin Bezer

    Suspended  2 years in all capacities; Fined $8,000 (includes $3,000 disgorgement);
Michael Sean Britten,
(OS/C3A030004/July 2003)		 Britten received a $342.25 payroll check from his BD and, without authorization, altered it to $7,342.25 and deposited it into a joint bank account with his wife.
  • Michael Sean Britten

    Barred
Clifford James Chinn,
(C8A990081/July 2003)		 Chinn entered into an agreement with public customers to use his own funds to trade in their account in an effort to apply any profits against prior losses the customers had sustained. 
  • Clifford James Chinn

    Suspended 1year in all capacities; Fined $10,000
Gary Ray Chromiak,
(OS/C9A020057/July 2003)		 Chromiak participated in the following scheme:

An individual used his position to award insurance/health services contracts to vendors --- and then skimmed off fees and commissions.  Chromiak served as the insurance broker of record for the contracts.  Further, Chromiak allowed the other individual to use his name in order to create a shell company and a bank account, through which the fraudulent proceeds were laundered and concealed.
  • Gary Ray Chromiak

    Barred
James Stephen Davenport,
(C05010017/July 2003)		 Davenport completed and signed his BD's "prohibited activities listing" forms on which he falsely represented that he had not borrowed $1,536,000 from firm customers.
  • James Stephen Davenport

    Suspended 9 months all capacities; Fined $10,000
Louis Martin Fischler,
(AWC/CAF030039/July 2003)		 Fischler prepared a research report for an issuer that was unbalanced, unwarranted, and contained omissions of material fact, e.g., the company may be required to issue securities in order to satisfy current debt, thereby diluting previously issued stock.
  • Louis Martin Fischler

    Suspended 45 days in all capacities; Fined $30,000
Loren Revel Johnson,
(AWC/C04030027/July 2003)		 Johnson submitted $109,686.56 in fictitious expense reports to his BD and then converted the funds to his own benefit.
  • Loren Revel Johnson

    Barred
Kimberly Jean Misaraca,
(AWC/CLI030012/July 2003)		 Misaraca failed to timely report customer complaints to NASD per Rule 3070, and failed to completely respond to NASD requests for information and documentation.
  • Kimberly Jean Misaraca

    Suspended for 1 year in all capacities; Fined $32,500
Francis Burke Murphy,
(AWC/C10030035/July 2003)		 Murphy engaged in the securities business of a BD as a general securities representative and assistant representative for order processing, although he was not registered in any capacity.
  • Francis Burke Murphy

    Suspended 30 days in all capacities; Fined $5,000
Judy Ann Payer,
(AWC/C10030029/July 2003)		 Payer permitted associated persons to act as general securities representatives and/or assistant representatives for order processing at a time when they were not registered in any capacity.  Further, Payer prepared or caused to be prepared, inaccurate records regarding the valuation of a security.
  • Judy Ann Payer

    Suspended 90 days in principal capacity; Fined $30,000
Monte Guy Pyle,
(AWC/C02030027/July 2003)
 		 Pyle, an RR, gave equity traders for whom he conducted securities business, gifts that exceeded $100 in value per individual.  Further, when he submitted an invoice to his BD for reimbursement of gifts given in the year 2000, it contained materially misleading and inaccurate information regarding one gift.  Finally, he failed to submit records reflecting some gifts and gratuities he gave to business contacts.
  • Monte Guy Pyle

    Suspended 8 months in all capacities; Fined $60,000
Donald Gene Schuster,
(OS/C3B030008/July 2003)		 Schuster issued checks totaling $27,198.60 drawn on a club (without the organization's authorization) for which he was treasurer and a control person.   The checks were made payable to a bank account controlled by Schuster.  Further, he failed to respond to NASD requests for information.
  • Donald Gene Schuster

    Barred
Randolph Frederick Simens,
(AWC/C10030033/July 2003)		 Simens, without previously notify his employing member firm, opened a securities account with another member firm .  Similarly, he failed to notify the other firm of his industry association.
  • Randolph Frederick Simens

    Suspended 10 business days in all capacities; Fined $1,500.
Wise Alsop Skillman III,
(AWC/C10030036/July 2003)
 		 Skillman failed to have an adequate supervisory system in place at his member firm.  Specifically, RRs in a branch office conducted the majority of their business with customers located in the United Kingdom (when the RRs visited the UK); however, the firm's supervisory system was deemed deficient in addressing such conduct.  Additionally, NASD found the written supervisory procedures inadequately addressed "suitability".  Further, Skillman was found to have failed to conduct reviews of customer accounts and new account documentation.  Finally, he failed to detect the undue concentration of a large percentage of customer assets in a single, speculative security.
  • Wise Alsop Skillman II

    Suspended 30 days in principal capacity; Fined $5,000; Required to requalify as a General Securities Principal within 90 days
Eugene Zlatsin,
(AWC/C9B030034/July 2003)		 Zlatsin submitted a letter on his member firm's letterhead to his college professor.  The letter stated that Zlatsin could not attend his mid-term examination because of a conflicting business event.  Unfortunately, the purported author of the letter was fictitious and there was no business event requiring Zlatsin's presence. 
  • Eugene Zlatsin

    Suspended 1 year in all capacities; Fined $5,000
Williams financial group and wilson williams
(AWC/CAF030031/July 2003)

Williams was responsible for reviewing and approving research reports for compliance with applicable laws and rules, but failed to adequately review sales literature written by an RR and allowed the RR to distribute research reports in violation of NASD Rule 2210(d).
  • Williams Financial Group
  • Wilson Williams

    Censured; Fined $10,000 (joint and several)

Joel Curtis Morgan (AWC/C02030020/June 2003)

 Without his firm's knowledge or consent, in an attempt to extricate himself from a controversy between another RR and a customer, Morgan created a fictitious memorandum and trade report on firm letterhead.  The fabricated documentation misrepresented that the controversy was favorably resolved for the customer.  Morgan  forged another employee's (described as a "trade desk supervisor") signature on the memo. 
  • Joel Curtis Morgan
    Barred
Richard Francis McNally (AWC/C11030013/June 2003) McNally recommended and initiated transactions in joint accounts with public customers without having reasonable grounds for suitability determinations.  Customers sustained $16,592.21 in losses. He also entered into an arrangement whereby he allowed a registered principal who had been denied registration in the Rhode Island to use his name when actively trading a customer's account.
Bill Singer's Comment

The NASD's official description of this case is poorly drafted.  Preliminarily, the explanation talks about unsuitable transactions in multiple customers accounts.  However, when discussing the Rhode Island registration aspect, we are suddenly confronted with "the customer's account," which would indicate a single client's account.   That understanding may well be correct, but there should have been some explanation in order to avoid confusion.  More to the point, the description is unclear as to whether McNally received $65,000 in commissions for allowing the principal to improperly use his name --- or whether the principal actually received that amount. 

  • Richard Francis McNally
    Barred; fined $16,592.21 plus interest (restitution to public customers)
Investors Capital Corporation; Timothy Boyle Murphy; and C. David Weller
 (AWC/ C11030012/June 2003)		 Investors Capital Corp's written supervisory procedures (WSP) and policies were deficient in following areas:
  • branch office inspections
  • heightened supervision
  • outside business activities
  • review of customer transactions
  • principal designations
  • RR's outside brokerage accounts
  • anti-money laundering
  • advertising

Firm failed to enforce WSPs. 

The firm acting through Murphy, firm failed to commit sufficient resources to its supervisory system. Also, conducted a securities business while failing to maintain minimum required net capital.

Similarly, the firm acting through Weller failed to adequately approve advertising and sales literature.  Firm's web site omitted material information and contained misleading/unwarranted statements.  Further, RRs posted items on an online bulletin board about the firm's parent company (apparently recommending the purchase of the parent's stock). Also, failed to

  • make and/or preserve certain books and records
  • ensure dissemination to customers during account openings of appropriate "pre-dispute arbitration clause." 
  • show required approval and review of Plan business
  • timely report customer complaints.

Weller failed to ensure that WSPs were

  • adequately updated, maintained, and enforced;
  • reasonably designed to be compliant

Additionally, Weller failed to ensure that firm's compliance staff performed their delegated duties (pointedly advertising/sales literature and periodic review of RR's business).  Further, Weller failed to supervise RRs engaged in private securities transactions. 

Comment from Bill Singer:

The NASD's official description of this case is labored and raises a number of questions.  

First, what is the point of the legal fiction of the "firm acting through" Weller and/or Murphy, as opposed to the Firm acting on its own?  In parsing through the various misdeeds, the NASD has found the firm acting on its own, acting through Weller, acting through Murphy, and also Murphy acting in his own capacity and Weller acting in his own capacity.    

Second, why is there rarely such similar attention to detail set forth in matters involving larger firms?  It will be interesting to see how NASD carefully dissects the firm's responsibilities, the firm acting through, and the individuals acting on their own aspects of the nettlesome cases supposedly still under investigation involving the major BDs conduct in issuing bogus research or conflicted IPOs.

 
  • Investors Capital Corporation
    Censured; Fined $250,000(jt/several with Murphy($175,000) and Weller ($75,000)
     
  •  Timothy Boyle Murphy
    Fined $175,000 jt/several with firm; suspended principal capacity 30/d  
     
  • C. David Weller
    Fined $75,000 jt/several with firm; suspended principal capacity 9/m
Merrill Lynch, Pierce, Fenner & Smith, Inc. (AWC/CMS030108/June 2003) Merrill Lynch submitted/published OTC equity quotations in a quotation medium without
  • having 15c2-11 documentation;
  • reasonable basis for believing information was accurate in all material respects; or
  • reasonable basis for believing information sources were reliable.

Further, NASD found that quotations did not represent a customer's indication of unsolicited interest, the firm failed to file a Form 211 with NASD at least 3/bd before publication/display, and supervisory system deficient per 15c2-11 and 6740.
  • Merrill Lynch, Pierce, Fenner & Smith, Inc.


Censured, Fined $10,000, revise Written Supervisory Procedures for SEC Rule 15c2-11 and NASD Marketplace Rule 6740

Intersecurities, Inc.
(AWC/C05030020/June 2003)

 

Firm's procedures failed to
  • adequately provide for identification of correspondence as customer complaints; 
  • report certain customer complaints; maintain/preserve in each Office of Supervisory Jurisdiction all written customer complaints in either a separate file of complaints and a) action taken by the firm, or b) reference to other files containing correspondence connected to the complaint as maintained at each office; 
  • conduct adequate supervisory reviews of the complaint-handling process; 
  • provide adequate guidelines for conducting/tracking/documenting customer complaint investigations; 
  • provide adequate suitability guidance on variable universal life insurance transactions; 
  • demonstrate reasonable efforts to obtain information critical for suitability determinations and related supervisory reviews; 
  • establish procedures for the periodic review of customer account activity through surveillance of transactions in variable products to identify possible sales practice abuses.  
  • Intersecurities, Inc.

    Censured; Fined $125,000

Citigroup Global Markets, Inc. f/k/a Salomon Smith Barney, Inc.
(AWC/C05030021/June 2003)

Firm, when acting as managing underwriter or syndicate member in hot IPOs, placed shares of cancelled customer orders into proprietary branch error accounts after the commencement of secondary trading. Said shares were subsequently sold at a profit, in violation of NASD's Free-Riding and Withholding Rule. Similarly, firm failed to maintain an adequate system to provide for the proper handling of cancelled customer allocations of IPOs.
  • Citigroup Global Markets, Inc.

    Censured; Fined $225,000 (includes $125,000 disgorgement)

Briarcliff Capital Corp
(AWC/C07030023/June 2003)

Firm failed to establish and maintain a supervisory system reasonably designed to achieve compliance with applicable laws/regulations, in that it had no supervisory system or written procedures relating to compliance with NASD customer complaint reporting requirements.
  • Briarcliff Capital Corp.

    Censure; Fined $15,000

Acument Securities, Inc.
(AWC/CO1030009/June 2003)

Firm advertised on the World Wide Web that it would effect retail customer transactions for market orders at certain prices, but failed to disclosed that when multiple executions at different prices were required to fill a market order, the firm would charge a separate commission for each execution.
  • Acument Securities, Inc.

    Censured;Fined $20,000

DAVID WESLEY WYANDT (AWC/C9A030008/May 2003)

Wesley submitted employee business expense reports on which he overstated by some $18,600 his actual expenses by including previously reimbursed amounts.

Comment from Bill Singer:
 Compare this case to MARIUS CONSTANTIN STAN (OS/C9B030002/MAY 2003)  Clearly, RRs who engage in fraudulent conduct through falsification of expense reports or claims are worthy subjects of regulatory scrutiny.  Nonetheless, one notes a dearth of cases pertaining to senior executives at broker-dealers who reportedly submit padded expenses.  Not that such conduct is routine --- perish the thought --- but why is it that Wall Street is so often filled with joking gossip about the big brass' non-client lunches and the unusual purchases charged to firms during business trips?  Doesn't it seem odd that when the big boys dip into the till it's called "managerial discretion or executive prerogative," but when the grunts do it it's called a bar-able offense?

  • David Wesley Wyandt

    Barred in all capacities

MARIUS CONSTANTIN STAN (OS/C9B030002/MAY 2003)

Stan submitted a health insurance claim to his member firm's health insurance carrier seeking reimbursement totaling $15,680, falsely overstating the amount of money that he had paid in connection with a medical procedure in which he incurred charges of $137.
  • Marius Constantin Stan

    Barred in all capacities

Barbara Alice Edwards
(AWC/C9B030014/May 2003)

Edwards accepted unsolicited sell orders from the sole heir to a public customer although the power of attorney over the customer's account was no longer in effect due to the customer's death (making the sales unauthorized). When subsequently questioned about the customer, Edwards failed to inform her supervisor that the customer (whose account appeared on the firm's active account report) was deceased . 
  • Barbara Alice Edwards

    Fined $5,000; Suspended 1 year in all capacities

Darrel Edward DeMarco (AWC/C8B030006/May 2003)

DeMarco forged the name of an official of his member firm on a corporate resolution which guaranteed that the firm would stand behind automobile loans and leases entered into by an automobile dealership with professional athletes DeMarco hoped to attract as customers. 

Comment from Bill Singer:
 Compare this case to Stephen Emerson Davis (AWC/C07030010/ April 2003), in which RR Davis induced customers to do business with him through the use of misrepresentations that included falsely representing that his clients included celebrities. He also failed to respond to request to provide sworn testimony.  Davis was barred in all capacities. These cases continue to challenge the industry as to once-honored practices of going the extra mile to win clients.  What once got a manager's pat on the back and a knowing nod, now gets a bar.

  • Darrel Edward DeMarco

    Barred in all capacities

David Aaron Appell and Adam Bruce Swickle
(OS/CAF020065/May 2003)

Registered Principals Appell and Swickle failed 
  1. to establish, maintain, and enforce a supervisory system, including adequate written supervisory procedures, reasonably designed to achieve compliance with applicable securities laws, regulations, NASD rules regarding 
      the timing of account reviews, 
      the type of account reviews to be performed, or
      the purpose of account reviews;
     
  2. to establish procedures that would provide
       guidance to the Compliance Director to perform sales practice reviews on a daily, weekly, and monthly basis; 
       the authority to accept and approve new accounts, trades, and outgoing correspondence;
       and the authority to handle customer inquiries. 
  3. to update their firm's supervisory system to reflect personnel changes, that procedures were not followed to prevent unauthorized transactions, and that appropriate disclosures were made to public customers with respect to stock recommendations. 
  4. to ensure that sales were reviewed for account suitability, commission charges, and recommendations made by representatives. 
  5. to ensure that the firm's Compliance Director had the requisite general securities license and experience, failed to provide him with a description of duties, failed to determine if he was performing his duties, and failed to hire a new Compliance Director.

Comment from Bill Singer:
  Compare Appell/Swicker with Brookstreet.  We see an emerging trend in which NASD is holding principals personally responsible for the alleged failures to maintain reasonable procedures.  Nonetheless, these prosecutions always raise a troubling questions.  When a firm applies for membership, it is required to submit Written Supervisory Procedures (WSPs).  The WSPs are presumably reviewed and approved by the Staff pursuant to approving the applicant's membership.  Further, during every ensuing examination the Staff normally reviews the WSPs.  What many industry veterans cite with frustration is the NASD's frustrating (if not infuriating) practice of suddenly discovering the inadequacy of WSPs that were previously reviewed by the Staff and not deemed in violation.  Similarly, the age-old call for a standard WSP still goes unheeded.  Yes, the regulators say that one-size cannot fit all and that the WSPs must be tailored to each firm.  However, compliance veterans rarely buy that line.  

  • David Aaron Appell 

Fined $15,000; Suspended 30 days in principal capacity; requalify as Series 24

  • Adam Bruce Swickle

Fined $15,000; Suspended 30 days in principal capacity; requalify as Series 24

 

Brookstreet Securities Corporation; Stanley Clifton Brooks, and Kathleen Margaret McPherson (AWC/C02030010 April 2003)

 Brookstreet acting through Registered Principals Brooks and McPherson, failed to implement, maintain, and enforce reasonable written supervisory procedures/system.  Notably, firm failed to prevent and detect registered representatives’ violations.
  • Brookstreet Securities Corporation

Censured; fined $100,000 ($25,000 of which is joint/several with Brooks and McPherson; retain independent consultant for firm’s supervisory and compliance policies/procedures

  • Stanley Clifton Brooks

$25,000 jt/several fine with Brookstreet and McPherson; Suspended 30 days principal capacity

  • Kathleen Margaret McPherson

$25,000 jt/several fine with Brookstreet and Brooks; Suspended 15 days principal capacity

 

Computer Clearing Services, Inc. and Stephen Scott Worcester (AWC/CO2030014/ April 2003)

Firm acting through Worcester failed to accurately compute Special Reserve, to deposit sufficient funds into Special Reserve Bank Account to satisfy reserve requirement, to have and maintain sufficient net capital; to make/keep current/preserve financial books and records; and to prepare and preserve accurate supporting documentation.
  • Computer Clearing Services, Inc.

Censured, fined $40,000 jt/sev; retain independent consultant for firm’s financial and operations policies/procedures

  • Stephen Scott Worcester

Fined $40,000 jt/sev and an additional $5,000 in personal capacity; suspended 45 days as FINOP

 

Magellan Securities, Inc. and Terry Michael Laymon (C3B010016 April 2003)

 

 

Firm acting through Laymon  apparently failed to exercise reasonable supervision over a particular RR’s activities.  Respondents were cited for failures 1) to conduct an on-site compliance exam of RR’s office, 2) to review RR’s correspondence, 3)to review certain customer account documentation, and 4)to review RR’s trading activity in his account at another member firm.  NASD “found that Laymon chose not to supervise the representative.”
  • Magellan Securities, Inc.

Censured, fined $20,000 jt./sev

  • Terry Michael Laymon

Censured, fined $20,000 jt/sev, barred as a supervisor; suspended 2 years principal capacity, and required to requalifiy as a principal

 

Intrepid Securities, Inc. and Stephen Peter Kelly (AWC/C02030003/ April 2003)

 

 

Firm acting through Kelly failed to establish and maintain a supervisory system reasonably designed to ensure compliant behavior by producing branch-managers (at its office of supervisory jurisdiction)
  • Intrepid Securities, Inc.and Stephen Peter Kelly

Censured, fined $10,000 jt/sev

Michael Chien, Scott Keith Kaplan and Chiaying Wong (OS/CAF020024/ April 2003)

 

 

Chien, who was firm’s co-president and a branch-office supervisor but was not properly qualified or registered as a principal, initiated sales efforts to privately place $21 million of common stock of an affiliated company through a purported Regulation D/Rule 506 offering --- despite the fact that the offering did not comply with Rule 506, was not eligible for any other exemptions, and no registration statement had been filed.  Further, Chien acted recklessly in creating offering memoranda containing material misrepresentations and omissions.  Moreover, Chien assisted in the design and creation of a non-compliant Web site that made inaccurate and exaggerated claims about a target company, and failed a)to provide a balanced risk statement concerning investment in the common stock of an affiliated an target companies, b)to reflect sufficiently the inherent uncertainty of investment returns.  .  Kaplan also failed to disclose specific risks to customers, made material misrepresentations, made price predictions, and engaged in efforts to distribute the non-exempt/unregistered common stock.  Additionally, Chien and Wong failed to adequately supervise an associated person’s sales practices and failed to adequately respond to “red flags” indicating sales practices violations
  • Michael Chien

Barred, no fine per financial status

  • Scott Keith Kaplan

Barred, no fine per financial status

  • Chiaying Wong

Suspended 6 months in principal capacity; requalify as principal

Mitchell Mark Cohen (AWC/C05030011/ April 2003)

 

 

Cohen (apparently associated with multiple member firms) violated the Free-Riding and Withholding Interpretation by purchasing for his own account at member firm XYZ, IPO shares that traded at a premium in the immediate aftermarket (“hot issue”).  Further, he failed to notify the member firms of the investment account he maintained at XYZ, and he failed to provide written notice to XYZ disclosing his association with other member firms.
  • Mitchell Mark Cohen

Fined $42,000(to be paid before reassociation and reflects consideration of financial status); suspended 30 days all capacities; requalification as a general securities rep within 90 days after reassociation.

Stephen Emerson Davis (AWC/C07030010/ April 2003)

Davis induced customers to do business with him through the use of misrepresentations that included falsely representing that his clients included celebrities. He also failed to respond to request to provide sworn testimony.

 

Comment from Bill Singer:
 In Jonathan Matthew Aschoff (CAF030003/AWC March 2003), Aschoff wanted to issue a research report about a public company for which his member firm was an issuer.  Using an assumed name and misrepresenting himself as a medical doctor, he spoke with members of the medical profession in an effort to obtain confidential information about the effect of a drug under development by the company.  After being confronted about his deception, he never used the information in a report.  
Fined $10,000, and suspended 2 weeks in all capacities.  
One can distinguish Davis from Aschoff by noting that the former failed to appear for sworn testimony --- non-cooperation with an investigation being a serious issue.  That issue aside, it seems that NASD is now focusing on the ethics of “sales spiels” long accepted in the industry as the hallmark of a go-getter.  Times are clearly changing.  Take note!

 

 

  • Stephen Emerson Davis

Barred.

David Edward Hausch (OS/C103301580/ April 2003)

 

 

Hausch failed to testify truthfully, accurately, non-deceptively, and/or completely during an NASD on-the-record interview.
  • David Edward Hausch

Suspended 2 years in all capacities.

nima taherian, registered principal,
nasd Case # os/c06020019/
march 2003

Taherain effected put and call transactions in his cash account at his member firm whereby the cost of purchases was improperly met by the sale of the same securities; thus transferring market risk to the member firm.  Said transactions were undertaken at a time when Taherian did not have the ability or intent to pay for the purchases.
  • Barred in all capacities

EDWARD LEE MCCAFFERTY, REGISTERED REPRESENTATIVE NASD CASE OS /C05020052/
MARCH 2003

 McCafferty fabricated an "account value screen" on his computer and then misrepresented to a client that the print-out (which overstated the account's value by approximately $100,000) was an accurate and complete statement from his member firm's back-office.
  • Barred in all capacities

DAVID GORDON FRIED, REGISTERED REPRESENTATIVE NASD CASE # AWC/C10030001/
MARCH 2003

 Without designating account numbers, Fried entered trades for himself and customers into a holding account at his member firm.  At or around the end of the day, when in possession of the positions intra-day performance, he then allocated the trades.  He also exercised unauthorized discretionary authority.
  • Barred in all capacities

ANDY CRACCHIOLO, REGISTERED REPRESENTATIVE
NASD CASE #CMS020089
OS
MARCH 2003

 Cracchiolo entered small buy(sell) orders into an Electronic Communications Network (ECN) in order to affect the national best bid(offer).  He was then able to buy(sell) shares of a NASDAQ security through the automatic execution of his larger sell(buy) order on the opposite side of the market at a price a market maker would guarantee as an inside-market execution.  

[Not in the NASD case description but offered to explain:

9:55:01 ---  XYZ is 2.31 Bid X 800 / 2.42 Ask X 300
9:55.02 ---  Mr. Doe, looking to sell 500 shares of XYZ, first enters Bid through an ECN for 2.35 for 100 shares
9:55:05 ---  XYZ is 2.35 X 100 / 2.42 Ask X 500
9:55:07 ---  Market Maker ABC has policy of automatically executing orders at the inside price.  Mr. Doe now offers to sell his 500 shares of XYZ.  ABC buys Mr. Doe's 500 shares of XYZ at 2.35 per share.]
  • Fined $16,284.38 (includes $1,284.38 disgorgement of unlawful profits)
  • Suspended 90 days in all capacities

JONATHAN MATTHEW ASCHOFF, REGISTERED REPRESENTATIVE
NASD CASE # CAF030003
AWC
MARCH 2003

 Aschoff wanted to issue a research report  about a public company for which his member firm was an issuer.  Using an assumed name and misrepresenting himself as a medical doctor, he spoke with members of the medical profession in an effort to obtain confidential information about the effect of a drug under development by the company.  After being confronted about his deception, he never used the information in a report.
  • Fined $10,000
  • Suspended 2 weeks in all capacities

U.S. TRADING CORP
 -AND-
VINCENT RALPH LANDANO, REGISTERED PRINCIPAL 
-AND- 
WILLIAM ANTHONY MANCUSI, REGISTERED PRINCIPAL
NASD CASE #CL1030001
AWC
MARCH 2003

 U.S. Trading Corp. acting through Landano and Mancusi failed to adequately supervise inter-customer lending practices by permitting
  1. use of cash journal forms containing photocopied signatures
  2. use of photocopied notarizations

Also maintained the General Securities Representative registrations of 

  1.  individuals either no longer in the firm's investment banking or securities business, and
  2.  not functioning as representatives, and/or
  3. for the sole purpose to avoid the qualification exam. 
  • Censured
  • Fined $15,000 joint and severally

KRIEGER-CAMPBELL, INC. 
-AND- 
ROYAL GENE KRIEGER, REGISTERED PRINCIPAL 
-AND- 
MICHAEL CAMPBELL, REGISTERED PRINCIPAL 
NASD CASE #C01030001
 AWC
 MARCH 2003

 Krieger-Campbell, Inc. acting through Krieger and Campbell  transmitted funds raised in contingency offerings to a bank escrow accounts under the firm's control as escrow agent, in violation of  SEC Rule 15c2-4.  Further, the initial offering deadline was extended without a timely reconfirmation offer to investors.
  • Censured
  • Fined $11,000 joint and several

STERLING FINANCIAL INVESTMENT GROUP, INC. 
-AND-
ALEXIS CASIMIR KORYBUT , REGISTERED PRINCIPAL
-AND-
BERNARD LEWIS GOLEMBE, REGISTERED PRINCIPAL
NASD CASE # AWC/C07030004/
MARCH 2003

 Sterling underwrote a mini/max private placement.  Acting through Korybut the firm failed to disclose
  1. that persons affiliated with Sterling and its parent would purchase units that counted towards the mini;
  2. that the Sterling's parent loaned the issuer $309,000;
  3. parent company would use a portion of funds owed to it by the issuer to pay for units in order to meet mini to close the offering;

Additionally, firm did not immediately display or execute customer limit orders.  Golembe functioned as a General Securities Principal without proper registration.  Sterling failed to:

  1. maintain evidence of internal inspections for 2 years ;
  2. conduct branch and non-branch office inspections as provided for in its written supervisory procedures (WSJs);
  3. adopt, implement, and enforce adequate WSJs in regards to freeriding and withholding questionnaires; and
  4. adopt procedures for underwriting activities.

 

 Sterling Financial Investment Group, Inc.
  • Censured
  • Fined $131,000 ($45,000 of which is joint and several with Korybut and Golembe.  $66,000 of which is disgorgement of underwriting profits)
  • Retain outside consultant for underwriting and investment banking activities

Korybut

  • Fined $35,000, jointly and severally with Sterling
  • Suspended 20 business days all capacities

Golembe

  • Fined $10,000, jointly and severally with Sterling
  • Suspended 20 business days all capacities

INTRA NETWORK SECURITIES, INC. MEMBER FIRM -AND- 
DENNIS ALVIN PEARSON, JR., REGISTERED PRINCIPAL
NASD CASE #C02030001
AWC
MARCH 2003

 Intra Network acting through Pearson, Jr. participated in a contingency offering for which the offering memo stated that 
  • investors' funds would be returned from escrow if minimum not raised by certain date;
  • proceeds would be placed in escrow;
  • firm would receive commissions of 10% proceeds

Raised funds were not properly transmitted to escrow and were prematurely withdrawn from bank account before minimum raised. Further the offering memo did not disclose the consulting relationship between the offering firm and a company that was owned and controlled by Pearson, Jr.  Nor did the memo disclose that consulting fees were paid to Intra Network.  Additionally, the firm received commissions in excess of the 10% represented.  

Finally, the firm sold shares after the termination date for such transactions and placed false and misleading communications on the World Wide Web.  Said site was not properly submitted to NASD for review. 

Intra Network

  • Censured
  • Fined $30,000 joint and severally with Pearson, Jr.
  • Required to offer rescission to investors
  • For 2 years must file ads/literaturee with NASD at least 10/d prior to use and obtain a no-objection response prior to use.

Pearson

  • Fined $30,000 joint and severally with Sterling
  • Suspended in Principal/Supervisory capacity for 7 months

ABSOLUTE RETURN ADVISORS, LTD, MEMBER FIRM
-AND-
NICHOLAS LOUIS IHASZ, REGISTERED REPRESENTATIVE
NASD CASE #C11030002
AWC
MARCH 2003

 Ihasz executed trades in a trading account prior to allocating said transactions to a specific account.  He apparently allocated a disproportionate share of the favorable day trades to "proprietary accounts."  This decision is a bit unclear as industry veterans would view a "proprietary account" as one traded for the benefit of the member firm.  I believe that NASD Staff meant that the disproportionate favorable trades were allocated to a number of "discretionary " accounts over which Ihasz exercised investment discretion (including his personal accounts and those of his family members). Absolute Return was found to have failed to establish adequate supervisory procedures to prevent such conduct
  • Absolute Return and Ihasz fined $125,000 jointly and severally
  • Ihasz barred
  • Absolute Return censured
  • Required to revise Written Supervisory Procedures
Coley James Neel
Registered PRINCIPAL
NASD CASE #CMS020246
AWC
FEBRUARY 2003 		Registered Principal Neel failed in transactions for or with a customer to use reasonable diligence to ascertain the best inter-dealer market, and to buy or sell in such market so that the resultant price to a customer was as favorable as possible under prevailing market conditions. 
  • censured; 
  • fined $100,000; 
  • required to pay $30,375, plus interest, in disgorgement; and 
  • required to requalify by exam as a general securities representative, registered principal, and equity trader with NASD within 90 days. 
Elizabeth Virginia Revelle, Registered representative
 NASD CASE #C9B020068
FEBRUARY 2003 		RR Revelle failed to respond to NASD requests for information. In addition, she failed to return a computer to her former member firm upon demand. 
  • barred from association with any NASD member in any capacity.
Bruce Alan Pivar, Registered PRINCIPAL
NASD CASE #C8A030002
AWC
FEBRUARY 2003 		Registered Principal Pivar accepted the deposit into his personal brokerage account of personal checks from another RR, who had asked Pivar for permission to effect transactions in Pivar's account. The RR representative then directed Pivar to buy and sell options in his account for the representative's benefit using the funds. In addition, Pivar placed trades with said funds in his personal account solely on behalf of the representative, including the sale of uncovered options. These transactions were effected notwithstanding that Pivar knew or should have known that the RR was restricted from effecting uncovered options transactions. 
  • fined $10,000, 
  • suspended from association with any NASD member in any capacity for 10 business days, and 
  • barred from association with any NASD member in a principal or supervisory capacity

 

Eric Rau Lupo, Registered Supervisor
NASD CASE #C10020128
AWC
FEBRUARY 2003 		Registered Supervisor Lupo effected transactions in the account of a public customer without the customer's prior knowledge, authorization, or consent; and induced a public customer to purchase shares of a NASDAQ security by promising to place a stop loss order on the shares purchased and failed to do so, resulting in an approximate loss of $58,825 to the customer. Lupo then sent letters (one of which was on firm stationery), without the firm's prior approval to the customer concerning the stop-loss failurel; thus, preventing the firm from discharging reviewing outgoing correspondence. 
  • fined $20,000 and suspended from association with any NASD member in any capacity for 1 year.
John Joseph Fisher 
NASD CASE #C3A010036
OS
FEBRUARY 2003 		RR Fisher received commissions activity in a public customer's "churned" account, which had been turned over 783 times on an annualized basis, and the cost/equity ratio was 100 percent. Further, Fisher caused a public customer to sign margin guarantee agreements guaranteeing the margin accounts for five other customers at his member firm that were not reasonable in light of the customer's age, mental and physical condition, financial situation, and lack of investment sophistication. 
  • fined $6,950, 
  • suspended from association in any capacity for 30 days, and 
  • required to pay $8,050 in restitution to public customers

 

Sarah L. Colbert 
NASD CASE #C06020016
OS
FEBRUARY 2003 		Associated Person Colbert wrote a personal check in the amount of $800 in payment of her monthly rent that was subsequently returned for insufficient funds and was advised by her landlord that she would be subject to a daily late fee unless she could prove that her check was returned as a result of a bank error. In order to avoid the late penalty, Colbert obtained blank stationery from her member firm, composed a letter stating the reason her check was returned was due to a bank error, forged the name of a former bank officer on the letter knowing that the officer was no longer with the firm, and sent or gave the letter to her landlord. 
  • Barred from association in any capacity.
National Securities Corp.
NASD CASE #C3B020023
AWC
FEBRUARY 2003 		National Securities failed to disclose customer complaints on RRs' Forms U-4 (Uniform Applications for Securities Industry Registration or Transfer) and/or U-5 (Uniform Termination Notices for Security Industry Registration), and, similarly, settled written customer complaints without disclosing such facts on RRs' Forms U-4/-5. Firm permitted a RR to continue to perform registered duties when his registration status  was inactive due to his failure to complete the Regulatory Element of NASD's Continuing Education (CE) Requirements. The firm's CE program failed to maintain an adequate system to monitor RRs' completion of the modules. Firm failed to establish, maintain, and/or enforce adequate written supervisory procedures and failed to:
  • timely report customer complaints and settlements on Forms U-4 and/or U-5; 
  • prevent registered persons from continuing to perform registered duties when their registration status with NASD is inactive due to failure to complete the CE's Regulatory Element; and
  • monitor and document the completion of the CE's Firm Element. 
  • Censured and fined $32,500

 

Instinet Corporation
 NASD CASE #CAF020069
AWC
FEBRUARY 2003 		In both print and television advertisements,  Instinet failed to provide a sound basis to permit the public to evaluate the facts in regards to the services offered.  Additionally, the firm failed to disclose the basis for claimed "savings." Further, the firm failed to disclose that the savings were not based on actual trades, as implied, but were derived from calculations performed by the firm based on market analysis by an outside firm, which was not identified as the source of the analysis. Notably, a print ad failed to establish any correlation between the rankings identified and the claimed savings.
  • Censured and fined $15,000

 

Security Capital Trading, Inc. n/k/a Vertical Capital Partners, Inc. 

- and-

Ronald Mark Heineman, Registered Principal

NASD CASE #CAF020032
OS
FEBRUARY 2003

Firm executed an underwriting "letter of intent" for a $10.98 million IPO "on a firm commitment basis." The firm, acting through Heineman, terminated the issuer's firm commitment offering without justification after four days of aftermarket trading and requested that NASDAQ cancel all trades. The termination affected over 500 members and their clearing agents, and public customers whose trades had to be unwound and canceled. The issuer failed to receive the proceeds. 

Security Capital Trading, Inc.:

  • fined $75,000 (reduced to $25,000 in consideration of $50,000 settlement payment) and 
  • suspended from participating in any firm commitment underwritings in any underwriting capacity for 6 months, and 
  • suspended thereafter for an additional 18 months from participating in any firm commitment underwritings as a lead managing underwriter. 

Ronald Mark Heineman

  • Heineman was fined $50,000 and 
  • suspended from association with any NASD member in any capacity for 2 months.

 

 

 





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