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.

2005
NASD CASES OF NOTE 

Hasegawa received a prospective public customer referral from an unregistered person, then paid the unregistered person a referral fee. Hasegawa engaged in electronic communications with customers from his personal computer, but failed to provide notice to his member firm, preventing the firm from discharging its obligations to review and retain outgoing correspondence relating to its securities business.

Censured; Fined $10,000

Finally, here is yet another case in which we see growing regulation of online conduct.  Folks, ask yourself before you use your computer to send any message or post any comments whether your conduct could be deemed "relating to the securities business."  It's not as clear-cut a question as you may think.

Williams submitted a falsified Series 7 examination score report to her member firm and failed to respond to NASD requests for information and documents. 

Barred

Taylor caused public customers’ accounts to be charged fees for investment advisory services that they had not authorized and did not receive, by forging, or causing to be forged, customers’ signatures on various documents to authorize the fees to be charged. He failed to respond to NASD requests for information.

Barred

Surankapan falsified and forged customer signatures on authorization letters and converted $24,000 of customers’ funds without the customers’ knowledge, authorization or consent. In an attempt to conceal his misconduct, changed the address of one of the customer’s accounts and, when the customer became aware of the unauthorized change of address and a wire transfer from the customer’s account, he created and sent the customer a letter on his member firm’s letterhead, without the firm’s knowledge, authorization or consent, falsely representing that the wire transfer was due to a firm system error which was then corrected. 

Barred

Morrison received $750 from public customers to pay the premium on a homeowner policy; instead, he deposited the funds to his personal checking account without the customers’ knowledge or consent.

Barred; Required to pay $750 in restitution

Mitchell, an associated person, prepared and issued, or caused to be prepared and issued to the trustees of the customer account, false account statements, confirmation statements and Forms 1099 of the Internal Revenue Service that purported to represent the performance of the customer account to conceal his misconduct, and that overstated the value of the customer’s account by several million dollars. 

Barred

Maryniw purchased securities in the securities account of a stockbroker, who was registered at a different NASD firm than Maryniw --- and he did so without notifying 

• the other NASD firm that he was associated with an NASD firm, and 
• his own firm that he had a beneficial interest in the other broker’s securities account. 

Maryniw participated in a private securities transaction in that he failed and neglected to give written notice to his employing NASD firm, and failed to receive written approval from his firm, prior to engaging in such activity. 

Fined $5,000; Suspended 10 business days in all capacities

Lieb attempted to compensate a public customer for penalties incurred when withdrawals from the customer’s IRA account were not returned to the account in a timely manner. Lieb wrote a personal check payable to the customer without informing his member firm that he had attempted to compensate the customer, and without obtaining authority from his firm to settle the loss in this manner. 

Fined $5,000; Suspended 10 days in all capacities.

Kwan obtained CDSC waivers for customers by misrepresenting that they were disabled. The waivers deprived mutual fund companies of fees that they were otherwise entitled to, and that caused her company’s books and records relating to the redemptions to contain false information regarding the customers’ disability statuses. Also, Kwan exercised discretion in public customers’ accounts of without written authorization.

Barred

Haskell participated in private securities transactions without providing written or oral notification to, or receiving prior written approval from, his member firm. He settled a customer complaint and did not inform his member firm of the customer’s complaints, or of his agreement to personally help repay the notes to the customer. 

Fined $5,000; Suspended 6 months in all capacities; Requalify as General Securities Representative

On behalf of his member firm, Feltz obtained a subordinated loan agreement for $5 million, but then entered into a side agreement with the lender that contradicted the terms of the secured demand note. The side agreement states that Feltz, on behalf of the firm, would not attempt to pledge, hypothecate or encumber the collateral for the note and that, in furtherance of the side agreement, a limited power of attorney was signed giving the lender control of a bank account containing the funds used for collateral. Feltz, on behalf of the firm, filed the required documents with NASD to get approval of the $5 million subordinated loan for net capital purposes without disclosing the side agreement and power of attorney to NASD. If the filing had not been misleading, NASD would not have approved the demand note. As a result, the firm was allowed to conduct business for over a year until NASD learned of the side agreement and power of attorney. When NASD’s approval was rescinded, the firm was forced to cease doing business for lack of adequate net capital. 

Fined $10,000; Suspended 3 months in all capacities

Esposito signed new account forms with the purported signature of another registered representative without his authorization. Esposito provided inaccurate, incomplete testimony during an NASD on-the-record interview. 

Barred

Belizaire published an unbalanced electronic bulletin board message on the Internet which failed to disclose material facts and to have sent a misleading, false, exaggerated and unwarranted e-mail to a public customer without his member firm’s prior approval. Also, he failed to respond to NASD requests for information.  

Barred

I wish the good folks  at NASD would take a page from the NYSE's book and begin to give us just a tad more meaningful information.  Again, don't take my word for it --- compare for yourself. For example, see the recent NYSE Romano case [Mitchell Allan Romano SFC/HPD 05-106/September 19, 2005]. Compare the NYSE's Romano decision with the NASD's Belizaire case, and you will see the chasm in reported information.  No, I'm not suggesting the NASD needs to issue as detailed a decision as the NYSE -- and I fully understand that the NASD's caseload is far more extensive than that of the NYSE; nonetheless, the devil is always in the details.

The Firm

• filed late, or did not file, amendments to the previously filed Forms U4 of persons registered with the firm and Forms U5 pertaining to persons formerly registered with the firm;
• failed to report, or reported late, matters that required disclosure within 10 days as required by NASD;
• reported late, did not report or inaccurately reported matters required to be included on quarterly statistical reports; and
• paid transaction-related compensation to a person previously, but no longer, registered with the firm. 

Individuals of the firm who were required to participate in an annual compliance interview did not. Written supervisory procedures documenting the supervisory system did not assign a principal with the responsibilities for the review of the firm’s supervisory system and procedures and for making recommendations to the firm’s management for changes to them; and the firm did not consistently and systematically enforce some of its written supervisory procedures. In addition, the firm’s supervisory system and procedures for its municipal securities business did not include provisions for record retention, new municipal securities accounts, transaction reporting, suitability reviews and mark-up reviews. 

The firm’s supervisory system and procedures were not reasonably designed to 

• achieve compliance with applicable rules;
• oversee the activities of the firm’s geographically dispersed sales force;
• assure that proper steps were taken to review the conduct of persons whose histories in the securities business indicated the propriety of heightened supervision;
• assure that proper steps were taken to recover firm records and property from persons whose registrations were terminated; and 
• timely report information required by NASD. 

Censured; Fined $122,500

I was also struck by what was a fairly new charge; namely, that the firm had failed to "recover firm records and property" from terminated registered reps.  Frankly, I wish NASD had explained this one in a bit more detail.  What exactly was the issue here --- that "confidential" records involving customer information had been taken?  

Pruco failed to file certain amendments to Forms U4 and U5 in a timely manner, and filed Forms U5 for terminated registered representatives late. The firm’s supervisory system and procedures were not reasonably designed to achieve compliance with its reporting obligations. 

Censured; Fined $550,000; Required to conduct internal audits to evaluate the effectiveness of its system for ensuring compliance with the reporting obligations of the Uniform Applications for Securities Industry Registration or Transfer (Form U4) and the Uniform Termination Notice For Securities Industry Registration (Form U5); and an officer of the firm must certify that such audits have occurred, that recommendations from the audits have been implemented, and that the firm has established systems and procedures reasonably designed to achieve compliance with NASD reporting requirements.

Pruitt failed to preserve memoranda brokerage orders and any other instruction given or received for the purchase or sale of securities, whether executed or unexecuted. 

Acting on behalf of her member firm, Pruitt also failed to

• preserve any of the firm’s internal or external email communications;
• print and review the firm’s email as required by the firm’s written supervisory procedures; and
• implement her firm’s written supervisory procedures for review of email correspondence.

Censured; Fined $20,000 ($5,000 joint/several with Firm)

Pardon me for a bit of sarcasm here, but, geez, you can't pile on in football but on Wall Street the regulators always seem to get in a couple of extra, late shots. Look, charge her with failing to preserve the orders. That's okay. Charge her with failing to follow the WSPs as pertaining to printing and reviewing emails.  But, come on folks, isn't it just a bit gilding the lily to also charge for failing to "implement" WSP procedures for failing to review emails when you already charged here with failing to review those same emails in accordance with the WSPs?  

Stewart accepted a $5,000 loan from a public customer without obtaining prior written approval from his member firm to borrow the funds. Also, Stewart failed to respond to NASD requests for information. 

Barred

While acting as treasurer of a business networking organization, Margossian forged the signature of the organization’s president on a company check, cashed the check and misappropriated $700 of the organization’s funds.

Barred

Levardsen took the NASD Series 7 examination, received a failing score of 45 percent, then altered the proctor’s report to reflect that he received a failing score of 65 percent. He then presented the altered proctor’s report to his firm’s managers, thereby misrepresenting that he had received a higher score than the one he actually received.

Fined $5,000; Suspended 6 weeks in all capacities

Lara prepared and submitted requests for reimbursement to his member firm for business travel expenses totaling $26,268 that he did not incur, and accepted the reimbursement payment knowing that he had not incurred the expenses for which he was being reimbursed. 

Barred

Kollar accepted $54,449 in compensation from an insurance company unaffiliated with his member firm for the sale of an annuity and an insurance policy to a public customer without providing notice to his member firm.

Fined $5,000; Suspended 30 days in all capacities

Hamlet settled verbal customer complaints without informing or obtaining authorization from his member firm. 

Fined $5,000; Suspended 3 months in all capacities

Bard 

• signed public customers’ names on client agreements/new account forms, discretionary power forms, variable annuity purchase applications and related documents, and third-party management agreements without the authority to sign the names;
• obtained signature guarantees for some of the signatures, notwithstanding that some of the signatures were fake;
• effected transactions in customers’ accounts based on oral or written discretionary power the customers had granted him but failed to obtain his member firm’s acceptance of the discretionary power; and
• effected a purchase of a variable annuity on behalf of a customer and guaranteed a minimum investment return, both orally and in writing. 

Barred

The Firm failed to comply with 

• its discovery obligations by failing to produce, in a timely manner, documents in its possession or control that were requested by the claimant; and
• orders issued by an arbitration panel requiring the firm to produce documents in its possession or control, or to submit an affidavit from its CEO providing specific information related to the production of documents. 

Censured; Fined $25,000; Required to revise its written supervisory procedures to notify all counsel representing the firm in arbitration proceedings of the firm’s policy to comply with discovery requirements as set out in the Code of Arbitration, and to comply with all orders of arbitration panels relating to discovery obligations

The Firm issued research reports that failed to 

• adequately disclose the valuation method used to determine price targets;
• adequately disclose the risks that may have impeded achievement of the price targets;
• contain disclosures on the front page of each report; and 
• prominently display the reference to the pages on which the disclosures were located.

In consideration of the above lapses, the Firm failed to present the required disclosures in a clear, comprehensive and prominent manner. 

Censure; Fined $10,000

Respondents violated Rule 3070 by failing to timely report customer complaints to NASD as statistical and summary information. 

The Firm failed to 

• properly train its registered representatives and other personnel with respect to the handling of customer complaints;
• adequately maintain and enforce supervisory procedures; 
• timely report customer settlements; and
• failed to timely amend a former registered representative’s Uniform Termination Notice for Securities Industry Registration (Form U5). 

Northwestern Mutual Investment Services, LLC: Censured; Fined $110,000

Diane Barbara Horn: Censured; Fined $15,000

Acting through Kuhns, the Firm 

• violated the membership rules by initiating a 50 percent transfer of its ownership to another person without giving prior notice, and without NASD approval; 
• failed to comply with their claimed exemption under Section 15(c) of the Exchange Act in that during various periods of time, the firm acted as the placement agent for a private offering and held customer funds in a firm bank account; 
• used the instrumentalities of interstate commerce to conduct a securities business while failing to maintain its minimum required net capital; and
• failed to make, maintain and preserve required customer information records and/or subscription agreement documents for offering investors. 

Kuhns Bros and Kuhns: Censured; Fined $15,000 joint/several

Without admitting or denying the allegations, the firms and individuals consented to NASD's findings of advertising and supervisory failures and agreed to the imposed sanctions.

In a September 2004 complaint, NASD charged DLA and David Lerner with using 11 radio advertisements and other communications between May 2001 and May 2003 that contained numerous statements and claims that were misleading, exaggerated or unwarranted. The firm advertised heavily on New York metropolitan area radio stations with 60-second spots that ran several days a week, frequently throughout the day. DLA spent $2.3 million during the review period on radio ads, which represented 71 percent of its total marketing expenditures. As the spokesman for the firm, David Lerner narrated all of the ads. A recurring theme of the radio advertisements was the concept of “providing returns of 10 percent and more” to “tens of thousands” of customers. 

• “For 25 years, we at David Lerner Associates have provided tens of thousands of people with investments that, even in these turbulent times, continue to pay over 10%.” 
• “We are currently providing returns of 10 percent and more in investments that have nothing to do with the stock market.” 

The firm’s advertisements also suggested that individuals who invested with DLA would retain the value of their assets regardless of market conditions, or would regain prior losses sustained in the stock market downturn in 2000. 

• “While past performance can never be a guarantee of future results, we at David Lerner Associates are proud and pleased that for 26 years, tens of thousands of our investors have been receiving high income and solid returns regardless of whether interest rates or the stock market went up or down.” 
• “By counseling them to select value-oriented investments, our clients have not only weathered the financial storm, they have actually seen their income grow and their assets more than hold their value.” 

Like radio advertising, investment seminars were also important to the firm’s marketing efforts. During the relevant period, the firm conducted approximately 70 to 80 seminars for the public, with Lerner appearing as the principal speaker at each seminar. As with the radio ads, the firm did not have factual support for many of the claims and also failed to disclose material information. 

SSH Securities, Inc. prepared inaccurate fact sheets distributed by DLA to promote its Spirit of America proprietary family of mutual funds. 

Dempsey, the principal of DLA responsible for approving advertisements, failed to discharge his supervisory responsibilities. 

David Lerner Associates: Fined $115,000; Ordered not to conduct any public seminar for 30 days; Ordered to pre-file all sales literature and advertisements with NASD's Advertising Regulation Department for at least 10 days prior to their first use for a period of 6 months

SSH Securities, Inc.: Fined $10,000

David Lerner: Fined $25,000

John Dempsey: Fined $25,000; Suspended for 30 days in principal/supervisory capacity

Alas, there's so much we don't know from those fairly circumspect NASD press releases.  Hey guys, maybe spend a bit less time looking up synonyms and a bit more time on improving your response times.  

Winslow engaged in trading activities that resulted in negative equity balances in his accounts totaling $750,000. His financial inability to eliminate the negative equity balances in his accounts caused his member firm and the clearing firm to incur substantial losses. 

Suspended 30 business days; Ordered to comply with the terms and conditions of the General Release and Settlement Agreement with the clearing firm.

Wilson affixed a notary public’s signature and seal without the knowledge or authorization of the notary public. 

Fined $5,000; Suspended 60 days in all capacities.

Swiat received $300 in cash from a public customer for investment purposes and failed to promptly use the customers funds as instructed. Swiat created and gave to the customer a fictitious order ticket and a fictitious receipt on which he signed his member firm’s branch office manager’s name without his knowledge or consent. He misused customer funds by failing to follow instructions, in that he used the funds for some purpose other than the benefit of the customer. 

Barred

Santangelo disseminated, by email, material confidential and non-public information to different institutional customers concerning stock preferences and trading for other large institutional customers. Santangelo improperly disseminated, by email, draft research reports to institutional customers without the prior approval of a registered principal of his member firm. 

Fined $50,000; Suspended 60 business days in all capacities

Reed did not disclose to her member firm that the data on the applications for public customers’ variable life insurance had been altered by her and was not the product of the paramedical examiner.

Fined $5,000; Suspended 6 months in all capacities

Gary Allen Randa
AWC/E8A2004082401/October 2005

Randa fraudulently obtained a public customer’s checkbook without the consent or knowledge of the customer, forged the customer’s signature on deposit slips and checks totaling $60,500, made them payable to himself, and deposited the funds in his bank account, thereby converting the customer’s funds to his own use and benefit. 

Barred

Margolis commingled a public customer’s funds with his own in that he deposited $10,000 in cash from a customer into his personal bank account and simultaneously had the bank issue a $9,990 check, and used the check to pay the semi-annual premium for a variable life insurance policy owned by customer’s wife. 

Fined $2,500; Suspended 15 business days in all capacities

Lazarus knowingly and intentionally 

• entered priced limit orders to buy or sell shares of NASDAQ securities into an Electronic Communications Network (ECN) at prices that he knew would improve, and were intended to improve, the National Best Bid or Offer (NBBO) in such securities; and 
• bought and sold shares of these securities at prices that were lower than he would otherwise have been able to buy, thereby obtaining a financial benefit. 

Lazarus caused to be published or circulated 

• limit orders at prices that affected the NBBO and became quotations for the securities, without believing that those quotations represented bona fide bids or offers for the securities; and
• purchases and sales of securities that he did not believe were bona fide purchases and sales. 

Fined $30,000; Suspended 42 days in all capacities; Ordered to disgorge $1,413.35 (plus interest)

Kelsey asked a colleague to notarize 401(k) rollover forms, knowing that the signatures for the participants’ spouses were not genuine.

Fined $5,000; Suspended 6 months in all capacities; Required to requalify in all capacities

Huston photocopied a public customer’s signature onto nine trading authorization forms used in connection with penny stock transactions without the customer’s knowledge or consent. 

Fined $5,000; Suspended 60 days in all capacities

Harper knowingly notarized 401(k) rollover forms that contained non-genuine signatures. 

Fined $10,000; Suspended 18 months in all capacities; Required to requalify

Daniels invested $5,000 in a variable annuity that required a minimum investment of $10,000 for a public customer with the notation that it was an initial deposit and additional funds would follow. When the insurance company failed to receive the additional $5,000, it issued a check canceling the customer’s application and returned the initial deposit. Without the knowledge or consent of the customer, Daniels negotiated the $5,000 check and misappropriated the proceeds to his own use and benefit.  Daniels failed to respond to NASD requests for information.

Barred

Aretz borrowed $25,000 from a public customer in contravention of the firm’s written procedures, and although he repaid the loan with interest, he did so only after the customer complained to NASD and his firm. 

Fined $5,000; Suspended 60 days in all capacities.

Amore engaged in securities transactions at his member firm that required him to be registered with NASD; and he failed to appear for an NASD on-the-record interview. 

Barred

The Firm failed to enforce written supervisory procedures for special supervision of registered representatives who had a history of customer complaints.

Censured; Fined $25,000

Firm failed to 

• timely 
  • file disclosures for reportable events to NASD within 10 business days after learning of such events;
  • report complaints to NASD by the 15th day of the month following the calendar quarter in which the complaints were received; and 
• promptly update Forms U4 and U5 for events that required regulatory disclosure. 

The Firm had inadequate written supervisory procedures relating to prompt reporting of events requiring regulatory disclosure filings. 

Fined $54,250

The Jeffrey Matthews Financial Group, L.L.C. 
AWC/E9B2004025501/October 2005

The Firm's supervisory system and procedures were not reasonably designed to ensure that the required written consent was obtained before pre-registration searches on WebCRD, and that the firm retained the required documentation. 

Censured; Fined $75,000

The Firm developed and implemented an AML program that was not reasonably designed to achieve and monitor compliance with the requirements of the Bank Secrecy Act and the implementing regulations thereunder. Also, the firm allowed a representative to maintain his registration as a general securities representative through his purported association with the firm, when in fact he was not actively involved in the firm’s securities business or otherwise functioning as a representative of the firm. 

Censured; Fined $10,000

The Firm failed to develop and implement an AML program reasonably designed to achieve and monitor its compliance with the requirements by failing to implement an adequate customer identification program in that the firm did not adequately verify the identity of new customers. 

Censured; Fined $10,000

Firm's anti-money laundering (AML) compliance program failed to implement procedures required by the firm’s customer identification program by failing to establish and maintain records of information obtained and reviewed to verify the identity of 49 customers of 50 new accounts opened. The Firm’s independent test of its AML program was limited to certain aspects of the firm’s AML program as opposed to the entire program. 

Censured: fined $10,000

Acting through St. Clair, the Firm 

• failed to establish, maintain and enforce taping procedures for supervising the telemarketing activities of all of its registered persons;
• sent a signed “certification regarding special written supervisory procedures for compliance with NASD 3010(b)(2)” to NASD that contained material misrepresentations; 
• failed to establish and implement policies and procedures that were reasonably designed to achieve compliance with the Bank Secrecy Act and regulations thereunder, by failing to have procedures to monitor accounts for described red flags, and failing to identify and adequately investigate suspicious activity in customer accounts despite the existence of red flags;
• failed to establish, develop and implement an adequate supervisory system or procedures allowing the firm to monitor, achieve and retrieve instant messages sent and received by its registered persons, and the use by its registered representatives of email; and
• failed to establish and maintain a system of supervision reasonably designed to ensure compliance with the rules of NASD and the applicable laws and regulations.

The firm also failed to obtain foreign bank certifications, and failed to have supervisory procedures designed to prohibit insider trading in accounts maintained for public customers.

Viewtrade Securities, Inc.: Censured; Fined $185,000 ($30,000 jt/sev with St. Clair); Required to retain an independent consultant to conduct a complete audit of the firm’s policies, practices and procedures

James St. Clair, Jr.: Fined $30,000 jt/sev with Firm; Suspended 18 months in principal capacity

Acting through Campen, the Firm 

• reported customer complaints with inaccurate information and failed to report, or reported late, matters that required disclosure within 10 days pursuant to NASD Rule 3070;
• reported late amendments to Forms U4 and U5 and did not disclose information required to be disclosed on a Form U5;
• failed to establish a supervisory system; and 
• failed to establish, maintain and enforce written supervisory procedures reasonably designed to achieve compliance with applicable NASD rules pertaining to Rule 3070, reporting the timely and accurate filing of Forms U4 and U5, and the suitability of mutual funds share class recommendations. 

Acting through Lempe, the Firm recommended the purchase of mutual fund “Class B” shares to customers for whom a recommendation of “Class A” shares would have been economically more beneficial. 

Acting through an employee, the Firm failed to supervise the activities of registered representatives who were employing trading strategies with customers located abroad in a manner reasonably designed to achieve compliance with NASD rules. 

Censured; Fined $70,000 jt/sev with Campen (includes $65,083 restitution); required to attest in writing that it complied with the requirements of NASD Rule 3070

Fined $70,000 jt/sev with Firm (includes $65,083 restitution); Suspended 15 business days in principal capacity

Fined $224,618; Suspended 6 months in all capacities

Trigillo affixed a customer’s signature to securities related documents without the customer’s knowledge or consent; and transferred a customer’s funds from a fixed annuity to a variable annuity without the customer’s knowledge or consent. Trigillo affixed another registered representative’s signature on customer forms without the registered representative’s knowledge or consent. In addition, Trigillo engaged in outside business activity without providing prompt written notice to his member firm. 

Barred

Travaglianti signed or affixed customer signatures on firm account documentation for public customers as an accommodation to the customers in question and failed to disclose this fact to his member firm. 

Fined $5,000; Suspended 9 months in all capacities

Medansky obtained a credit card in the name of an individual by submitting an application and representing himself to be the individual. He then used the credit card to obtain goods, services or funds for his own benefit. He made payments on the card’s balance due, accepted an offer of a second credit card, and cashed a $500 promotional check drawn on the account of the credit card company payable to the individual. 

Barred

Hetzer filed an anonymous complaint on the SEC’s and NASD’s Web sites, posing as a public customer, without the customer’s knowledge or consent. In addition to falsely identifying herself as the customer, the material allegations in the NASD and SEC Web site postings were false. 

Fined $5,000; Suspended 60 days in all capacities.

Gibson failed to ensure that his member firm accurately computed its net capital and complied with its minimum net capital requirement. 

Fined $2,500; Suspended 2 months in FINOP capacity

Caska actively engaged in the management of a former member firm’s investment banking or securities business without being registered as a general securities principal. Acting on behalf of his member firm, he failed to file an application with NASD prior to transferring 25 percent or more of the firm’s assets or brokerage business to another NASD member firm. 

Fined $10,000; Suspended 15 business days in all capacities

The Firm allowed 

• allowed a representative to perform duties as a registered person while his registration with NASD was inactive due to his failure to complete the regulatory element of the continuing education program; 
• permitted employees to function in a capacity that required fingerprinting under SEC Rule 171-2, but failed to submit fingerprint cards to NASD; 
• failed to file Forms U5 for representatives in a timely manner, in contravention of Article V of NASD’s By-Laws;
• failed to establish, implement and enforce policies, procedures and internal controls that were reasonably designed to achieve compliance with all requirements imposed by the Bank Secrecy Act and books and records retention requirements. 

Also, the firm’s supervisory system and procedures were not reasonably designed to ensure that the required written consent was obtained before pre-registration searches on Web CRD and that the firm retained the required documentation. The firm did not maintain and preserve all electronic instant messaging as required and failed to report trades within 90 seconds of execution.

Censured; Fined $125,000

The firm received notice of events that were subject to the reporting requirements of NASD Rule 3070(a), but failed to 

• report to NASD within 10 business days after it knew or should have known of the existence of the reportable events;
• report customer grievances to NASD as statistical and summary information by the required deadline; and
• prepare and maintain adequate written supervisory procedures to ensure compliance with NASD Rule 3070(a)

Censured; Fined $75,000

Acting through a representative, the firm permitted an individual to maintain his securities license with the firm although he was not actively involved in its investment banking or securities business, and permitted an individual to act as the firm’s FINOP, although she possessed an inactive registration status with NASD. Also, the firm reported Trade Reporting and Compliance Engine (TRACE)- eligible securities and municipal securities transactions late or with the wrong MPID. 

Censured; Fined $10,000 (includes $5,000 jointly/severally with an unnamed individual)

Acting through York, the Firm 

• entered into an account purchase contract with a public customer that contained restrictive language prohibiting the customer from disclosing any information regarding the contract to securities regulators; and
• failed to maintain a record of the complaints filed by a customer, failed to file the customer’s complaint with NASD within 10 business days, and failed to amend York’s Form U4 as a securities representative to disclose a customer’s complaint. 

Interactive Planning Corp. and Lawrence St. John York: Censured; Fined $10,000 joint/several

Acting through Zubchevich, the Firm failed to 

• prepare a written needs analysis and training plans for the firm element of the continuing education program; 
• show that the training was executed and that all covered persons attended; and 
• establish a bank escrow account to safeguard customer funds for contingent private placement offerings and failed to maintain records reflecting the receipt and disbursement of customer funds. 

Also, the firm failed to develop and implement an anti-money laundering (AML) program that was reasonably designed to achieve and monitor compliance with the requirements of the Bank Secrecy Act and the regulations promulgated thereunder.

Gryphon Finanical Securities Corp.: Censured and Fined $17,500 (includes $12,500 joint/several with Zubchevich

Younis Zubchevich: Fined $12,500 joint/several with Gryphon

AWC/ELI2002004801/September 2005

Acting through Mekalainas, Great Eastern Securities failed to timely report on registered representatives Forms U4 (Uniform Applications for Securities Industry Registration or Transfer) :

• customer complaints that alleged one or more sales practice violations and contained a claim for compensatory damages of $5,000 or more; and
• settlement of a customer complaint that alleged one or more sales practice violations and was settled for an amount of $10,000 or more. 

Also, the firm permitted excessive commissions to be charged in agency transactions. Additionally, the firm permitted its president to conduct a securities business while his securities registration was inactive due to his failure to satisfy the continuing education regulatory element in a timely manner. 

Great Eastern Securities, Inc.: Censured; Fined $15,000 (includes $5,000 joint and several with an unnamed individual and $5,000 joint/several with Mekalainas, Jr.)

Alphonse Mekalainas, Jr.: Fined $5,000 joint and several with Great Eastern Securities, Inc.; Suspended 5 days in Principal/Supervisory capacities

Hennion & Walsh, Inc. 

• failed to report written grievances from public customers on quarterly reports and reported written grievances from customers in an untimely manner. 
• solicited and received payment from public customers for the purchase of shares prior to the effective date in the underwritings of closed-end mutual funds in violation of Section 5(a) of the Securities Act of 1933; and
• acting through Walsh and Hennion, 
  • failed to establish and maintain a supervisory system and written supervisory procedures reasonably designed to achieve compliance with applicable securities laws, regulations and NASD rules. 

Hennion & Walsh, Inc.: Fined $35,000 ($15,000 joint/several with Walsh and also with Hennion); Suspended as an underwriter or selling group member for any offering of closed-end mutual funds for 30 days; Required to retain an independent consultant to review and make recommendations concerning the adequacy of the firm’s current policies and procedures relating to past deficiencies, as well as the firm’s 3070 reporting, underwriting activities, and suitability of recommendations. 

William Walter Walsh: Fined $15,000 joint/several with Hennion & Walsh, Inc.; Suspended 10 business days in Principal capacity

Richard Hennion: Fined $15,000 joint/several with Hennion & Walsh, Inc.; Suspended 10 business days in Principal capacity

Respondents engaged in a course of conduct involving the unregistered offer and sale of common stock and promissory notes, in that Smith and Sweeney

• failed to establish and maintain a supervisory system reasonably designed to achieve compliance by Cardinal Capital Management, Inc., and its registered representatives with applicable sales practice rules (thus failing to reasonably supervise its registered representatives);
• failed to ensure full disclosure of all material facts, including the risks associated with the purchase of the notes, to the note purchasers; 
• sent sales communication to shareholders that contained exaggerated statements and price predictions concerning the stock;
• personally guaranteed the repayment of the notes when they had no reasonable basis for believing that they could fulfill their obligation; 
• failed to prepare and preserve records for each transaction as required by Securities Exchange Act Rules 17a-3 and 17a-4;
• failed to reflect said transactions on the firm’s books and records, and issued promissory notes to public customers without their knowledge or authorization;
• held customer subscription funds in a firm bank account before forwarding the funds onto the issuer; and
• failed to respond to NASD requests for information. 

Cardinal Capital Management, Inc.: Expelled

Hershel Francis Smith, Jr.and Christopher Alan Sweeney: Barred in all capacities

Rodriguez sent a letter to a public customer concerning a transaction in the customer’s account that was not on firm letterhead, was not made available for supervisory review, and was sent without his member firm’s knowledge or consent. 

Fined $10,000; Suspended 10 business days in all capacities

Holland failed to ensure that his member firm included a $500,000 settlement agreement as a liability of the firm. He filed inaccurate FOCUS Reports with NASD that significantly overstated the firm’s net capital position and Holland failed to give NASD notice of the firm’s net capital deficiencies.  Holland participated in private securities transactions and failed to give his member firm prior notice of his transactions involving a stock, his role therein, and whether he might receive compensation in connection with the transactions.

Fined $25,000; Suspended 1 month in all capacities; Suspended 3 months in principal capacity

Grinkmeyer failed to perform certain supervisory duties, including delegating certain compliance responsibilities to his unregistered assistant, failed to show evidence of review of and follow-up on certain exception reports, and failed to provide copies to his firm of certain executed forms. In addition, registered representatives assigned to Grinkmeyer’s Office of Supervisory Jurisdiction (OSJ) effected all transactions under his advisor number and, as a result, neither Grinkmeyer nor his firm could monitor the activity of individual registered representatives. 

Fined $10,000; Suspended 1 month in general securities principal capacity

Grafenauer falsified internal documentation so that he would be able to utilize uncompensated interns to promote his securities business and that of his partner. 

Barred

Jones impersonated another registered representative of his member firm who was scheduled to complete a firm element continuing education training module, and completed the training module in his place. Subsequently, Jones submitted a completion certificate to the firm, falsely indicating that the other representative had completed the training module, causing the firm’s books and records to be inaccurate. 

Fined $5,000; Suspended 18 months in all capacities

Fernandez learned that another registered representative of his member firm had 

• impersonated him and had completed the firm element continuing education training module in his place; and
• submitted a completion certificate to the firm falsely indicating that Fernandez had completed the training module, causing the firm’s books and records to be inaccurate.

However, Fernandez failed to take any action to correct the firm’s books and records or to report the other representative’s misconduct. 

Fined $5,000; Suspended 18 months in all capacities

Buchanan consented to the described sanctions and to the entry of findings that member firms, acting through Buchanan, engaged in the securities business while failing to have and maintain sufficient net capital. 

Fined $15,000; Suspended 20 business days in all capacities.

Bourdreaux engaged in a scheme to evade federal cash reporting requirements by advising the purchase of multiple money orders in amounts less than $3,000 and causing money orders totaling $11,650 to be deposited into a brokerage account maintained at his member firm. Also, Bourdreaux failed to respond to NASD requests for information.

Barred

Alb agreed to deposit $18,200 in cash received from another person into a bank account that Alb maintained at a bank where he worked, made two separate deposits of less than $10,000 on separate days to his account at the bank, and then gave the person from whom he had received the cash a check for $18,500. Alb intended to prevent the bank from filing a currency transaction report as required by federal law for any cash deposit exceeding $10,000. 

Barred

The Firm

• failed to report in a timely manner customer grievances required to be reported with quarterly statistical information or no more than 10 days following the firm’s discovery;
• failed to amend Forms U4/U5; 
• failed to ensure that registered representatives of the firm participated in a required annual compliance interview;
• failed to ensure that registered representatives of the firm completed one or both of two components of the required firm element continuing education program;
• settled a customer complaint by means of a settlement agreement that contained language implying that the customer could not voluntarily assist NASD or any self-regulatory organization with respect to the subject matter of the settlement;
• utilized two forms of written supervisory procedures that evidenced two forms of supervisory systems, both of which were not reasonably designed to achieve compliance with the reporting obligations of NASD Rule 3070, requirements to amend Forms U4 and U5, requirements to monitor for compliance with variable annuity and mutual fund compensation rules, rules pertaining to retail transaction in fixed income securities and corporate bond trading, continuing education provisions, SEC Rule 15c2-12, and the requirements for office inspections in NASD Conduct Rule 3010; and
• did not enforce its supervisory system and procedures relating to annual compliance interviews, firm element continuing education, office inspections, and advertising and sales literature reviews.

Censured; Fined $35,000

Firm permitted an individual to park his registration with the firm by maintaining his registration as a general securities representative through his purported association with the firm when, in fact, he was not actively involved in the firm’s securities or investment banking business or otherwise functioning as a representative of the firm. Acting through an individual, the firm failed to designate properly a branch office as an Office of Supervisory Jurisdiction (OSJ). The firm inaccurately reported to the MSRB the capacity for transactions by publishing an extraneous transaction report, failing to timely report transactions, and inaccurately reporting inter-dealer transactions as customer transactions. The firm failed to report accurately the capacity on certain customer confirmations. 

Censured; Fined $13,500 ($6,000 jointly/severally with an unnamed individual)

CJS Securities, Inc. permitted its analysts to sell securities issued by companies for which the analysts were primarily responsible for research coverage at times when the firm’s recommendation was to buy or hold the security. The firm’s analysts bought or sold securities issued by companies for which the analysts were primarily responsible for research coverage during a period of time prior to or after the issuance of research reports concerning those companies. Also the firm issued research reports covering companies from which the firm had received, or expected to receive, compensation for investment banking services in connection with participation in public offerings of the companies’ securities. The firm did not have written supervisory procedures reasonably designed to achieve compliance with NASD Rule 2711. 

Censured; Fined $40,000

The Firm

• used the mails or other means or instrumentalities of interstate commerce to effect transactions in securities when it failed to maintain the minimum required net capital;
• prepared inaccurate trial balances, general ledgers, and net capital computations;
• filed FOCUS IIA reports that overstated the member’s net capital;
• failed to prepare and maintain adequate written supervisory procedures to ensure that employees whose registrations were subject to numerous strict supervisory guidelines and restrictions by several state securities regulators remained in compliance with those restrictions; and
• failed to obtain NASD approval prior to effecting a material change in business operations in that the firm increased the number of associated persons involved in sales activities beyond the limits delineated in IM-1011-1: IM-1011-1. Safe Harbors for Business Expansions

Censured; Fined $22,000

Acting through Schumacher, the firm 

• failed to establish and maintain a supervisory system, including adequate written supervisory procedures, reasonably designed to achieve compliance by the firm and its representatives with numerous NASD rules; and
• permitted a registered representative to conduct a securities business while his registration was inactive. 

In addition, the firm failed to conduct independent testing of its antimoney laundering (AML) compliance programs, collect all required information for wire order/transfers, review wire orders, and verify the identities of customers who open accounts in violation of NASD Rules 2110 and 3011. 

Strasbourger Pearson Tulcin Wolff Inc.: Censured; fined $30,000 ($12,500 joint/several with Schumacher)

Michael J. Schumacher: Fined $12,500 joint and several with firm; Suspended 15 business days in principal capacities.

The firm 

• commingled customer securities with non-customer securities to collateralize bank loans;
• neglected to report to the Trade Reporting and Compliance Engine (TRACE) the underlying yield to inter-dealer corporate debt security transactions; and
• failed to make a timely transaction report to TRACE. 

Acting through Carrigg, the firm collateralized the loan set up for firm trades with a customer security position that was not fully paid and permitted a customer’s fully paid securities to remain in a non-control location for an extended period of time. 

Stoever, Glass & Company Inc.: Censured; Fined $7,000 joint and several with Carrigg; Fined an additional $5,000

Michael Francis Carrigg: Censured; Fined $7,500 joint and several with firm; Suspended 10 business days in FINOP capacity

Acting through Helbock, the Firm permitted a statutorily disqualified person to be associated with and conduct activities on behalf of the firm. The firm executed order tickets for equity and municipal transactions that were deficient, and was late in reporting municipal securities transactions executed by the firm. 

Jersey Shore Trading Group,Inc.: Censured; Fined $25,000 ($15,000 of which joint/several with Helbock)

John F. Helbock: Fined $15,000 (Joint/several with firm); Suspended 30 business days in principal/supervisory capacity

Quirini created and distributed sales literature in the manner of form letters to the public, which the firm failed to file with NASD’s Advertising Regulation Department. These form letters contained statements that 

• exaggerated the safety of the products
• failed to reflect the risks of fluctuating prices and the uncertainty of rates of return and the yield of investments;
• failed to provide balanced presentations of the risks and rewards of the products offered
• failed to disclose material information regarding the risks of each proposed investment, and 
• failed to provide a sound basis for evaluating the recommendations contained in the letters. 

The firm failed to adequately and properly supervise the use of these form letters and failed to establish, maintain, and enforce adequate written supervisory procedures designed to achieve compliance with applicable securities laws and regulations. 

David A. Noyes & Company: Censured; Fined $10,000 (jointly and severally with Quirini) and fined an additional $30,000; Must obtain a “no objection” letter from the NASD Advertising Regulation Department on any proposed sales literature or advertising prior to its use for one year.

Anthony Michael Quirini: Fined $10,000 (jointly and severally with firm); suspended 10 business days all capacities

Zdzieblowski willfully failed to disclose material information on his Form U4. 

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

On or about March 28, 1998, Michigan law enforcement charged Zdzieblowski with retail fraud, a misdemeanor. On July 29, 1998, Zdzieblowski pleaded guilty to the charge. The court placed him on probation for 12 months and ordered that he pay a fine and court costs. On or about December 30, 2001, Zdzieblowski submitted a Form U4 in connection with his registration as an investment company/variable contracts representative for USAllianz. On the Form U4, the Hearing Panel found that Zdzieblowski willfully failed to disclose that he had been charged with and convicted of a misdemeanor involving theft or wrongful taking of property. 

The NAC did not believe the record supported a finding that he had been convicted because the Court may not have "legally" accepted a guilty plea (but merely took the plea under advisement for one year and then closed the case). Nonetheless, the NAC was satisfied that the Respondent willfully failed to disclose the "charge" --- and that renders him statuorily disqualified in its own right.

Upon the request of public customers, Sibaja completed forms on their behalf to change the names of ownership on two of their accounts. After submitting the forms, Sibaja was notified that the forms were outdated and that the customers needed to submit an original, executed form for each account. However, in an attempt to accommodate the customers, he cut the customers’ signatures from the outdated forms and pasted them onto the new forms without the customers’ knowledge or consent. 

Fined $5,000; Suspended 45 days in all capacities

Kirsch provided false testimony about his activities at an NASD on-the-record interview. Also, he performed supervisory duties while subject to a 30-day suspension and failed to reasonably supervise his research department prior to his 30-day suspension to ensure that a research report issued by his member firm was accurate. 

Barred

While not licensed to sell securities in the states of New Jersey and Indiana and in order to circumvent securities licensing requirements, Inferrera entered into an arrangement with registered representatives who were properly registered. As a part of this arrangement, he created inaccurate records related to public customer accounts so that other representatives appeared as the registered representatives of the record when he was actually handling the customers’ accounts (the other registered representatives entered securities transactions for New Jersey and Indiana public customers on Inferrera’s behalf).

Fined $10,000; Suspended 6 months in all capacity.

Hook loaned $6,100 to public customers to be deposited into their account at his member firm for the purchase of shares of stock. Hook guaranteed public customers against loss in connection with the purchase of shares in a company. He opened a brokerage account for a public customer by completing and signing “New Account Approval” and “Client Option Agreement and Approval” forms (the information on the forms was inaccurate). 

Hook shared in the account of a public customer of his member firm by funding all transactions with his own funds and keeping all but $1,000 of the account proceeds for himself without obtaining prior written authorization from his member firm.  Hook executed unauthorized purchase and sale transactions in the account of a public customer; and exercised discretion in the accounts of public customers without having obtained prior written authorization from the customers and without prior written acceptance of the accounts as discretionary by his member firm. Hook recommended unsuitable purchase and sale transactions in the account of a public customer.

Barred

Hoffman and McCaffrey failed to 

• adequately supervise a representative with a view to prevent him from publishing fraudulent research reports; and
• respond adequately to red flags that the representative made unreasonable research assumptions that led him to publish unrealistically bullish ratings and price targets. 

John Baldwin Hoffman
Censured; Fined $120,001 (includes $1 disgorgement)[fines to be reduced by the amounts paid pursuant to an SEC Order]; Suspended 15 months in all capacities

Kevin Johnson McCaffrey
Censured; Fined $120,001 (includes $1 disgorgement)[fines to be reduced by the amounts paid pursuant to an SEC Order]; Suspended 15 months in all capacities

Blaylock wrongfully obtained employer funds by submitting travel and expense reports containing personal expenses, and received reimbursement of $22,700, to which he was not entitled. He submitted materially inaccurate reports and firm books and records by submitting expense reports containing personal expenses, occasionally using default names to complete the expense form when he could not recall the person entertained, and occasionally adding to the list of attendees to bring down of average cost. 

Fined $125,000; Suspended 20 business days all capacities

The Firm violated recordkeeping requirements in that the firm failed to preserve for three years certain electronic mail communications received by its employees that related to its business as a broker, dealer, or member of an exchange. The Firm failed to have a systematic means to retain electronic communications related to its business that were reasonably designed to achieve compliance with SEC and NASD rules. 

Censured; Fined $80,000

The Firm’s supervisory system and procedures were not reasonably designed to ensure 

• that required written consent was obtained before any pre-registration searches on Web CRD and that the Firm retained the required documentation;
• compliance with email retention requirements. 

The findings also stated that the Firm permitted individuals to perform duties as a registered person while their registration with NASD was inactive due to their failure to complete the Regulatory Element of NASD’s Continuing Education Program. 

Censured; Fined $200,000; Required to review its written supervisory procedures and establish a supervisory system to address deficiencies relating to pre-registration Web CRD researches and its procedures regarding the preservation of electronic mail communications for compliance with NASD rules and federal securities laws and regulations. 

American Express Financial Advisors Inc. failed to 

• have adequate procedures in place to monitor whether the managing principal representative (MPR) performed certain supervisory reviews of the office of supervisory jurisdiction (OSJ), or to identify and review transactions by individual registered representatives under the MPR’s supervision.
• reasonably ensure that the OSJ forwarded copies of letters regarding mutual fund switches to the home office on a consistent basis, as required by its written supervisory procedures. 

Censured: Fined $25,000; Required within 30 days to provide NASD staff with a report attesting to, and setting forth the details of, its implementation of procedures correcting supervisory deficiencies. 

Shilling purchased and sold securities in a manner inconsistent with recommendations made in his research reports, and sold common stock shares in two insurance companies that were restricted prior to the publication of the report. The Firm and Shilling issued research reports that failed to provide distribution of ratings and price chart information. Acting through Shilling,the Firm failed to adopt and implement any written supervisory procedures reasonably designed to ensure compliance with NASD Conduct Rule 2711: Research Analysts and Research Reports

A. Gary Shilling & Co., Inc.
Censured; Fined $15,000 jointly and severally with Shiling

Albert Gary Shilling
Censured; Fined $30,000 ($15,000 jointly and severally with A. Gary Shlling & Co.)

The Firm permitted Doley and Mireskandari to perform duties as registered persons when they failed to complete the Regulatory Element of NASD’s Continuing Education Requirement. 

Acting through Doley, the Firm failed to 

• develop and implement a written anti-money laundering (AML) program reasonably designed to achieve and monitor the firm’s compliance with the requirements of the Bank Secrecy Act and the implementing regulations promulgated by the U.S. Department of Treasury; and
• establish adequate supervisory procedures. 

Acting through Doley and Mireskandari, the Firm failed to make required disclosures and certifications in a research report that reported on a publicly traded entity.

Acting through Grattan, the Firm 

• permitted an individual, while he was statutorily disqualified, to become an associated person with the firm; and
• failed to take timely or adequate supervisory action designed either to ensure that the firm complied with the requirements of Article III, Section 3(b) of NASD’s By-Laws or to ensure that a statutorily disqualified individual did not associate with the firm. 

Grattan Financial Securities, Inc.
Fined $20,000 jointly and severally with Grattan

Georgene Marie Grattan (Principal) 
Fined $20,000 jointly and severally with Grattan Financial; Suspended 45 days in principal capacity; Required to requalify as general securities principal

Mineart, acting as the firm’s registered options principal, failed to adequately supervise a representative by allowing the representative to recommend and execute options transactions when Mineart knew or should have know that the transactions were unsuitable for customer. 

Berthel, Fisher & Company Financial Services, Inc.
Fined $10,000 jointly and severally with Mineart

Craig Vincent Mineart (Principal)
Suspended 10 business days in principal/supervisory capacities

Acting through Shino, the Firm failed to 

• report customer complaints and an arbitration award, and reported customer complaints late; and 
• file and amend Forms U4 and U5 in a timely manner. 

Also, the Firm failed to maintain accurate financial records and filed inaccurate FOCUS reports. Also the Firm failed to maintain its required minimum net capital and accepted funds for investment in a private placement, but did not forward the funds to an account established in accordance with SEC Rule 15c2-4. The Firm executed transactions in long-term options for which customers were charged commissions that were excessive in light of relevant factors. The Firm’s supervisory system was not reasonably designed to achieve compliance with NASD conduct rules related to excessive options commissions.

Berry-Shino Securities, Inc.
Censured; Fined $45,050 (includes $7,550 disgorgement; $10,000 of the fine is joint and several with Shino, and $5,000 is joint and several with another individual) 

Ralph Matthew Shino (Principal)
Censured; Fined $10,000 joint and several with Berry-Shino Securities, Inc.

Weaver engaged in the fraudulent offer and sale of unregistered securities in the form of limited partnership interests through ostensibly separate offerings to public customers, and each offering was made pursuant to a private placement memorandum that contained numerous misrepresentations and omitted to state several material facts. Weaver failed to respond to NASD requests to appear and provide on-the-record testimony.

Barred; Ordered to pay $547,468 plus interest in restitution to public customers.

Pizzirusso entered into an agreement with a registered representative in order to circumvent securities licensing requirements. Pizzirusso falsified a public customer’s account records so that he appeared as the registered representative of record. 

Fined $10,000; Suspended 15 business days in all capacities

Paterno engaged in fraudulent and deceptive devices and contrivances involving trading in stocks through the use of instrumentalities of interstate commerce, the mails, or a facility of any national securities exchange. Acting through his member firm, Paterno failed to act with reasonable diligence to ascertain the best inter-dealer market for the subject securities, and failed to act diligently to ensure that the prices paid by the customers were as favorable as possible under the prevailing market conditions at the time. In addition, he was never been registered with NASD in any capacity, but functioned as an equity trader for the firm by entering and reporting trades on behalf of the firm, determining when and how to execute trades, directing trades to market makers or the firm’s clearing firm, and conducting proprietary trades for the firm. Acting through his member firm,  Paterno failed to make and preserve order tickets for the transactions as required by Rules 17a-3 and 17a-4.

Fined $5,000; Suspended 2 years in all capacities

Kennedy failed to adequately supervise a registered representative. 

Fined $5,000; Suspended 5 business days in all capacities

English failed to supervise a registered representative. 

Fined $15,000; Barred in any principal capacity

Doherty failed to take appropriate action to supervise a registered representative. 

Fined $5,000; Suspended 10 business days in supervisory capacity

Cotton engaged in a “ponzi-type” scheme involving totaling $2,565,725 in funds. He represented to public customers that the funds would be used to purchase securities from a private individual at a discounted price and then sold at the market price for an immediate profit. However,  Cotton did not purchase the securities and arranged for funds received from new investors to be wired directly to accounts of prior investors, purportedly representing investment profits without the knowledge or involvement of either of his member firms. Cotton caused $30,800 to be deposited into the securities account of public customers for the purpose of compensating them for trading losses in their accounts without the knowledge of his member firm. In addition, he created and sent a customer an account statement incorrectly reflecting an overstated value in the customer’s securities account. 

Barred

Burke forged the signatures of public customers on insurance and/or investment-related documents. Burke submitted a falsified marketing expense report to his member firm. 

Barred

Bestine settled a complaint with a public customer without the approval or authority of his member firm. 

Fined $5,000; Suspended 6 months in all capacities

Belizaire falsified an authorization agreement for automatic deposits for public customers without the customers’ knowledge, authorization, or consent. Belizaire failed to respond to NASD requests for documents and information.

Bar

Beitner borrowed $20,000 from a public customer, contrary to the firm’s written procedures. 

Fined $5,000; Suspended 10 business days in all capacities

Begale affixed a public customer’s initials to a new account form and submitted the form to his member firm without the customer’s knowledge or consent. 

Fined $5,000; Suspended 90 days in all capacities

Audifferen purchased shares of stock for a public customer in the customer's cash account at his firm and knew, or should have known, that the customer did not have sufficient cash to cover the cost of the purchases. Audifferen then deposited his own funds into the customer’s account to cover the cost of the purchases, thereby willfully violating Regulation T by directly or indirectly extending credit to or for the customer’s account. In addition, Audifferen sold securities from the account of the public customer, received $17,500 from the customer that represented, in part, proceeds from the sale, thereby obtaining the beneficial use of an extension of credit and willfully causing his member firm to violate Regulation T. 

Audifferen maintained his own securities account at his member firm, purchased and sold securities in the account, and knew he did not have sufficient margin or sufficient funds to cover the cost of the purchases, thereby causing his member firm to make an extension of credit to him in violation of Regulation T. Finally, Audifferen failed to disclose information on his Form U4.

Fined $17,500; Barred

The NAC found that  Abbondante 

1. participated in private securities transactions without providing prior written notice to, and receiving prior written approval from, his member firm; 
2. recklessly made material misrepresentations and omissions to public customers with respect to an investment fund; 
3. engaged in outside business activities without providing prompt written notice to his member firm; and 
4. knowingly facilitated another in providing false account statements to seven customers of his member firm.

Barred; Required to pay public customers $276,265 in restitution.

Awadalla threatened an official of a public company in an attempt to obtain a fee for his firm’s investment banking services that was larger than the company was willing to pay. 

Censured; Fined $75,000

The Firm failed to 

• establish and implement polices, procedures, and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act and implement regulations thereunder, including the obligation to report suspicious activities as required; 
• provide for independent compliance testing to be conducted by a qualified outside party. 

Additionally, the Firm conducted a securities business while failing to maintain its required minimum net capital and filed a materially inaccurate FOCUS report in that its net capital calculation was inaccurate. 

Censured; Fined $12,500

The Firm failed to take the necessary steps to make an accurate determination of the value of municipal security transactions, resulting in the firm’s purchasing the securities from the customer at prices that were below the fair market value, and failed to ensure that the transactions were executed at aggregate prices that were fair and reasonable. The Firm failed to ensure that the municipal securities purchase and sales transactions were approved by a municipal securities principal. 

Censured; Fined $15,000; Required to pay $8,975 restitution to public customer, plus interest.

The Firm failed to take reasonable steps to ensure that its representations to NASD that specific shares would not be sold prior to the expiration of lock-up periods would be adhered to. The Firm’s supervisory system contained inadequate policies or procedures for monitoring restrictions on sales of securities:

• which the firm had represented to NASD would not be sold for specified periods in connection with obtaining approval of the terms of an offering; abd
• including securities held by firm affiliates or affiliated firms, which could not be sold for specified periods of time.

Censured; Fined $150,000; Ordered to pay $2,545,618.14 disgorgement

The Firm failed to take reasonable steps to ensure that its representations to NASD that specific shares would not be sold for specified periods of time from the initial date of the IPO would be adhered to. The Firm’s supervisory system contained inadequate policies or procedures for monitoring restrictions on sales of securities held by individuals associated with the firm, which could not be sold for specified periods of time. 

Censured; Fined $150,000

Solomon served as Greenwich Global’s Limited Principal–Financial and Operational without registering with NASD as a Limited Principal–Financial and Operational by taking and passing the appropriate qualification exam. 

Acting through Daly, its CEO, and President, Greenwich failed to 

• comply with its membership agreement in that the firm made a material change in its business activities without giving prior notification to and receiving approval from NASD; and
• failed to establish, maintain, and enforce written procedures to supervise its options and variable annuity business. 

All Respondents were Censured; Fined $15,000, jointly and severally

The firm failed to implement an adequate written antimoney laundering (AML) compliance program. 

Censured; Fined $10,000

Acting throught Phillips,  Wachovia created and distributed written communications that failed to disclose adequately material facts regarding investment products and strategies, or made exaggerated, unwarranted, or misleading statements or claims regarding those products, or both. 

Acting primarily through DiCenso, Wachovia failed to 

• reasonably supervise a registered representative’s written communications activities in connection with correspondences and sales literature
• failed to file Phillips’ sales literature with NASD; and
• failed to establish and maintain procedures that were reasonably designed to achieve compliance with NASD’s requirement for filing sales literature within 10 days of first use. 

Wachovia’s written supervisory procedures improperly instructed the firm’s managerial personnel on when written communication qualified as sales literature that needed to be filed with NASD. 

Wachovia Securities: Censured; Fined $25,000

Phillips: Fined $20,000; Suspended 10 business days:

DiCenso: Censured; Fined $15,000.

Acting through Greenberg, Pond Equities sold shares of a stock to the public that were not registered, and no applicable exemption from registration applied. In effecting sales of a company’s shares to the public, Pond failed to comply with its obligations to exercise due care to prevent the sale of unregistered securities. The firm lacked an adequate supervisory system and written procedures for sales of unregistered stock, and failed to 

• provide sufficient guidance to its brokers to enable them to identify circumstances that should lead them to conclude the stocks are restricted;  
• instruct its brokers as to the steps necessary to conduct due diligence before selling stock that may be restricted; 
• establish the steps supervisors or the compliance department needed to take to review transactions in such stock. 

The firm lacked systems to provide reasonable assurance that its brokers were conducting a reasonable investigation into whether securities were registered or subject to valid exemption from registration. 

Pond Equities: Censured; Fined $30,000 (includes $3,800 disgorgement); shall review its system and procedures regarding the purchase and sale of restricted securities for compliance with NASD rules and federal securities laws and regulations. 

Greenberg: Fined $10,000; Suspended 20 business days in all capacities. 

Vestuti effected purchase transactions and sell transactions for his own benefit in an error account of his member firm (without authorization) because he did not have funds to pay for the transactions (presumably in his own account). 

Fined $10,000; Suspended 2 years 

Tettenborn borrowed $5,000 from a public customer contrary to his member firm’s written procedures. 

Fined $5,000; Suspended 20 business days in all capacities

Schroeder

• forged the signatures of public customers and their trustee to life insurance assignment forms involving insurance policies without the knowledge and consent of the customers and their trustee;
• pledged the life insurance policies as collateral for a loan made to a company principally owned and operated by him, and 
• affixed the signature of a loan officer of the bank that made the loan to his company to a release of one of the life insurance assignment forms without the loan officer’s knowledge and consent; and
• failed to respond to NASD requests for information.

Barred

Salaverria submitted a falsified examination score report to her employing member firm. 

Barred

Kornblut failed to supervise a registered representative. 

Fined $5,000; Suspended 5 business days in supervisory capacity

While registered with a member firm, Hesdra impersonated another registered representative while soliciting clients to open new accounts or to engage in securities transactions.  Although Hesdra opened the accounts or handled the transactions in question, nonetheless, he entered the other registered representative's name on new account forms and order tickets as the RR of record (and forged the RR's signature on new account forms). 

Hesdra, in participation with other registered representatives and associated persons of his member firm, misrepresented to customers that he was selling them shares of stock, and thereafter diverted those customer’s checks away from his member firm in order to convert those funds. Hesdra failed to respond truthfully to questions during an NASD on-the-record interview. 

Barred

Graves 

• engaged in a private securities transaction with a public customer without providing written notice to his member firm;
• recommended an unsuitable security to a public customer;
• participated in outside business activities without prior written notice to his member firm; and
• received a loan from a public customer, which violates his member firm’s policy prohibiting the receipt or solicitation of loans from customers. 

Fined $7,500; Suspended 20 business days in all capacities

DeBock borrowed $40,000 from a public customer contrary to his member firm's written procedures prohibiting registered persons from borrowing money from customers.

Fined $5,000; Suspended 60 calendar days in all capacities.

Dahmer engaged in outside business activities without providing prompt written notice to his member firm. Fined $5,000; Suspended 60 days in all capacities; Required to requalify as a General Securities Representative 

Cassin forged signatures to letters and checks relating to an insurance claim. 

Barred

Bello made unsuitable recommendations to public customers; and engaged in outside business activities for compensation without providing prompt written notice to his member firm. 

Fined $26,718.92 (includes disgorgement of $26,718.92 --- apparently NASD limited the fine to the actual disgorgement because of Bello's "financial status"); Suspended 1 year.

Bell forged the signatures of public customers on automatic extension forms that he filed with the Internal Revenue Service.

Fined $5,000; Suspended 6 months

Aresenau affixed the signature of a public customer on a life insurance illustration form and a life application supplement without the customer's knowledge or consent. 

Fined $5,000; Suspended 30 business days in all capacities (given 20 business days credit for firm imposed suspension . . . required to serve 10 business days).

Alessi received more than $18,000 in cash from a public customer who had been issued a day-trading margin call. Alessi then purchased cashier checks drawn to the order of his member firm, temporarily retained some of the funds, and later remitted the checks with a copy of the margin call to his member firm to meet the day-trading margin call, thereby structuring the deposit to evade the reporting requirements of 31 U.S.C. §5313(a): Reports on domestic coins and currency transactions. 

Barred

Online Brokerage Services raised $2,270,000 for its general operating capital from private placement securities offerings that the firm represented were exempt from SEC registration when in fact none of the self-offerings offered and sold was registered with the SEC.  The Firm failed to make an offer of rescission to purchasers who invested in the self-offering when material terms of the offering changed, including changes in the 

• offering price, 
• minimum purchase required of investors, 
• minimum and maximum amounts of the offering, and 
• changes in the offering period. 

The findings also stated that the firm failed to file promptly with NASD documents and information relating to its self-offerings and failed to prepare and maintain an adequate written AML compliance program. 

Censured; Fined $37,500

Monex Securities 

• failed to file an application with NASD for approval of a change in ownership;
• permitted a registered representative to engagein activities that required registration as a general securities principal when the individual was not registered as such; and
• failed to complete a training needs analysis and develop a written training plan as required by the Firm Element of NASD’s Continuing Education Requirement. 

Censured; Fined $10,500; Fined $7,500 joint/several with an unnamed individual

Fano Securities LLC (CRD #37867, Purchase, New York)
AWC/CLG050025/May 2005

Fano Securities LLC accepted a public customer’s short sale orders, but failed to 

• make/annotate an affirmative determination that the firm would receive delivery of the security on behalf of the customer, or that the firm could borrow the security on behalf of the customer for delivery by settlement date. 

• preserve the memorandum of brokerage orders in an accessible place for a period of not less than three years. 

Firm's supervisory system did not provide for supervision reasonably designed to achieve compliance with respect to applicable securities laws and regulations and NASD Rules 3110(b)(1) (marking customer tickets), 3350 (bid test), 3360 (short interest reporting), and NASD Marketplace Rule 6130(d)(6) (ACT Reporting)

Censured; Fined $12,500

Acting through Golembe, Sterling Financial Investment Group failed to 

• specify a cycle for the inspection of branch offices in its written supervisory procedures, 
• conduct internal inspections of offices of supervisory jurisdiction and branch offices, 
• conduct annual compliance meetings, and 
• conduct a review of all of the businesses in which it engaged to assist in detecting and preventing violations of, and achieving compliance with, applicable securities laws, regulations, and NASD rules. 

The Firm utilized an offering memorandum that materially misrepresented the total compensation received or to be received by the firm in connection with a private placement offering; and the Firm failed to 

• immediately display customer limit orders;
• maintain the quote for other customer limit orders;
• notify NASD prior to the employment of an electronic storage media for maintaining firm records;
• determine the true beneficial owners of certain accounts carried by the firm (and failed to review the activity in those accounts);
• file customer complaints in a timely manner;
• make reports pursuant to NASD Rule 3070(a)(4) within 10 days of registered representatives being suspended; and 
• failed to update or timely amend Forms U4 and U5 for its registered representatives.

First Global Securities failed to develop and implement a written anti-money laundering (AML) program in a manner that was reasonably designed to achieve and monitor compliance with the Bank Secrecy Act.

Acting through Trenham and other individuals, the firm effected transactions in securities and/or induced or attempted to induce the purchase or sale of securities when the firm failed to have and maintain sufficient net capital. 

Acting through Trenham, the firm 

• permitted registered persons to act in capacities requiring registration while their NASD registrations were deemed inactive due to their failure to complete timely the Regulatory Element of NASD's Continuing Education requirements; and
• failed to develop and maintain a continuing and current education program for its covered registered persons.

Acting on behalf of her member firm, Kan 

• permitted individuals to act in capacities that required registration while their registration status with NASD was deficient due to Kan’s failure to submit fingerprint records on their behalf;
• allowed individuals to “park” their registrations with her firm by maintaining their registrations as general securities representatives through their purported associations with the firm when in fact they were not actively involved in the firm’s securities business or otherwise functioning as representatives of the firm; and
• conducted a securities business when the firm’s net capital fell below the minimum amount required under SEC Rule 15c3-1. 

Censured; Fined $10,000

Roth issued a research report in which he recommended the purchase of an OTC Bulletin Board-traded company, which contained baseless and exaggerated sales projections, price predictions, and an unsupported claim that the company would achieve profitability. Also, he failed to disclose that he was being paid by the company in cash and securities to promote the company and to solicit investors to purchase its securities at the time of the issuance of the research report.

Barred

Reynolds stole a check from his supervisor, forged the supervisor’s signature on the check, and converted the funds to his own use and benefit without his supervisor’s knowledge or authorization. Also, he failed to respond to NASD requests for information. 

Barred

Mizenko committed forgery by tracing a corporate officer’s name onto a document without his knowledge or permission and by using his notary seal to affix a purported corporate seal onto a document. This decision has been appealed to the SEC, and the sanction is not in effect pending consideration of the appeal. 

Barred

Lueung fraudulently recommended and sold the securities of a certain company to public customers. He told his customers that he conducted an appropriate investigation and reasonable due diligence into the company, but failed to do so. Lueung made material misrepresentations about the company’s securities and failed to disclose material adverse facts that he was or should have been aware of, including the company’s financial condition.Further, he made statements about the company and its business, including stock price projections and guarantees, for which he had no basis.

Barred

In connection with class B share liquidations for public customers, Levy falsified firm records by entering codes into his firm’s computer system that falsely indicated that the customers had died or were disabled, which had the effect of waiving the CDSC charges for customers when they were not entitled to the waiver. 

Barred

King induced the customer to sign, unknowingly, withdrawal slips and a certified check request form, and made $75,409.59 in withdrawals from customer’s bank account.  King  used the funds for a purpose other than the benefit of the customer for a period of time before returning the funds to the customer. King failed to respond to NASD requests for documents and information. 

Barred

Gregg was a co-owner of bank accounts maintained at a bank that was affiliated with his broker-dealer, and he caused sham service fee refunds to be credited to those accounts (he subsequently made a total of $2,160 in withdrawals from the accounts) and used the refunds for his own benefit. 

Barred

Colella charged a personal expense, or caused a personal expense to be charged, to a personal credit card owned by a business associate, who was also a co-worker, without that person’s knowledge or authorization.

Barred

Avila received $92,000 from public customers to invest in securities for the customers, but failed to follow the customers’ instructions and converted the funds to his own use and benefit. Further, he owned or maintained control over two brokerage accounts at an NASD member firm, but failed to disclose his association with his member firm to the firm carrying the accounts, and failed to disclose the existence of the accounts to his member firm. Also, Avila failed to provide prompt written notice to his member firm that he was employed by, or received compensation from, an outside business activity. 

Barred

Antipatis circulated false and misleading investment opinions and research reports, which included fraudulent and deceptive representations and omissions of material facts about speculative, low-priced securities that were promoted by a stock promotion and public relations firm for which he worked and from which he received a salary. In furtherance of said violations he:

• did not include financial information about companies he covered in his investment opinions;
• failed to disclose material negative information about the companies that he covered; 
• did not base his investment opinions on principals of fair dealing and good faith (they were not fair and balanced, and did not provide a sound basis for evaluating the facts in regard to any particular security or type of security);  
• omitted material facts or qualifications that, in light of the context of the material presented, caused the communications to be misleading;
• made false, exaggerated, unwarranted, or misleading statements or claims in his communications with the public;
• published, circulated, or distributed public communications (or caused same), that he knew or had reason to know contained untrue statements of material fact or were otherwise false or misleading;
• predicted or projected performance, implied that past performance will recur, or made exaggerated or unwarranted claims, opinions, or forecasts; and
• issued investment opinions or research reports, which contained only favorable research, opinions, or news about the companies he covered and the directly or indirectly offered the favorable research report and a specific rating as consideration or inducement for the receipt by him of business or compensation.

Antipatis was registered with a member firm for the sole purpose of avoiding a lapse in his registration and re-examination requirements. Antipatis failed to provide prompt written disclosure to his member firm that he was working for, and being compensated by, a company for writing investment opinions and research reports. Antipatis did not disclose the true nature of his work and deceived his member firm into believing that his outside employment was not investment related.  Antipatis failed to notify his member firm, in writing, of his securities accounts at another member firm, and failed to notify a member firm of his associated status with another member firm.

Barred

Hennion made unsuitable recommendations to a public customer and exercised discretion in the customer’s account without written authorization. Walsh failed to exercise reasonable supervision over Hennion. Hennion & Walsh, Inc. failed to have reasonable supervisory systems and procedures. 

Udy engaged in private securities transactions without providing prior written notice to his member firm. Further, he acted in a supervisory capacity at his member firm without registration as a general securities principal or investment company and variable contract products principal. 

Toole failed to: 

1. establish, maintain, and enforce an adequate system reasonably designed to comply with NASD rules regarding exception reports; 
2. supervise activities in connection with the sale of variable annuity and variable life products;
3. supervise an agent adequately, in that he neither conditioned the agent’s employment upon heightened supervision nor put a plan of heightened supervision into effect; and 
4. maintain and enforce written supervisory procedures requiring annual compliance conferences with registered representatives, and to respond reasonably to red flags raised by a customer complaint. 

Toole was Fined $10,000; Suspended 6 months in principal capacity

Toohey failed to supervise adequately the activities of a registered representative in connection with the publication of a press release and a summary buy recommendation that contained certain misleading, exaggerated, and unwarranted claims and omissions of material fact.

Fined $5,000; Suspended 5 business days in all capacities; Barred in supervisory capacities as a General Securities Principal

Acting on behalf of his member firm, Swanson had a supervisory system and written supervisory procedures that were inadequate and did not appropriately deter and detect violations of NASD rules, which included misrepresentations and omissions in the sale of its proprietary products, unsuitable recommendations, and inadequate review and approval of sales of proprietary products. Swanson failed to take effective supervisory action in the face of red flags indicating improper sales practices by registered representatives. 

Swanson Fined $5,000; Barred in principal capacity

Powell affixed his wife’s signature to a letter (which requested the registration and taxpayer I.D. number of the account be changed) addressed to the member firm where her securities account was maintained without her knowledge or consent; and effectively transferred control of the account from his wife to himself. 

Powell was Fined $20,000 and Suspended 3 months in all capacities.

While acting individually and as a members of a group of salespersons, Magee, Blackwell, and Ferrara employed classic boiler-room techniques to induce customers to purchase shares of a company. They engaged in fraudulent misrepresentations and omissions to induce purchases or to discourage sales of shares in a company, and routinely predicted the stock would shortly increase in price. They engaged in unauthorized trading, as well as other deceptive practices, including buying more than the customer authorized or insisting that the customer pay for an unauthorized trade before selling the stock. In addition,  each member of the group knowingly or recklessly provided substantial assistance to other members of the group engaged in the same or similar misconduct, in furtherance of the scheme. 

The respondents and members of the group failed to furnish customers, prior to effecting such transactions, a risk disclosure document containing the information required by penny stock rules and failed to obtain from customers, prior to effecting customer transactions in a stock, a manually signed and dated written statement acknowledgement receipt of such risk disclosure documents. They failed to: (1) disclose to customers, either orally or in writing, prior to effecting customer transactions in a stock, the inside bid and offer quotations for the stock; (2) provide the same in writing prior to the time of any written confirmation sent to the customer pursuant to SEC Rule 10b-10; and (3) keep and preserve records of such disclosures as required by the penny stock rules.

Magee was Fined $10,000 and Suspended 2 years in all capacities
Blackwell was Barred
Ferrara was Barred

Livak prepared and submitted, or caused to be prepared and submitted, a letter to his landlord that contained a fabricated story as to why he could not pay his rent. The letter was written on his member firm’s letterhead and was purportedly signed by the “Director of Security, NASD.” The individual who signed the letter was Livak’s friend and had never been an employee of NASD or his member firm. In addition, Livak prepared and submitted a variable life insurance policy application to his member firm that contained false and inaccurate information. 

Livak was Fined $25,000 and Suspended 2 years in all capacities

Kim withdrew or transferred $26,988 from the bank accounts of public customers without their authorization. Kim changed the mailing address on a public customer’s account form to his branch office address without the consent or knowledge of the customer.

Kim was Barred

Huck

1. endorsed and deposited into her personal securities and bank account, $59,079.69 in checks meant for her member firm, without the firm’s knowledge or consent, and used the proceeds for her own benefit or for the benefit of someone other than the firm;
2. received a $10,000 check, made payable to her member firm, with instructions to deposit the check into the account of a public customer but she deposited the funds into her own personal securities account and used the funds for some purpose other than for the benefit of the customer. She later had the deposit reversed and credited to the customer’s securities account; and
3. endorsed and deposited into her personal securities account, $2,800 in checks made payable to her member firm, and used the proceeds of the checks for her own benefit or for the benefit of someone other than the customer. 

Huck failed to respond to NASD requests for documents and information. 

Huck was Barred

Gornatti issued 13 checks totaling $14,001.78, made payable to himself from the operating account of the member firm; converted the funds to his own use and benefit by endorsing and negotiating the checks without the knowledge or consent of his member firm; and concealed his activities by falsifying the general ledger and altering bank statements. 

Gornatti was Barred

Coyner forged a college administrator’s signature on student Intern Agreement forms in an effort to facilitate the interns’ participation in his member firm’s summer program. 

Coyner was Fined $5,000 and Suspended for 1 year in all capacities.

The Firm failed to implement its anti-money laundering (“AML”) program in a manner that was reasonably designed to achieve and monitor compliance with the requirements of the Bank Secrecy Act and the implementing regulations promulgated thereunder by the Department of Treasury. Acting through Saunders and an unnamed other individual, the Firm permitted registered representatives to act in a capacity requiring registration when such persons were deemed inactive for failing to complete the Regulatory Element of Continuing Education. 

Acting through Saunders, the Firm failed to 

• report in a timely manner information regarding customer complaints to NASD, 
• file all information regarding customer complaints, and 
• report, within 10 business days, information regarding settlements of claims for damages against the firm and Registered Representatives and the receipt of a customer complaint alleging forgery, and
• ensure that all new account forms contained the signature of a partner, officer, or manager accepting the account on behalf of the firm

Acting through an unnamed individual, the Firm failed to update in a timely manner the Forms U4 and U5 of registered representatives to disclose customer complaints, settlements, and/or arbitrations, as well as the Form U4 of Registered Representatives. 

GunnAllen and Saunder Censured and Fined $11,250 (jointly/severally); GunnAllen additionally fined $18,750 (of which $8,750 was jointly/severally with an unnamed other individual)

The Firm failed to 

• obtain signed and dated receipts from public customers evidencing the receipt of penny stock risk disclosure documents for purchase transactions; and
• failed to document a review of a company’s financial statements, and other material business information, to ensure that its representatives had a reasonable basis to recommend stock to clients. 

Acting through Alfonsi, the firm failed to establish, maintain, and enforce an adequate supervisory system that was reasonably designed to achieve compliance with the penny stock rules. Alfonsi failed to supervise reasonably the representatives in his branch office to ensure compliance with the penny stock rules. 

Clark Street Capital, Inc. and Alfonsi Censured and Fined $15,000 (jointly/severally); and Alfonsi Suspended 6 months in principal capacities.

Acting through Carazolez, the Firm  : 

1. failed to register a person associated with the firm who was engaging in the firm’s securities business and acting as a principal of the firm; and 
2. failed to name this associated person in Schedule A of the firm’s Form BD, even though this person held an ownership interest of more than 5 percent of the firm; and 
3. encouraged and directed a registered representative acting under the firm’s direction and control as its employee and agent to employ fraudulent sales practices and to make baseless price predictions and unsuitable recommendations of a security to public customers. 

The Firm and Carazolez egregiously failed to: supervise properly, establish and implement a supervisory compliance structure, and provide the firm’s registered representatives with written supervisory procedures reasonably designed to prevent fraudulent sales practices. In addition, Carazolez provided misleading documents and made false and misleading statements under oath in response to NASD’s requests for information. 

Back Bay Capital, Inc. was Expelled
Carazolez was Barred

Wang placed advertisements in a Chinese language newspaper and distributed sales literature in the form of a booklet without prior approval from his member firm. The advertisements and sales literature were variously misleading and contained exaggerated or unwarranted statements and claims. The advertisements discussed and promoted Wang’s securities business but failed to identify his member firm as the broker-dealer that offered the securities.The sales literature provided incomplete and oversimplified comparisons and contained investment company performance not in accordance with the requirements set forth in SEC Rule 482 with regard to the inclusion of standardized average annual total returns, specific disclosure language, and prospectus offer. 

Wang was Fined $5,000 and Suspended 30 business days in all capacities.

Urro created fictitious reimbursement documents, forged the signature of a school official on the documents, and submitted the documents to his member firm in an improper attempt to obtain funds from the firm.

Urro was Barred

Torres received $324,000 from a public customer for the purchase of municipal bonds and converted the proceeds to his own use and benefit. He created and sent false invoices to a public customer, purportedly reflecting her investments in municipal bonds that Torres had purchased for her when, in fact, no such bonds had been purchased. 

Torres was Barred.

Taggart allowed an individual to sign roster sheets indicating that the individual had attended insurance continuing education sessions taught by Taggart when he had not. and then he provided the individual with Insurance Department Course Completion documents for courses the individual had not completed. 

Taggart was Fined $10,000 and Suspended 45 days in all capacities.

Sung forged the signatures of public customers and a branch manager on forms authorizing Sung to become the new representative of certain “orphaned” brokerage accounts. 

Sung was Barred.

Silberman exercised discretion in the account of a public customer by placing securities transactions after the customer had died without prior written authorization from the customer and prior written acceptance of the account as discretionary by his member firm. Despite knowing that the customer had died, Silberman sold, or caused to be sold, option call contracts, which were set to expire. The sale was made without the knowledge or consent of the executor of the customer’s estate and in the absence of written or oral authorization to Silberman to exercise discretion on such account. 

Silberman was Fined $5,100 and Suspended 5 business days in all capacities.

Seidman changed a limit order to a market order without the customer’s permission. 

Seidman was Fined $5,000 and Suspended 30 days in all capacities.

As director of recruiting for a branch office of his member firm, Richard created false firm recruiting profiles for individuals using firm customer social security numbers. 

Richard was Barred.

Raymond altered her copy of her test report for the Series 7 General Securities Representative exam to reflect a passing grade and provided a copy of the falsified test report to her member firm in an attempt to convince them she had qualified as a general securities representative. She provide false and misleading testimony during an NASD on-the-record interview. 

Raymond was Barred.

Montenegro received $19,975 from public customers for investment and converted the funds to his own use and benefit. 

Montenegro created a Web site for his own direct-access trading firm and plagiarized copyrighted material from the Web site of his previous member firm. In addition, he failed to obtain approval for the Web site from a registered principal with the member firm with which he was registered. 

Montenegro provided false testimony during an NASD on-the-record interview. 

Montenegro was Barred

In response to margin calls, Martin credited his securities account at his member firm with a deposit of $3,000 using his member firm’s computer system;  but time after he made these “electronic deposits,” he intentionally or recklessly failed to deposit the actual funds into his securities account. 

Martin was Fined $5,000 and Suspended 6 months in all capacities.

Larsen affixed the signatures of public customers on an account authorization document without the customers’ knowledge or consent. He recommended and effected transactions for public customers without having reasonable grounds for believing that the recommendations and resultant transactions were suitable for the customers based on their financial situation and needs. 

Larsen purchased securities in his personal accounts for which he did not make timely payments as required by Regulation X and sold each position before payment was due, using the proceeds of the sale to pay for the purchase. In addition,  Larsen caused his member firm to extend credit to him in violation of Regulation T by writing checks from one account, depositing that check in the other account, and then either transferring money back to the first account or depositing a check from the second account back to the first account before the initial check cleared. 

Larsen was Barred

Ford failed to 

• establish, maintain, and enforce a supervisory system reasonably designed to detect and prevent violations of federal securities laws and NASD rules;
• establish and implement a supervisory system reasonably designed to supervise municipal securities representative’s sales practices while recommending the purchase of municipal securities to public customers; 
• establish and maintain a supervisory system reasonably designed to respond to customer complaints of sales practices abuses;
• recognize the “red flags” that indicated that a municipal securities representative was executing unauthorized transactions in public customer accounts and making misrepresentations and material omissions while recommending the purchase of municipal securities to public investors. 

Ford was Fined $3,000; Suspended for 1 year as a general securities principal and municipal securities principal; and Required to Requalify as a general securities principal and municipal securities principal.

Acting through Claiborne, a member firm violated its membership agreement because it made markets in at least 20, and at times as many as 46, OTC Bulletin Board (OTCBB) securities although the firm’s membership agreement limited the firm from making markets in no more than 10 OTCBB securities. Claiborne failed to supervise a registered representative to ensure that the representative did not function as a general securities principal without the benefit of registration. 

Claiborne was Fined $5,000 and Barred in a principal capacity.

Buehner caused funds totaling $4,783 to be electronically transferred from a proprietary account at his member firm to an account he owned at the firm without the firm’s knowledge or authorization. He used the firm’s funds from one to 13 days before transferring an equal amount from his personal account back to the proprietary account. Buehner caused $500 to be transferred electronically from an IRA at his member firm that was owned by a registered representative to an account Buehner owned at the firm without the representative’s knowledge or authorization and used the funds for two days before transferring $500 from his personal account at the firm back to the representative’s IRA. 

Buehner was Barred

Without the knowledge or consent of a public customer, Boyce caused online payments totaling $5,500 to be made from the customer’s checking account to Boyce’s credit card accounts in order to satisfy debts; withdrew $21,000 in the form of checks payable to the customer and to a business controlled by Boyce; and deposited them into bank accounts under her control, thereby converting the funds to her own use and benefit. In order to obtain possession and control of funds belonging to the customer and without the customer’s knowledge or consent, Boyce affixed, or caused to be affixed, the signature of the customer as an endorsement to the checks she caused to be issued. 

Boyce was Barred.

Armenta failed to disclose in his member firm’s quarterly compliance questionnaires that he had borrowed money from a client of the firm when he had, in fact, borrowed $25,000 from a client.

Armenta was Fined $10,000 and Suspended 30 days in all capacities.

Steven L. Falk & Associates, Inc. failed to establish and implement policies, procedures, and internal controls reasonably designed to achieve compliance with all requirements imposed by the Bank Secrecy Act and the regulations promulgated thereunder. The firm failed to 

• identify an individual responsible for implementing and monitoring the firm’s AML program; 
• address in the firm’s AML program the firm’s responsibility to provide prompt notification to NASD regarding changes to the individual’s contact information; 
• conduct an independent testing of the firm’s AML program; and 
• have the firm’s AML program approved, in writing, by a member of the firm’s senior management. 

Steven L. Falk & Assoc. was Censured and Fined $10,000.

NFB failed to amend Forms U4 and Forms U5 to disclose customer complaints in a timely manner, which may have 

• impeded the investing public’s ability to assess the background of certain brokers through NASD’s public disclosure program (NASD BrokerCheck), 
• denied member firms access to relevant information in making hiring determinations, 
• enabled some brokers to transfer firms without having their application reviewed by the appropriate state securities regulator, and 
• hindered NASD from promptly investigating certain disclosure items. 

NFB was Censured and Fined $20,000. 

Benson York Group, Inc. 
AWC/CLI040038/February 2005

Benson York was not approved to conduct options transactions in its membership agreement although the firm’s customers were actively trading options. The firm completed a change in the equity ownership or partnership capital of the firm that resulted in a person or entity directly owning, indirectly owning, or controlling 25 percent or more of the equity or the partnership capital prior to the filing with NASD of an application for approval of change in ownership, control, or business operations at least 30 days prior to the change. The firm failed to report customer complaints through the Rule 3070 reporting system, and executed settlement agreements with its customers that contained language that restricted the customers from disclosing the settlement terms or underlying facts of the dispute to NASD. In addition,  while participating in a private placement, the firm made certain prohibited material misrepresentations in connection with the offering and failed to transmit properly, or maintain the payments received, in connection with the offering. 

Benson York Group was censured and fined $27,500.

American Express Financial Advisors failed to supervise a general securities representative with respect to his handling of public customer accounts. The firm assigned four consecutive supervisors to the representative.  All four supervisors failed to take corrective action when the accounts of the representative’s customers appeared on numerous Redemption/Purchase Reports, disclosing unsuitable trading through redemptions and subsequent purchases of different share funds of different mutual fund families within a 30-day period. The Redemption/ Purchase Reports that the firm prepared for the supervisory review of significant activity in customer accounts contained inaccuracies and were difficult to decipher, severely limiting their usefulness as a supervisory tool. 

American Express Financial Advisors was Censured, Fined $20,000, and Required to Demonstrate the adequacy and effectiveness of the supervisory tools the firm devised to detect and prevent mishandling of public customer accounts by registered representatives and to improve the accuracy of firm Redemption/Purchase Reports.

Acting through Margolick, JLM Securities commenced offerings in limited partnerships through the use of an Offering Memoranda and Subscription Agreements and failed to segregate properly purchasers’ funds while the funds were being raised and improperly forwarded the funds to the partnerships prior to raising the minimum required. 

JLM and Margolick were Censured and Fined $10,000, jointly and severally.

Acting through Tonner, Stuart Financial Corporation failed to maintain a supervisory system, including written supervisory procedures, internal operating procedures, and compliance procedures, reasonably designed to prevent and detect violations of federal securities laws, rules, regulations, and NASD rules. The firm failed to maintain a copy of its written supervisory procedures on site at the firm, and that the firm’s procedures were not specifically tailored to its business activities and did not address how the firm’s activities would be supervised, including the type of supervisory reviews to be performed and who would perform such reviews. The firm had no procedures for the review of incoming and outgoing correspondence and failed to maintain copies of any correspondence to or from customers. The firm failed to ensure that all of its registered personnel attended its annual compliance meeting. Moreover, the firm failed to develop and implement a written AML program reasonably designed to achieve and monitor compliance with the requirements of the Bank Secrecy Act and the implementing regulations promulgated thereunder by the Department of Treasury. 

Stuart Financial Corporation was Censured; Fined $35,000 ($15,000 jointly/severally with Tonner); and Required to Retain an independent outside consultant to conduct a review of, prepare a written report, and make recommendations as to the adequacy of the firm’s supervisory and compliance policies and procedures and its system for applying and enforcing such policies and procedures.
Tonner was Suspended 10 business days in any principal/supervisory capacity. 

Itradedirect.com and Arlt failed to establish, maintain, and enforce an adequate supervisory system reasonably designed to achieve compliance with industry rules and regulations regarding sales of private placements, Form U4 updates, and customer complaint reporting. They failed to supervise a representative of the firm by allowing him to conduct business without being properly registered in two states, failed to monitor reasonably the progress of a criminal case against the representative to ensure his Form U4 was properly amended and a Rule 3070 report was filed timely upon his guilty plea to fraud charges, and failed to ensure that the firm did not associate itself with a statutorily disqualified person.

Firm was Fined $20,000 ($7,500 jointly/severally with Arlt)
Arlt was Fined $7,500 jointly/severally with Itradedirect.com, and Suspended 30 business days in all principal capacities  (NASD Case #)

Acting through Goldsmith, Crown Financial Group 

• failed to accrue virtually all of its liabilities and to record such liabilities in its financial statements; 
• utilized the instrumentalities of interstate commerce to conduct a securities business while failing to maintain the minimum required net capital; and
• prepared financial statements and filed periodic reports with the SEC and NASD that contained misstatements. 

Crown Financial Group was Censured and Fined $50,000; 
Goldsmith was Fined $10,000, Suspended in a FINOP capacity (four months?); and Required to Requalify as a FINOP (Series 27)prior to acting again in that capacity.

Acting through Blumer and Leventhal, Harrison Securities failed to 

• establish and maintain a system to supervise the activities of each registered representative and associated person reasonably designed to achieve compliance with applicable securities laws, regulations, and NASD rules; 
• develop an adequate supervisory system for review of customer accounts to detect and prevent excessive trading or churning;
• respond to “red flags” indicating that excessive trading or churning was occurring in the customer accounts of certain registered representatives, including excessive account activity, excessive commissions earned, and customer complaints; 
• timely amend Forms U4 (Uniform Applications for Securities Industry Registration or Transfer) or Forms U5 (Uniform Termination Notices for Securities Industry Registration) and the firm’s Form BD (Uniform Application for Broker-Dealer Registration) to disclose reportable events. 
• register properly the firm’s office of supervisory jurisdiction (OSJ) with NASD; 
• conduct an annual inspection of the firm’s businesses and supervisory systems, including a periodic examination of customer accounts to detect and prevent irregularities or abuses, an annual inspection of each OSJ, and the maintenance of a written record of each such review and inspection;
• operate with a properly registered financial and operations principal (FINOP); 
• establish and maintain an adequate antimoney laundering (AML) compliance program; 
• file an application, pursuant to NASD Membership and Registration Rule 1017, for approval of a change in ownership, control, or business operations upon the direct or indirect acquisition of substantially all of the firm’s assets by another member firm; and 
• make or keep current its arbitration, correspondence, and financial books and records, or to preserve such records, in a readily accessible place. 

Harrison Securities and Blumer: 

• permitted advertisements and sales literature to be disseminated to the investing public that contained material misstatements and omissions and contravened NASD’s rules relating to communications with the public;
• permitted individuals to maintain registrations with NASD through the firm while the individuals were not actively engaged, or to be engaged, in the investment banking business or securities business of the firm; and
• failed to comply with SEC Rule 17a-5(a)(2)(iii), in that the firm failed to file its quarterly FOCUS report

Additionally, Blumer failed to respond to NASD requests for information and or documents. 

Harrison Securities and Leventhal permitted a registered representative to continue to conduct a securities business while his registration was inactive due to his failure to complete the Regulatory Element of the Continuing Education Requirement, and they failed:

• enforce the firm’s written supervisory procedures (WSPs) related to options transactions by failing to conduct, and memorialize, periodic reviews of options activities in customer accounts;
• report, and to report timely customer complaints in violation of NASD Conduct Rule 3070; 
• enforce the firm’s WSPs related to compliance with NASD Conduct Rule 3050 dealing with transactions for or by associated persons; and 
• establish and maintain adequate procedures to ensure compliance with NASD Rule 2711 dealing with research analyst and research reports. 
  

Harrison Securities, Inc. was expelled from NASD membership. 
Blumer was Barred
Leventhal was fined $40,000, Suspended 1 year in principal/supervisory capacities and Required to Requalify as a Registered Principal (Series 24)

The SEC affirmed the NASD's National Adjudicatory Council decision imposing sanctions following appeal of an NASD Office of Hearing Officers decision. The firm churned the account of a public customer, and Studer and the firm failed to reasonably supervise trading in the account of a public customer by ignoring “red flags” that indicated potential problems with the account. The firm and Studer induced a public customer to execute margin guarantees that benefited the firm and exposed the customer to significant risk

Castle Securities was Expelled from NASD membership; Fined $98,300; and Fined $37,500 jointly/severally with Studer
Studer was Barred in all capacities and Fined $37,500 jointly/severally with Castle Securities 

Tedeeva arranged for an imposter to take the Series 6 and Series 63 qualification exams on her behalf. 

Barred

As the treasurer of a condominium association, Worden misused funds totaling $3,800 belonging to the association without the knowledge, consent, or authorization of the association. 

Barred

Shaalan wrongfully obtained approximately $96,000 from his member firm and converted the funds to his own use and benefit. In perpetrating the scheme, he established a bank account under the name of a fictitious entity of which he was the purported owner. The entity’s name was substantially similar to the name of an actual company with which his firm had a business relationship. Then using an invoice the firm had received from the actual vendor, Shaalan created an invoice template for the fictitious company and on various occasions generated false invoices for services the fictitious company purportedly provided the firm, submitting the false invoices to the firm for payment. At Shaalan’s request, the checks issued to pay the false invoices were given to him to be transmitted to the fictitious company. Subsequently, he endorsed the checks and deposited them into the bank account he had established in the name of the fictitious company, thereby converting the funds to his own use and benefit. 

Barred

Registered representatives of a member firm, under Sandifur's direction and control, engaged in fraudulent and deceptive sales practices by making material misrepresentations and omitting material facts with the sale of proprietary products to public customers without an adequate basis for recommending the proprietary products to customers for whom the sales were unsuitable. Sandifur and the firm’s compliance officer spent the majority of their time working as officers and/or directors of affiliated companies, and the compliance officer delegated his responsibilities to others who were unqualified, inexperienced, and unable to perform the delegated tasks due to insufficient staffing. Sandifur knew, or should have known, that the compliance officer and the supervisor of all the registered representatives were not effectively discharging their responsibilities. 

As president of the firm, Sandifur was responsible for establishing an effective supervisory system at the firm, but the firm’s supervisory system was not reasonably designed to achieve 

• compliance with applicable securities laws, regulations, and NASD rules regarding monitoring the sales activities and recommendations of registered representatives; 
• compliance training for sales presentations of proprietary products; and 

did not provide guidance concerning the risk level and suitability of proprietary products for investors with a low to medium risk tolerance and/or preservation of capital as a primary investment objective. 

Barred; agreed to testify  if NASD files disciplinary proceedings against the firm’s current or former agents relating to the misconduct referenced in this AWC.

Sandifur is an important case to note because it holds the President of a BD responsible for ineffecitve supervision --- when many defense lawyers would argue that the liability should stop with the Director of Compliance.  Also note that Sandifur has agreed to testify against his current/former agents. most intriguing, his sanction seems to have taken into acount his "consent to testify" against his former firm and colleagues.

One concern I have is that the NASD must be careful not to go overboard with the criteria for "insufficient staffing."  A growing complaint among smaller firms is that they are being driven out of business by excessive regulation and paperwork demands.  We need to be very careful that in pursuing regulatory goals that NASD does not start creating policies that make it impossible to operate smaller, regional broker-dealers.  

Also read the Olsen decision

Regis was apparently a "limited" securities representative )not registered as a General Securities Representative) during a period in time when he was apparently selling payphone investment contracts to public customers. Such sales were outside his permissible range of products.  He engaged in private securities transactions without prior written notice to his member firm describing the proposed transaction, his proposed role in the transaction, and stating whether he had received, or might receive, compensation.  Regis failed to respond to NASD requests to appear and give testimony. 

Barred

Parrott prepared correct bank slips for deposit of her member firm’s daily receipts into various accounts at the firm’s clearing firm but transmitted false electronic lists to the clearing firm to divert approximately $23,168.70 into her personal account, which she quickly withdrew by check or ATM. She accomplished the diversion of funds by falsifying the amounts of deposit to her account, duplicating the amount of deposit to her account on the electronic list, or by listing fictitious deposits to her account on the electronic list. To conceal her conduct, Parrott used other employees’ electronic IDs when transmitting fraudulent electronic lists to the clearing firm and destroyed copies of the relevant deposit slips. 

Barred

Without the knowledge or approval of Otero's member firm, he wrote checks totaling $404 to a public customer to prevent the customer from making complaints concerning contingent deferred sales charges.

Fined $3,500 and suspended 10 business days in all capacities.

As the supervisor for the registered representatives of his member firm, Olsen was unable to monitor reasonably their sales activities. Although he knew, or should have known, that he would be unable to supervise reasonably such a large number of geographically disbursed registered representatives, he continued to act as supervisor while fraudulent and deceptive sales practices, material misrepresentations, and unsuitable recommendations persisted at his firm. Supervisory action taken by Olsen in the face of red flags indicating improper sales practices was inadequate in that he reviewed and approved subscription agreements that indicated the proprietary products were not suitable for the investing customers. 

Fined $5,000, suspended 1 year in any principal capacity, and consented to testify if NASD files disciplinary proceedings against his former member firm’s current or former agents relating to the misconduct referenced in this AWC.

And now to throw down the gauntlet.  Fine, let these types of sanctions against the brokerage community stand.  But this standard should also be applied to the regulatory community as well.  I want to know why no individual regulator was held responsible for failing to supervise when the SEC sanctioned the NASD and the NYSE?  Look it up. Then show me the "failure to supervise" charges leveled in the wake of NY Attorney General Spitzer's landmark prosecutions of Wall Street --- where were NASD and NYSE for all the years these now discredited practices went on?  Any heads roll for that inability to supervise such a large number of member firms over a geographically disbursed area?

Also read the Sandifur decision

Mirchandani falsified the social security number of a client on an insurance application as an accommodation to the customer who was in the process of marrying a United States citizen and was awaiting citizenship documentation and a valid social security number.

Fined $5,000 and suspended 3 months in all capacities.

McVey prepared and submitted documents on which the purported signatures of public customers were affixed without their knowledge or consent so that he could obtain payments for financial plans that he did not provide to the customers; as a result, the customers were improperly charged fees totaling more than $120,000 that were paid to and used by McVey. Also, McVey failed to respond to NASD requests to appear and provide testimony. 

Barred

Marche effected discretionary transactions in the accounts of a public customer pursuant to verbal authority without prior written authorization from the customer and prior written acceptance of the accounts as discretionary by his member firm. Also, he placed orders for transactions in securities accounts maintained at his former member firm without notifying the firm that he had become associated with another member firm and without notifying his new member firm that he had the securities accounts at his former firm.

Fined $5,000 and suspended 10 days in all capacities

Levy created a pledge agreement to assist a public customer attempting to use his account with Levy’s member firm as collateral for a loan, signed the pledge agreement, and delivered the pledge agreement to the customer who submitted it to the bank even though it had not been approved or authorized by Levy’s firm. 

Fined $5,000 and suspended 6 months in all capacities

Kurtulus opened brokerage accounts for public customers at his member firm without the knowledge, authorization, or consent of the customers, and then effected transactions in those accounts

Fined $7,500 and suspended for 10 business days in all capacities

Katona substantially participated in the sale of unregistered securities by entering into an arrangement with the principals of a private company to help raise money by selling “to be issued” shares to public customers and failed to tell them that 25 percent of the money they invested was compensation to him. He also failed to amend his Form U4 to disclose material information. 

No fine in light of financial status; Suspended 1 year in all capacities; Required to requalify by exam

Granik was authorized to use a corporate credit card by the card’s holder to charge airfare and hotel expenses for a business trip, but without authorization Granik also charged an additional $727.35 for personal expenses to the card and failed to pay the individual for the total amount of $3,304.07 he charged to the credit card. Also, Granik willfully failed to disclose material facts on his Form U4. 

Barred

Bill Singer's Comment:We're seeing more of these types of "personal" matters coming under regulatory scrutiny.  Brokers would be well advised to recognize that even matters not necessarily involved with a securities transaction may be deemed regulatory in nature. 

Kampta Doobay  
(AWC/CLI040033/January 2005) 

Doobay circumvented the requirements of New York State Department of Insurance Regulation 60 in connection with the replacement of life insurance policies for public customers. Although Doobay met with each of the customers on two different occasions to discuss the advantages and disadvantages of the replacement products versus the existing products as required by Regulation 60, he backdated replacement documentation for the customers to indicate that all of the documents had been signed by the customers during their initial meetings with Doobay. 

Kampta Doobay Fined $5,000; Suspended 30 business days all capacities.

Bill Singer's Comment:  The Reg 60 fallout continues.  For more extensive coverage on this issue and other cases, visit Reg 60 link 

Chandler caused a bank certificate of deposit (CD) owned by a customer of a bank affiliated with her member firm to be redeemed without the customer’s knowledge or authorization by forging the customer’s signature on a form she completed and used to redeem the CD, thereby converting $4,987 in cash to her own use and benefit. 

Barred 

Bryce Allen Boltz 
AWC/C8A040105/January 2005

Boltz issued, or caused to be issued, an ATM card for a public customer of his member firm’s bank-affiliate without the knowledge or consent of the customer; and he used the card to withdraw funds totaling $2,700 from the customer’s bank account, also without the customer’s knowledge or consent. 

Barred

Birkenfeld assisted an individual with obtaining a mortgage by falsely representing the individual’s employment status and income on documents that comprised a portion of the mortgage application.

Fined $2,500 and suspended 10 business days in all capacities

Louis Joseph Bacher, Jr., Robert Jay Holub, and Robert Stephen Minka (all Principal)
OS/C01040004/January 2005

Principals permitted a statutorily disqualified person to be associated with their member firm. 

Bacher and Holub: Barred
Minka: Fined $10,000 and barred in a principal capacity.

Babington misrepresented the sales charge on a unit investment trust product to public customers and forged their signatures on the transaction cover sheet that would have disclosed the correct sales charge.

Barred.

W. R. Hambrecht & Co., L.L.C.
AWC/C01040028/January 2005

The firm failed to 

• report correctly to ACT the transaction type for transactions that were reported as cross transactions when they were, in fact, riskless principal transactions; 

• prepare and retain an order ticket for one side of the trade in trades effected on a riskless principal basis; and 

• indicate the time of execution on order tickets in trades effected on a riskless principal basis. 

The firm's Anti-Money Laundering (AML) Program was not approved in writing by a member of senior management; and failed to:

• identify the internal controls the firm would implement to detect attempts to open correspondent accounts by foreign banks; 

• require the address of U.S. designated agents when opening correspondent accounts for foreign banks; 

• specify the time frame in which the firm would terminate its relationship with a foreign bank upon notification by the Secretary of Treasury or the Attorney General that the foreign bank had failed to comply with or contest a summons;

• specify the firm’s policy on opening or maintaining private banking accounts for non-U.S. persons and failed to describe the internal controls the firm would implement to detect attempts to open such accounts; 

• have procedures to freeze accounts and prohibit transactions with persons suspected of terrorist activities pursuant to Executive Order #13224 issued by the Office of Foreign Assets Control; and 

•  have procedures for providing information to federal law enforcement officers not later than seven days after receipt of a request. 

censured and fined $20,000

Firm failed to report 

• the correct time of execution to the Municipal Securities Rulemaking Board (MSRB) in transactions for which the firm had reporting obligations; and 
• timely any transaction information for transactions in Trade Reporting and Compliance Engine (TRACE) eligible securities. 

Firm also submitted Wells letters in which the firm provided incomplete or inaccurate information concerning who was responsible for supervision for municipal trade reporting and TRACE reporting, and whether that person met his/her responsibilities. Firm failed to establish, maintain, and enforce written supervisory procedures reasonably designed to achieve compliance with MSRB Rule G-14 relating to trade reporting in municipal securities and NASD Rule 6230 relating to trade reporting in TRACE-eligible securities. 

Censured and fined $80,000

1st Discount Brokerage, Inc.
AWC/CMS040185/January 2005 

An RR informed the firm he intended to perform clerical, non-investment related services for a company involved in the securities field when, in fact, he circulated misleading, exaggerated, and unwarranted investment opinions and research reports touting Over-the-Counter (OTC) Bulletin Board and Pink Sheet securities that contained unsubstantiated price projections. Firm failed to monitor reasonably an RR's outside business activities and its supervisory system failed to provide for supervision reasonably designed to achieve compliance with applicable securities laws, regulations, and NASD rules concerning compliance with NASD Conduct Rule 3030.

Censured and fined $12,500.