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NOTE: Offers of Settlement (OS) and Letters of Acceptance, Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions and to the entry of findings. 2006
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DEVELOPING ENFORCEMENT TRENDS AS NOTED BY BILL SINGER |
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ESCROW ACCOUNTS |
BORROWING |
EXPENSES |
FINOP |
E-Communications |
TRUSTEES |
| Gunnar, American Eastern, D.E. Wine, Sky, Certes, Formy-Duval, Lindros, Philadelphia, Cambridge, Springboard, J.P. Turner, Oak Ridge | Bailey, Conte, Hanke, Lurry, XXXXX, Martin, Reiss, Cassano, Davis, Anthony. Hughes, Kendall. Kellogg, Newell, Ashooh, Lee, Lewis, Tyus, Federico, Buchalter, Kelly, Rhode | Cheesman, Sussman, der Merwe, Takacs | Thieme, Drawbaugh, Groth, Galeotafiore, Eidarous, Lozinski, Sutterlin; Brighton; Davis, Energy, Daly, Rosen | Tejas, Bisys, Gassoso , NYLife, Orion, Paradigm, Pulse, Raymond James, ING, ACR, Keating, Rosen, Hampton, Harris Williams | Vaughan, Hughes, Hinchliffe, Sasaki |
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Chad Eugene Miller (Principal) AWC/#20050005531-01/December 2006 Miller allowed public customers to trade online through an expelled firm’s Web site, but never altered the Web site to reflect a change of ownership, and as a result, the Web site contained numerous statements that misleadingly portrayed the expelled firm as an active NASD member and broker-dealer. The Web site did not provide sufficient information to determine the relationships that existed among the expelled firm, Miller’s member firm and its clearing firm. The site did not contain the appropriate Securities Investor Protection Corporation (SIPC) disclosures. Chad Eugene Miller : Censured; Fined $16,000 |
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| Bill Singer's Comment: Truly an oddball case --- you actually need to read it twice to make sure you didn't misunderstand. Apparently, Miller used an expelled firm's web site for his customers. All of the SIPC and notice issues aside, I wish NASD gave some explanation as to "why" Miller used the defunct firm's site and what the "relationship" was between his firm and the expelled firm. | |||||
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Andrew Jerome Whelan (Principal) AWC/#2005003189401/December 2006 Whelan signed and submitted audit reports to his member firm representing that he had conducted inspections of branch offices, although he had not. Andrew Jerome Whelan: Fined $5,000; Barred in Principal capacity; Suspended 30 days in all capacities |
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| Bill Singer's Comment: No matter how long I remain in the securities industry, I know that this issue will never vanish. What could be a simpler proposition? If you certify that you did an audit, you really should have done it. I can't tell you how many times compliance officers seem to think that the annual Florida branch office inspection is an excuse for a fishing trip or the annual Denver branch office inspection is actually a paid ski trip. | |||||
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Charles Roland Triana Jr. (Principal) AWC/#2005002343501/December 2006 Triana affixed a public customer’s signature and the signature of a former associated person to insurance forms with their knowledge and consent but in violation of his member firm’s written supervisory procedures that prohibited representatives from signing another person’s name whether or not such person consented. Charles Roland Triana Jr.: Fined $5,000; Suspended 60 days in all capacities. |
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Ronald Shuichi Sasaki AWC/#20050002599-01/December 2006 Sasaki borrowed $74,818 from a trust for which he acted as a trustee in contravention of his member firm’s written policy prohibiting its employees from borrowing money from firm customers. He engaged in business activities outside the scope of his member firm and failed to provide his firm with prompt written notice. Ronald Shuichi Sasaki : Fined $10,000; Suspended 1 year in all capacities. |
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| Bill Singer's Comment: As I noted at the beginning of the year (and even added this issue to the matrix at the top of this page), RRs acting as trustees seemed to have attracted the NASD's scrutiny in 2006. Here we have a double whammy --- another hot-button 2006 area: borrowing from clients. | |||||
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Kurt Louis Rhode AWC/#2006004154401/December 2006 Rhode received a $30,000 loan from individuals, including a client, even though his member firm had written procedures forbidding registered representatives from borrowing money from customers. Kurt Louis Rhode : Fined $5,000; Suspended 60 days in all capacities |
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Michael Francis O’Neill #E102003130804/December 2006 O’Neill conducted his securities business jointly with an unregistered person who had been barred from associating with a member firm in any capacity for serious misconduct, and O’Neill knowingly violated NASD’s registration requirements by compensating the individual for soliciting customers. Michael Francis O’Neill: Barred |
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| Bill Singer's Comment: See Westpark, Gilmore and Centaurus for similar matters. | |||||
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Sekou Mansur McClendon AWC/#2005003508701/December 2006 McClendon exercised discretionary authority in a deceased public customer’s account without the customer’s written authorization to exercise discretionary authority in his account, and without having obtained his member firm’s written acceptance to exercise discretionary authority in the account. Sekou Mansur McClendon: Fined $2,500; Suspended 10 business days in all capacities |
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Dominique Demetri Logan AWC/#20060052481-01/December 2006 Qhile taking the Series 7 licensing examination, he retained in his possession and had access to notes related to the subject matter of the licensing examination even though he knew this was prohibited. Dominique Demetri Logan: Barred |
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Joseph Latour AWC/#2005002247101/December 2006 In an effort to cause an annuity to be liquidated for a public customer and the proceeds sent to the customer so that the funds could be reinvested, Latour called the company that had issued the annuity, falsely identified himself as the representative of record and asked that the annuity be liquidated and the proceeds remitted to the customer. Joseph Latour: Fined $5,000; Suspended 10 business days in all capacities |
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| Bill Singer's Comment: We're seeing more and more of this so-called impersonation cases. Seriously, folks, be careful about this type of situation. I understand that you frequently view this as a form of customer service, but the regulators don't. | |||||
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William George Kelly, Jr. OS/#2005002049901/December 2006 Kelly borrowed $25,000 from a public customer in contravention of his member firm’s written supervisory procedures stating that employees were not allowed to borrow money from, or lend money to, firm customers. Kelly falsely represented to his firm in a signed compliance questionnaire that he had not borrowed money from any firm customer. Further, Kelly delivered a personal check to the customer as repayment of the loan but the check was returned to the customer for insufficient funds due to a closed account—Kelly has never made any payment on the loan. Kelly failed to respond to NASD requests for information.. William George Kelly, Jr.: Barred |
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John Stuart Coffey (Principal) AWC/#E9A2005000602/December 2006 Acting on his member firm’s behalf, Coffey failed to obtain the required written consent in connection with Central Registration Depository searches of individuals, who were not seeking employment with the firm, nor was the firm considering any of them for employment. The searches were conducted to identify the member firms which employed registered representatives whose names had appeared in a commercial publication listing high-producing individuals and thereby determine if Coffey’s firm already had selling agreements with the firms. Also, Coffey failed to cause his member firm to have a supervisory system and procedures reasonably designed to ensure that the firm obtained the required written consent before conducting searches on Web CRD and that it retained required documentation. John Stuart Coffey : Fined $10,000; Suspended 3 months in all capacities. |
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| Bill Singer's Comment: Keep an eye out for more of these unauthorized CRD query cases. Seems like NASD is beginning to enforce these matters. | |||||
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Qi Chen #E8A2004107002/December 2006 Chen sent to a public customer a false account statement on a defunct company’s letterhead purporting to show investments in certificates of deposit (CDs) and a viatical settlement worth a total of $314,501, and failed to respond to an NASD request to appear for an on-the-record interview. Qi Chen: Barred |
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| Bill Singer's Comment: This one does have a ring to it: A false statement for a defunct company showing purported holdings --- and what???? NASD was surprised about the OTR no-show? | |||||
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Fausto Efrain Callava #E072004088501/December 2006 Callava participated in the sale of an unregistered security to a public customer in contravention of Section 5 of the Securities Act of 1933, because no registration statement had been filed for the security and there was no exemption from registration. In an effort to cover up the sale of the unregistered security, he falsified documents and deliberately deceived his member firm. Fausto Efrain Callava: Barred |
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Daniel Alan Buchalter (Principal) AWC/#2006004288601/December 2006 Buchalter borrowed $15,000 from a public customer and failed to
Daniel Alan Buchalter : Fined $7,500; Suspended 60 days in all capacities |
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Francis John Bello Jr. AWC/#2006005426501/December 2006 Bello submitted a Special Accommodation Request Form to NASD seeking an additional 60 minutes to complete the Regulatory Element of NASD’s Continuing Education Requirements that required the signature of his member firm’s compliance officer, but he signed the form himself without the compliance officer’s knowledge, authorization or consent. Francis John Bello Jr. : Fined $5,000; Suspended 60 days in all capacities. |
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Track Data Securities Corporation AWC/#ELI2005004702/December 2006 While engaging in option trading, the Firm failed to
Also, the Firm published newspaper advertisements and did not retain evidence of principal approval. Track Data Securities Corporation : Censured; Fined $12,500 |
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Libertas Partners, LLC AWC/#E112005021201/December 2006 The Firm permitted individuals to perform duties that require registration while their NASD registrations were inactive due to their failure to complete the Regulatory Element of the Continuing Education Program. Libertas Partners, LLC: Censured; Fined $10,000 |
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Harris Williams LLC, nka Harris Williams & Co. AWC/#2006003783701/December 2006 The Firm's supervisory system and written procedures were not reasonably designed to ensure compliance with email retention requirements because they did not provide for adequate follow-up and review to ensure that hard copies of email communications were being retained. The Firm did not maintain and preserve all email communications as SEC Exchange Act Rule 17a-4 requires. Harris Williams LLC, nka Harris Williams & Co.: Censured; Fined $50,000; Required to review its procedures regarding the preservation of electronic mail communications for compliance with federal securities laws, regulations and NASD rules. |
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| Bill Singer's Comment: Seems to me that if you have an electronic back-up system, that you should not also need to retain hard copies of emails --- you could print them out from the system. Not sure I fully understand the issue here. | |||||
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Hampton Securities (USA), Inc. AWC/#2006003899801/December 2006 The Firm did not maintain and preserve electronic communications as SEC Exchange Act Rule 17a-4 requires, in that it utilized an electronic back-up system to capture and retain email communications but recycled the back-up tapes each week, overwriting them with new data. Hampton Securities (USA), Inc.: Censured; Fined $25,000; Required to review its system and procedures regarding the preservation of electronic mail communications for compliance with federal securities laws, regulations and NASD rules. |
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| Bill Singer's Comment: Please read this case and note the problem: You cannot over-write archived back-up tapes week after week. I know this is a somewhat common cost-saving approach, but if you really think about it, it does defeat the whole point. | |||||
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Friedman, Billings, Ramsey & Co. Inc. AWC/#E9A2005004702/ December 2006 The Firm failed in certain respects to enforce its written supervisory procedures relating to securities transactions by its research analysts and other associated persons that required the firm’s compliance department to obtain duplicate confirmations and statements for all securities accounts maintained by those associated persons at other firms. As a result of its failure to enforce those provisions with respect to the research analyst, the firm failed to detect and prevent the research analyst’s violations of NASD rules. Friedman, Billings, Ramsey & Co. Inc.: Censured; Fined $15,000 |
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| Bill Singer's Comment: 2006 was a year in which NASD seemed to focus on outside accounts maintained by research analysts. This trend seems likely to continue. | |||||
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Westpark Capital, Inc. and Richard Alyn Rappaport (Principal) AWC/#E022004062801/December 2006 Rappaport failed to comply with a suspension NASD imposed, and continued to be actively involved in the management of his member firm’s investment banking and securities business during the suspension period. The Firm failed to establish, maintain and enforce a supervisory system or written procedures reasonably designed to ensure that Rappaport did not act in a principal capacity during the suspension period. Westpark Capital, Inc.: Censured; Fined $10,000 Richard Alyn Rappaport : Fined $10,000; Suspended 30 days in all capacities |
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| Bill Singer's Comment: No, no, no, no, no!!! You just can't do this and, frankly, Rappaport is lucky that he got off with only a 30 day suspension. He must have had one hell of a lawyer. See Gilmore and Centaurus for similar matters. | |||||
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The Oak Ridge Financial Services Group, Inc. and Laurence
Stuart Zipkin (Principal) AWC/#E0420050103-02/#E0420050103-03/December 2006 In connection with private placement contingency offerings, acting through Zipkin, the Firm opened bank accounts to receive public customer funds for the offerings when there were no escrow agreements signed by the firm or the issuer. A separate account for one of the offerings was established, but funds continued to be deposited in the first account and were not promptly sent to the second account, which led to net capital problems. The Firm had possession and control of customer funds on contingency “best effort” offerings, yet did not conduct an NASD Rule 15c3-3 reserve account computation and segregate funds in a designated account. Acting through Zipkin, the Firm participated in a “best efforts” offering and, despite reaching the offering maximum, continued to offer shares of the common stock and did not
The firm sent written requests to customers in the second offering requesting that the offering period be extended but did not
The Oak Ridge Financial Services Group, Inc: Censured; Fined $50,00 Laurence Stuart Zipkin: Fined $20,000; Suspended 4 months in Principal capacity. |
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| Bill Singer's Comment: Yet another in a growing line of 2006 NASD cases sanctioning escrow deficiencies. Regrettably, the official publication of this case is not the model of clarity, but it serves the purpose of getting the point across. Here are a few punchlist items to make sure are in place for your offerings. Confirm that you have signed escrow agreements in place for all proposed escrow accounts. When conducting a Best Efforts offering, make sure you "close" the deal in accordance with its terms -- you cannot keep raising funds beyond the limits set in the offering without getting permission from prior investors. More to the point, extensions of any nature typically require you to offer all investors the choice of staying in the deal or rescinding their purchase. | |||||
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J.P. Turner & Company, L.L.C and S. Cheryl Bauman
(Principal) AWC/#E072003011201/December 2006 Acting through Bauman, the Firm
In connection with the hedge fund offering, the Firm made improper use of a public customer’s funds by
Also, the Firm failed to establish a proper escrow account for a private offering. and paid securities commissions that totaled $2,226,130.90 to non-member entities or persons. J.P. Turner & Company, L.L.C: Fined $211.372 (includes $86,372 disgorgement of commissions/fees; and $40,000 joint/several with Bauman); Prohibited from offering hedge fund interests or opening new hedge fund accounts for 6 months; (after 6 month offering/opening prohibition) Suspended from offering hedge fund interests and opening new hedge fund accounts until the firm submits revised written supervisory procedures with NASD that satisfactorily address the supervision of hedge fund offerings as well as the trading in hedge fund accounts; Subjected to a 6-month pre-use filing requirement with NASD for all customer advertisements and sales literature relating to hedge funds, beginning with the first use of such sales communications following the suspension from offering hedge fund interests and opening new hedge fund accounts. S. Cheryl Bauman (Principal) Fined $40,000 joint/several; Suspended 3 months in Principal capacity. |
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| Bill Singer's Comment: An amazing, almost breath-taking case with which to close out the year. Touches on many of the emerging regulatory issues of 2006 and likely continuing into 2007. As to the violations, we see that NASD has hedge fund activities within its crosshairs. Among the areas of regulatory focus are trading in the hedge fund's account and the marketing of the fund. Also of interest are the citations for misuse of subscription funds, improper escrow practices, and the payment of commissions to non-members. Finally, notice the tailored sanction pertaining to offering/opening hedge funds. I suspect that we will see far more of these types of sanctions in 2007. | |||||
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Dennis Russell Weddle II AWC/#20050012479-01/November 2006 Weddle affixed customer signatures to documents concerning financial planning services. Dennis Russell Weddle II: Fined $7,500; Suspended 60 days in all capacities (NASD credited Weddle with 20 days served on the 60 day suspension in consideration of a 51-day suspension imposed upon him by his member firm) |
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Mark Allen Upchurch AWC/#2006004847601/November 2006 Upchurch signed a public customer’s name to an account transfer form without her permission. Mark Allen Upchurch : Fined $5,000; Suspended 30 business days in all capacities |
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Andrew Mark Stinson (Principal) AWC/#20060049044-01/November 2006 Stinson cut a public customer’s signature out of a copy of an original state-sponsored 529 plan account application and pasted it in onto an amended application, then submitted it to his member firm for processing. Andrew Mark Stinson : Fined $5,000; Suspended 60 days in all capacities |
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| Bill Singer's Comment: If only Mr. Stinson knew Mr. Simpson (see two cases below). Maybe he could have affixed the signature from a fancy computer graphics program and escaped detection. Was this guy part of Respondent Sojka's (see immediately below) environment? | |||||
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Kenneth Lewis Sojka (Principal) OS/#2005002485301)/November 2006 Sojka directed, encouraged and/or permitted individuals to sign public customers’ names on Account Transfer Forms, making the documents false and inaccurate, without the public customers’ authorization or consent. Sojka promoted and maintained a workplace environment in which individuals were directed, encouraged and/or permitted to affix customer signatures to firm documents without the customers’ authorization or consent. Sojka settled a customer complaint by paying the customer $592.40 without his member firm’s knowledge or approval. Kenneth Lewis Sojka : Fined $10,000; Suspended 9 months in all capacities |
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| Bill Singer's Comment: Okay, so maybe it's just my warped sense of humor, but this decision just strikes me as a tad too cute. What kind of violation is this? He "promoted and maintained a workplace environment in which individuals . . . affix(ed) customer signatures . . ." Call me a sour-pus cynic, but anyone ever recall seeing a case in which someone was charged with promoting and maintaining a workplace environment that was racist or sexist? Hmmm . . . can't really recall. Guess that never happened. | |||||
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Harold Stephen Simpson, Sr. AWC/#2006004213501/November 2006 Simpson received a $6,250 check from a public customer for investment purposes but used the funds for his own use and benefit without the customer’s authorization or knowledge. Simpson created and delivered a false certificate of stock for a nonexistent company to the customer in order to convince the customer that he had invested the funds as directed. Simpson failed to disclose in writing to his member firm the existence of a brokerage account in which he held a beneficial interest and failed to notify his member firm in writing of his association with another firm. Harold Stephen Simpson, Sr.: Barred |
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| Bill Singer's Comment: Ain't computers wonderful? I mean, hell, look at all the creativity these machines allow us to channel for profitable uses. A false stock certificate in a nonexistent company. Well, with the Bar, I guess Mr. Simpson can try his hand at something more challenging. Anyone got a hundred dollar bill he can look at? | |||||
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Thomas John Scipione AWC/#E1020040957-01/November 2006 Scipione made a recommendation to a public customer without having reasonable grounds for believing that the recommendation was suitable based upon the customer’s financial situation, investment objectives and needs. Scipione submitted to an insurance company an equity indexed annuity application a public customer executed in the state of New York, on which Scipione falsely represented that the customer executed the application in the state of Florida in order to circumvent the requirement that the insurance company be registered in New York to offer its products. Thomas John Scipione: Fined $10,000; Suspended 2 years in all capacities |
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| Bill Singer's Comment: This foolish practice of screwing around with the state of origin is as old as the hills --- and doesn't get any smarter with each year's retelling. Don't do it. It's not worth the commission. | |||||
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Jody Gordon Scheiman (Principal) AWC/#2005002264901/November 2006 Scheiman's housekeeper posed as her aunt on a telephone call to obtain information about an insurance policy the aunt owned. Scheiman misled her member firm about the phone call her aunt purportedly made. Jody Gordon Scheiman : Fined $7,500; Suspended 10 business days in all capacities |
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| Bill Singer's Comment: Omigod . . . is this for real? | |||||
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Robert Michael Ryerson (Principal) #C9B20040033/November 2006 NAC Decision on Appeal from OHO Decision Ryerson engaged in private securities transactions, for compensation, without providing prior written notice to, and receiving prior written approval from, his member firm. Also, he paid $100,000 in commissions to a non-member firm in connection with variable annuity referrals that he had received. Finally, Ryerson failed to fully and promptly provide on-the-record testimony NASD requested. No additional sanction, however, was imposed for Ryerson’s failure to provide required testimony. Robert Michael Ryerson: For Private Securities Activities: Fined $230,000; Suspended 2 years in all capacities; Ordered to re-qualify in all capacities For Payment of Commissions to an Unregistered Entity: Fined $5,000; Suspended 15 business days in all capacities (suspensions run concurrently) |
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| Bill Singer's Comment: I still don't understand why there is such hostility to paying referral fees (yes, I agree that the payments must be disclosed prior to the sales). Seems to me that this is an area for rulemaking changes. On the other hand, I am truly puzzled as to how someone fails to "fully and promptly provide" OTR testimony and isn't barred. There must be some further details that NASD is unfortunately not providing. Finally, this is one of the very few NASD cases in which the sanctions are specifically divided between two charges. I applaud this break-out practice and hope to see more of it. | |||||
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Richard Lewis Rosen (Principal) #E102002179201/November 2006 Acting through Rosen, his member firm
Rosen failed to complete the regulatory element of NASD’s Continuing Education requirement, which caused his registration to be inactive while he continued to effect securities transactions and serve as a president of the firm. Richard Lewis Rosen: Barred |
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| Bill Singer's Comment: If you read the Parks case immediately below, you will see that there is some NASD focus on the payment of commissions for securities sales. In Rosen we also have a wonderful "study" case for year-end discussion: So many violations and a number of them touching upon hot topics for this year. | |||||
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Samuel Conant Parks AWC/#E3B2004021902/November 2006 Parks intentionally or recklessly, failed to disclose that he had received compensation from the issuer for his recommendations and sales of a stock to public customers. Parks failed to disclose conflict of interest and compensation to customers in that he knew, or had reason to know, that the agreement to compensate him for the sale of the stock and subsequent payments to him created an actual material conflict of interest at the time of he published research reports regarding the stock. Parks participated in private securities transactions, for compensation, without providing prior notice to, and receiving approval from, his member firm. Parks opened an account with another firm without providing prior notification to his member firm or of his association with the other member firm, and falsely stated that no NASD registered person had an interest in the account on a new account signature card. Samuel Conant Parks: Barred |
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| Bill Singer's Comment: Rule #1 in any securities offering is to disclose all material conflicts, and nothing could be more material than the disclosure of compensation paid to recommend or sell the stock at issue. Rule #1 in handling any regulatory matter is not to compound one violation by attempting to cover it up --- if you have an interest in an account at another firm you should not deny it in writing. All of which explains Rule #1 in regulation: Bar folks for serious rule violations. | |||||
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David John Palen #E3A2004036501/November 2006 Palen withdrew approximately $203,000 from public customer accounts to pay for financial planning fees that the customers had not authorized or approved. Palen signed a public customer’s name to an advisory service agreement without the customer’s authorization or consent and submitted it to his member firm. Palen failed to appear for an NASD on-the-record interview. David John Palen: Barred |
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Mary Ann Naventi (Principal) AWC/#2006004215401/November 2006 Naventi falsely notarized the signatures of persons on deeds and a mortgage document without having actually witnessed the signatures. Mary Ann Naventi: Barred |
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| Bill Singer's Comment: You have to be an idiot to to something as stupid as this. Just think about the cascade effect of liability this lunacy could set off. | |||||
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William Andrew Malloy (Principal) AWC/#20050000286-02/November 2006 Malloy failed to perform branch audits and failed to conduct regular compliance reviews of trading activity in customer accounts as his firm’s written supervisory procedures required. William Andrew Malloy : Barred |
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| Bill Singer's Comment: See Daly below for a similar case. | |||||
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Peter J. Maldjian (Principal) OS/#E9B2004028401/November 2006 Maldjian created and submitted a fictitious certificate of formation for a limited liability company to his member firm in attempt to open a brokerage account at his member firm, used the business filing number from another bona-fide limited liability company and replicated the New Jersey State Treasurer “filed“ stamp. The false certificate of formation gave the impression that the firm was a bona-fide New Jersey established limited liability company, when in fact it was not. Peter J. Maldjian: Fined $5,000; Suspended 3 months in all capacities. |
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| Bill Singer's Comment: Okay, so maybe I'm getting cranky in my old age, but only 3 months for creating and submitting false documents ? | |||||
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Marvin Ray Koerselman AWC/#2005001737201/November 2006 Koerselman engaged in outside business activities and failed to provide his member firm with prompt written notice. Koerselman completed and submitted questionnaires to his member firm wherein he falsely indicated that he was complying with the firm’s requirement that he not accept customer checks made payable to him. Marvin Ray Koerselman : Fined $10,000; Suspended 3 months in all capacities |
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| Bill Singer's Comment: It's bad enough to engage in an undisclosed outside business -- but to lie about it on the annual questionnaire? | |||||
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Kimberly Pine Hardaker (Principal) AWC/#20050002046-01/November 2006 Hardaker
Kimberly Pine Hardaker : Barred |
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Roger Ernest Frank AWC/#E1020041096-01/November 2006 Frankl traded securities through an account maintained at another member firm without providing notice to his member firm or notice of his association with the firm that maintained that account. Also, Frank engaged in private securities transactions without providing prior written notice to his member firm. Roger Ernest Frank: Fined $17,500; Suspended 15 business days in all capacities |
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| Bill Singer's Comment: Yet another area that seems to be popping back on the radar in 2006: accounts at another member firm. Might be a good time during year-end to review the policies and procedures of away accounts with the firm's employees. | |||||
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Timothy James Daly (Principal) AWC/#E112005009201/November 2006 Daly failed to establish and maintain a supervisory system and written procedures reasonably designed to supervise his firm’s registered representatives’ and associated persons’ activities to achieve compliance with applicable securities laws, regulations and NASD rules. Acting on his member firm’s behalf, Daly:
Timothy James Daly: Fined $15,000; Barred in Principal capacity |
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| Bill Singer's Comment: Did Daly fail to conduct internal inspections (at all) or did he not conduct satisfactory inspecitons -- once again, I wish NASD would simply clarify most of his monthly releases to better educate us. Nonetheless, it goes without saying that three of the hallmarks of even the most rudimentary of supervisory systems are 1. on-site inspections of OSJs, 2. reviews of transactions. and 3. review of correspondence with the public. | |||||
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David Joseph Cottam OS/#E9B2003026301/November 2006 Cottam improperly obtained Contigent Deferred Sales Charge (CDSC) waivers for public customers in connection with mutual fund redemptions by falsely representing, on his member firm’s electronic order entry system, that the customers were disabled, when in fact, they were not. As a result, several mutual funds companies were deprived of fees to which they were otherwise entitled; and Cottam’s actions caused his member firm’s books and records relating to redemptions to contain false and misleading information regarding the disability status of the customers and their entitlement to a CDSC waiver. David Joseph Cottam : Fined $5,000; Suspended 18 months in all capacities. |
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John Ivey Amon, Jr. AWC/#2005002553601/November 2006 Amon reallocated a public customer’s sub-account holdings for a variable annuity totaling $13,000 from a guaranteed fixed rate to equity mutual funds without the customer’s knowledge or authorization. Amon agreed to reimburse the customer for his incurred losses as a result of the unauthorized transactions, wrote a check for $577.56, and then had these funds deposited directly into the customer’s annuity without disclosing the settlement to his member firm. John Ivey Amon, Jr.: Fined $10,000; Suspended 4 months in all capacities. |
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| Bill Singer's Comment: 2006 seemed destined to be a somewhat quiet year for these "undisclosed settlement" cases, but in the past two months I've noticed multiple violations cited by NASD. The increase in sanction activity might indicate that folks are forgetting the prohibition about this conduct. Compliance Depts might want to take the opportunity to remind the salesforces that this is a no-no. | |||||
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Tower Square Securities, Inc. AWC/#E112005002601/November 2006 The Firm's supervisory system and procedures were not reasonably designed to ensure that the firm obtained and/or retained required written consent for pre-registration searches on Web CRD. The firm failed to obtain and/or retain the required written consent in connection with its pre-registration searches of individuals, many of whom were not seeking employment with the firm or were seeking employment with an affiliated broker-dealer and not the firm. (With respect to the latter searches, the individuals seeking employment with an affiliated broker-dealer had consented to a pre-registration search by the affiliated broker-dealer, but not by Tower Square.) Also, the Firm failed to implement a written AML program reasonably designed to achieve compliance with the requirements of the Bank Secrecy Act and the regulations promulgated thereunder. Tower Square Securities, Inc. : Censured; Fined $85,000; Required to review its written supervisory procedures and establish a supervisory system reasonably designed to achieve compliance with laws, regulations and rules concerning pre-registration Web CRD searches. |
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| Bill Singer's Comment: And NASD wonders why there is a vibrant dissident movement within its ranks? As best I understand the allegations here, a member firm went onto the sacrosanct Web CRD system to confirm the backgrounds of applicants (or, yes --- I got it --- applicants for an "affiliated" BD but not for the firm) and didn't obtain or retain the required written consent. Okay. And for that there is an $85,000 fine??? Yeah, I know, there was also an AML violation. Still --- these violations required an $85,000 fine? As I have harped on for so many years, the NASD's sanctions in this case may well be fair and appropriate, but the SRO must do a much better job explaining the underlying facts and circumstances to justify its conduct. | |||||
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Sharebuilder Securities Corporation AWC/# 2006003887001/November 2006 The Firm committed several violations of NASD’s advertising rules by means of various false and misleading statements regarding its services, including predictions of performance, incomplete and unbalanced comparisons with its Web site and Internet advertising. These misleading advertisements were available for widespread use by the investing public, not only for those who were the firm’s customers. The Firm failed to file Exchange Traded Funds (EFT) related communications with NASD as it was required to do. Sharebuilder Securities Corporation : Censured; Fined $140,000; Required to file all advertisements used on the firm’s Web site or on the Internet with NASD at least 10 days prior to their first use for one year |
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Morgan Keegan & Company, Inc. AWC/#2005002050701/November 2006 The Firm failed to timely file amendments to Uniform Applications for Securities Industry Registration or Transfer (Forms U4), and failed to timely file Forms U5 with NASD. Morgan Keegan & Company, Inc. : Censured; Fined $29,000 |
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Fox & Company Investments, Inc. AWC/#E3A20050043-02/November 2006 The Firm failed to timely and accurately
Also, the Firm erroneously made reports to the MSRB for transactions that did not actually occur, and failed to make and keep current order tickets for municipal securities transactions. The Firm failed to adopt and maintain written supervisory procedures reasonably designed to achieve compliance with MSRB rules. Fox & Company Investments, Inc. : Censured; Fined $25,000 |
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Feldman Securities Group, L.L.C. AWC/#E8A2005007601/November 2006 The Firm’s written supervisory procedures were incomplete in certain respects and the firm did not fully implement other procedures with regard to its dissemination of research reports containing disclosure deficiencies. The Firm did not balance favorable discussions of securities identified in research reports with sufficient disclosures of risks associated with an investment in the securities. The Firm did not fully ensure compliance with SEC Regulation AC, in that some research reports did not include an Analyst Certification. Feldman Securities Group, L.L.C.: Censured; Fined $22,000 |
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A.G. Edwards & Sons, Inc. AWC/#EAF0400790002/November 2006 The Firm included an attorney’s fee clause—which provided that the customer would be responsible for the firm’s costs and attorney’s fees in the event the customer brings a claim against the firm, regardless of whether or not the customer is successful in pursuing the claim in violation of NASD rules—in its customer agreements. A.G. Edwards & Sons, Inc.: Censured; Fined $10,000; Required to provide a report to NASD attesting that it has given notice to all customers whose relationship with the firm is still controlled by any agreement containing the attorney’s fee clause at issue, by letter, that the firm will not take any action to enforce that clause. |
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| Bill Singer's Comment: Now here's one you don't see everyday! A major, national firm "threatens" to charge its customers for attorney's fees and costs in the event the customer files a claim against the firm --- and the NASD concluded that such a blanket warning could have been reasonably interpreted as covering both winning and losing cases. Well, good for the NASD! And I'm serious. One likely impact of such a blanket admonition in a customer agreement is to discourage less savvy clients from bringing legitimate claims. Why? Simple, such naive folks might read the warning and conclude that they would have to pay for costs and fees. The warning is fair and appropriate when properly limited to a "victor" clause, but not when so broadly worded as apparently was the case here. Sadly, it would have been nice if NASD included the offending language in the monthly disciplinary report so that others might learn from this mistake. | |||||
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Torrey Pines Securities, Inc. and Jack Clark Smith, Jr. (Principal) AWC/#E0220050158-02/November 2006 In its membership agreement, the Firm (acting through Smith) represented to NASD that it would not receive securities or customer checks payable to the firm. Acting through Smith, the Firm
Torrey Pines Securities, Inc. and Jack Clark Smith, Jr. (Principal): Cenusred; fined $15,000 joint/several |
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| Bill Singer's Comment: Frankly, I haven't seen this one for some time --- but it was a very popular violation in years past. So, just in case we're seeing a resurgence of this problem, keep in mind that if you're operating under the typical net capital computation exemption, you likely are precluded from receiving securities/cash/checks from clients. Sure, customers can mistakenly send such things in to you, but your policies/procedures must promptly forward the certs or payments to your clearing firm, and you should also admonish the client not to continue sending such things to you. | |||||
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Energy Securities, Inc. and Lawrence Reed Buettner
(Principal) AWC/#20050014461-01/November 2006 Acting through Buettner, the Firm used the mails or other instrumentalities of interstate commerce to effect transactions in securities when it failed to maintain the minimum required net capital. Energy Securities, Inc. and Lawrence Reed Buettner (Principal): Fined $15,000 joint/several; Firm's exemption from the requirement to qualify and register an individual as a limited principal-financial and operations was revoked. |
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| Bill Singer's Comment: A fairly mundane net cap case but with an unusual sanction: Revocation of a Limited FINOP exemption. | |||||
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Lawrence Michael Weinberg (Principal) AWC/#E1020040813-01/October 2006 Weinberg opened or maintained accounts with other member firms without notifying, in writing, his member firm of the accounts, or the other member firms of his association. Weinberg purchased shares in “hot issue” initial public offerings for accounts in which he had a beneficial interest. Lawrence Michael Weinberg : Fined $47,999 (includes $37,999 disgorgement of profit); Suspended 10 business days in all capacities |
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Bill Singer's Comment:
Old timers (geez --- I guess I'm one) will likely recall the flood of
"hot issue" cases in the 80s and 90s. Not that we're
exactly swimming in IPOs right now, but it might be a good time to
review NASD Conduct Rule 2790. Restrictions on the Purchase and
Sale of Initial Equity Public Offerings . What happened to the
old Free-Riding and Withholding Interpretation? On October 24, 2003,
the approved the replacement of the former Free-Riding and Withholding
Interpretation (IM-2110-1) with Rule 2790.
Rule 2790 generally prohibits a member from selling a "new issue" to any account in which a "restricted person" has a beneficial interest. The term "restricted person" includes most associated persons of a member, most owners and affiliates of a broker/dealer, and certain other classes of persons. Before selling a new issue to any account, a member must meet certain "preconditions for sale," which generally require the member to obtain a representation from the beneficial owner of the account that the account is eligible to purchase new issues in accordance with the Rule. The Rule also contains a series of general exemptions. |
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Kathy Hurst Seyle AWC/# 2005003297601/October 2006 Seyle falsified a Rollover Election, Deposit and Certification Form in order to facilitate the opening of a client’s rollover IRA account by copying the client’s signature from another form and affixing it to the document. Kathy Hurst Seyle : Fined $5,000; Suspended 6 months in all capacities |
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Matthew Robert Nall (Principal) AWC/#2005001028601/October 2006 Nall completed Change of Broker/Dealer and/or Representative Authorization Forms by changing the broker of record for variable annuities owned by public customers from another broker Nall’s member firm previously employed, to Nall. Nall affixed the customers’ signatures on the forms without their knowledge or consent. Matthew Robert Nall : Fined $5,000; Suspended 60 days in all capacities |
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David Matthew Garrity (Principal) AWC/#20050017487-01/October 2006 Garrity purchased and/or sold securities of companies that he was covering as a research analyst, but he failed to
David Matthew Garrity : Fined $10,000; Suspended 45 days in all capacities. |
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| Bill Singer's Comment: NASD Conduct Rule 3050: Transactions for or by Associated Persons was designed to obligate members to use reasonable diligence in determining whether executed transactions in the accounts of associated persons of another member firm, or accounts in which the associated person has discretionary authority, will adversely affect the interests of the employer member. These "other" account cases involving research analysts seem to be a growing problem. Perhaps Compliance Depts should simply send out an annual memo reminding analysts of the prohibitions/requirements for maintaining accounts away from the employing firm. | |||||
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Leonel Federico AWC/#20050018579-01/October 2006 Federico borrowed $55,000 from public customers in contravention of his member firm’s written procedures prohibiting registered representatives from borrowing money from customers. Also, he failed to respond to NASD requests for information. Leonel Federico: Barred |
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Robert Allen Dorman OS/#2005001091801/October 2006 Dorman completed and affixed a public customer’s signature on a firm securities replacement form, even though his member firm’s written supervisory procedures stated that registered representatives were not permitted to sign a customer’s name or add the customer’s initials to any document even pursuant to the customer’s request. Robert Allen Dorman : Fined $5,000; Suspended 60 days in all capacities |
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| Bill Singer's Comment: This seems to trip up a number of folks. Even if the customer says "go ahead, sign my name," there may still be an in-house policy prohibiting that very act. It may not be a "forgery" if the client consents, but that doesn't mean it is still not a violation of in-house policies and procedures. | |||||
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Kevin Edward Davis (Principal) OS/#E1020050283-01/October 2006 While acting on his member firm’s behalf, Davis conducted a securities business while the firm’s net capital was below the minimum net capital requirement. Kevin Edward Davis: Fined $10,000; Suspended for 12 months in FINOP capacity; Required to requalify as FINOP within 90 days from the end of suspension. |
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Jeffrey Leonard Adell #20050003867-01/October 2006 Adell created false letters of instructions purportedly created and signed by a public customer directing his member firm to liquidate funds from the customer’s securities account and to send the proceeds to a third-party address, which was actually Adell’s home address. Adell falsely certified to his member firm that the forged signatures on the letters were authentic. He converted $29,460 from the customer’s securities account through the use of the forged letters of authorization and used the funds for his personal benefit without the customer’s knowledge or consent. Adell failed to respond to NASD requests for information. Jeffrey Leonard Adell : Barred |
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Vanguard Capital OS/#E052003017102/October 2006 The Firm failed to establish and maintain a system reasonably designed to supervise the activities of a registered representative and a branch office, and failed to maintain an appropriately registered principal in an Office of Supervisory Jurisdiction (OSJ) for a time period, in contravention of NASD Rule 3010(a)(4): Vanguard Capital: Censured; Fined $20,000 |
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| Bill Singer's Comment: NASD Rule 3010: Supervision requires in pertinent part under (a)(4) that The designation of one or more appropriately registered principals in each OSJ, including the main office, and one or more appropriately registered representatives or principals in each non-OSJ branch office with authority to carry out the supervisory responsibilities assigned to that office by the member. | |||||
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Morgan Stanley DW Inc. AWC/#E9B20050107-02/October 2006 The Firm's Financial Advisor Heightened Supervision Review Committee failed to review financial advisors who met the criteria for heightened supervision, in that it did not review the firm’s financial advisors until at least 100 days after meeting the review threshold. Morgan Stanley DW Inc.: Censured; Fined $100,000; Required to provide a report describing the steps it has taken to enhance the operations of its Financial Advisor Heightened Supervision Review Committee to NASD. |
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Mony Securities Corporation AWC/#E1020040703-01/October 2006 The Firm permitted individuals to act in a capacity requiring registration with NASD when they were not registered. The Firm failed to establish, maintain and enforce a supervisory system reasonably designed to achieve compliance with NASD rules that require persons who function as representatives to be registered as such with NASD. Mony Securities Corporation: Censured; Fined $20,000 |
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| Bill Singer's Comment: This Mony case is a perfect example of one of my oldest criticisms about NASD's inconsistent sanctioning policies. It has been my long-held belief that NASD resorts to a two-tiered system when it comes to examining, investigating, and prosecuting smaller and larger firms. Here is a perfect example. Compare this "failure to register" case with just these reported so far in October: Truman; Tullett; Brighton; Shields. Note any dramatic dissimilarities? Well, how come no human being is named in the MONY case? In the four other cited matters, an individual is censured, fined, and/or suspended -- and all these cases involve the failure to properly register indivduals. Are there no human being responsible for violations at MONY? | |||||
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Hibernia Investments L.L.C. nka Capital One Investments, LLC AWC/#E052005004101/October 2006 The Firm made payments to a bank for distribution to bank branch employees, who were not associated persons of the firm, as an incentive to employees who made referrals of potential customers to the firm during certain designated time periods. Hibernia Investments L.L.C. nka Capital One Investments, LLC: Censured; Fined $12,500 |
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Springboard Securities, Inc. and Jonathan McKee
Hansen (Principal) AWC/#E0220050147-02/October 2006 Acting under Hansen’s direction and control, the Firm
Springboard Securities, Inc. and Jonathan McKee Hansen (Principal) : Censured; Fined $15,000 jt/sev |
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Shields & Company and John Patrick Hughes, Jr. (Principal) OS/#E102004036901/October 2006 Acting through Hughes,the Firm failed to have a properly registered municipal securities principal to supervise its municipal securities activities. Hughes was responsible for reviewing all municipal transactions the firm conducted, even though he was not registered as the municipal securities principal during that time. Shields & Company and John Patrick Hughes, Jr. (Principal): Censured; fined $25,000 jt/sev |
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MCL Financial Group, Inc. and Gary Lynn Flater (Principal) AWC/#E3A2005004701/October 2006 Acting through Flater, the Firm
MCL Financial Group, Inc. and Gary Lynn Flater (Principal): Censured; Fined $12,500 jt/sev |
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Brighton Securities Corp. and George Thomas Conboy
(Principal) AWC/#E9B2005001701/October 2006 Acting through Conboy, the Firm failed to
Brighton Securities Corp. and George Thomas Conboy (Principal): Censured; Fined $15,000 jt/sev |
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Tullett Liberty Brokerage, Inc., Richard Coppolino (Principal) and Anthony
S. Arcabascio AWC/E1020040416-01/October 2006 The Firm and Coppolino permitted Arcabascio, an associated person, to be engaged in trading activity involving government securities, which required registration, and the firm paid him transaction-based compensation even though he was not properly registered with NASD. Tullett Liberty Brokerage, Inc.: Censured; Fined $40,000 ($20,000 of which jt/sev with Coppolino Richard Coppolino (Principal) Fined $20,000 jt/sev with the Frim; Suspended 5 business days in government securities principal capacity Anthony S. Arcabascio: Fined $10,000; suspended 5 business days in all capacities. |
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| Bill Singer's Comment: In recent months, I'm seeing an increase in cases dealing with improperly registered persons. See Brookstreet and Graboyes for similar issues. | |||||
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Asensio Brokerage Services, Inc. nka Integral Securities, Inc. and Manuel
Peter Asensio (Principal) #CAF20030067/October 2006 NATIONAL ADJUDICATORY COUNCIL DECISION FOLLOWING APPEAL FROM OHO DECISION Acting through Asensio, the Firm
Also, Asensio failed to fully respond to NASD requests for information during an on-the-record interview. Asensio Brokerage Services, Inc. nka Integral Securities, Inc.: Fined $20,000 Manuel Peter Asensio (Principal): Barred |
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The Truman Group Inc. and Kenneth Jason Saluk OS/#EFL2004000401/October 2006 Acting through Saluk, the Firm
Also, the Firm failed to register 1.Saluk and others as General Securities Representatives while they were soliciting investors, and 2. Saluk as a General Securities Principal while he was supervising the firm’s operations and employees. Finally, Saluk failed to appear for an NASD on-the-record interview. The Truman Group Inc.: Expelled Kenneth Jason Saluk: Barred |
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Stanley Yung aka Quang Chi Dung AWC/#20050025144-01/September 2006 With an accomplice’s help, Yung reactivated an inactive customer’s savings account and without the knowledge, authorization or consent of a second customer, arranged for the transfer of $60,000 from that customer’s account to the savings account, had his accomplice cash out the savings account, received the cash proceeds, and used the funds for his own personal use and benefit. Yung withdrew $50,000 from a third customer’s account without the customer’s knowledge, authorization or consent and transferred the funds into his accomplice’s own bank account. However, the bank froze the accomplice’s bank account before the funds could be removed from it. Stanley Yung aka Quang Chi Dung: Barred |
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Robert Philip Yorba, III AWC/#20050013421-01/September 2006 In an attempt to stop a public customer from transferring her accounts to another firm, and without the customer’s knowledge, authorization and consent, Yorba created a letter to his firm and affixed a copy of the customer’s signature through which she purportedly asked the firm to disregard her earlier transfer request. Robert Philip Yorba, III: Fined $5,000; Suspended 6 months in all capacities |
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| Bill Singer's Comment: The sanction is totally warranted. However, I wonder why we don't see sanctions imposed against firms who "jam up" the transfers of accounts by their departing brokers. | |||||
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John Fitzgerald Tyus AWC/# 2005003253401/September 2006 Tyus borrowed $30,000 from a public customer without first obtaining written approval from his member firm. John Fitzgerald Tyus: Fined $5,000; Suspended 10 business days in all capacities |
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Michael Antoine Rooms (Registered Principal) #C0620020003/E0619980215/September 2006 National Adjudicatory Council Decision sustained by the SEC and then upheld by The United States Court of Appeals for the Tenth Circuit The NAC’s found that Rooms violated certain provisions of the SEC’s penny stock rules by, among other things, recommending and selling penny stocks to customers without providing certain required disclosures. Rooms violated just and equitable principles of trade by attempting to obstruct NASD’s investigation of the penny stock violations. Rooms used two methods to create the false impression that he had complied with the penny stock rules:
Michael Antoine Rooms : Bar |
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Daniel Peter Ray AWC/#2005002115301/September 2006 Ray made improper use of customer funds, in that he cashed money orders intended to purchase securities that were erroneously made out to him instead of his member firm, and then provided the proceeds to another registered representative so that the representative could satisfy gambling debts. Daniel Peter Ray: Barred |
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| Bill Singer's Comment: I understand that Mr. Ray got a wonderful, warm, fuzzy feeling when he saw money orders mistakenly made out in his name. I also understand (but not approve) that he decided to cash them for himself and justify it all under "tough -- it's their mistake, not mine." But what defies commonsense is that here he takes the erroneous money orders IN HIS NAME and after he cashes them, he gives the proceeds to another RR to pay off that person's gambling debts. Talk about crapping out! | |||||
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Mark L. Lewis (Registered Principal) AWC/#E8A2004106201/September 2006 Lewis borrowed $650 from a public customer without first obtaining his member firm’s written approval. Lewis’ member firm’s written procedures prohibited its representatives from accepting or borrowing funds from customers. Mark L. Lewis : Fined $2,500; Suspended 10 business days in all capacities |
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Richard Lewis Lee AWC/#2005002016801/September 2006 Lee entered into a promissory note with public customers in contravention of the firm’s written procedures prohibiting registered persons from borrowing money from customers. Richard Lewis Lee: Fined $5,000; Suspended 90 days in all capacities |
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Jonathan Edward Kruse, Sr. AWC/#2005001626001/September 2006 Kruse engaged in private securities transactions without prior written notice to, and approval from, his member firm. Also, Kruse settled a customer complaint by purchasing back securities he had sold them without informing his member firms. Jonathan Edward Kruse, Sr. : Fined $25,750 (includes $15,750 disgorgement of financial benefits); Suspended 1 year in all capacities. |
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XXXXX (Principal) [name deleted at the discretion of
RRBDLAW.com] AWC/#E9A2005004701/September 2006 On numerous occasions, a member of XXXXX’s household effected a purchase or sale of securities issued by a company XXXXX followed in their personal account in contravention of the restrictions against trading during periods before and after the issuance of a research report set forth in NASD Rule 2711(g)(2). Some of the transactions were inconsistent with XXXXX’s recommendation as reflected in the most recent research report that she prepared concerning the respective company. XXXXX purchased and sold shares of a company’s common stock in a securities account she owned individually at another member firm that was inconsistent with the recommendation reflected in her published research report. XXXXX prepared research reports that failed to disclose that a member of her household owned shares of the company’s common stock. In addition, XXXXX maintained a personal securities account at two other NASD member firms and failed to promptly notify those firms in writing of her association with her member firm, and failed to promptly notify her member firm in writing about a personal securities account she maintained. XXXXX: Fined $30,000; Suspended 30 days as a research analyst |
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Craig L. Josephberg AWC/#EAF0400370005/September 2006 Josephberg opened several accounts for hedge fund clients for the purpose of market-timing mutual funds. Josephberg received increasing numbers of account blocks and trade rejects from mutual funds that were monitoring his clients’ market-timing activities for excessive market-timing. In an effort to hide from mutual funds that monitored for brokers that engaged in excessive market-timing, he requested new broker codes for his market-timing account and executed trades with the new broker codes in mutual funds that had already blocked a trade he had attempted to execute with his pre-existing broker codes. Josephberg was able to trade for clients in funds that may have been monitoring for and may have rejected trades associated with, his preexisting broker codes generating $34,000 in profits for his clients. In addition, Josephberg processed trades in a mutual fund after that fund had blocked his broker code from placing any further trades generating $86,000 in profits for his clients. Craig L. Josephberg: Fined $15,000; Suspended 35 days in all capacities |
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| Bill Singer's Comment: Several of these additional broker code cases were reported by NASD, but I've merely cited to this one for illustrative purposes. This type of violation puzzles me. The RR's misconduct is evident -- no debate from me on that. However, you would think that firms would be highly suspicious of any request for additional broker codes for the same RR. Moreover, assuming you issue such extra codes, you would also expect enhanced scrutiny of their use. The main thing I get out of these additional broker code cases is a growing skepticism of broker-dealers who claim they had no idea about the misuse of their firm for market-timing trades (how much more smoke do you need before you yell "fire")? Also, see Davis for the situation in which a Registered Principal was charged in failing to monitor this type of activity. | |||||
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John Vincent Hull AWC/#2005000094002/September 2006 Hull engaged in a series of pre-arranged and other manipulative trades, including trades with Canadian firms. Hull made a market in a thinly traded pink sheet stock, and moved his quotes and traded over 7.5 million shares of the stock, at the direction of an individual barred by NASD. Hull’s manipulative trading of the stock contributed to an increase of over 600 percent in the inside bid price of the stock, and his trading and other conduct created the false appearance of trading volume and market interest in the stock and artificially affected the security’s market price. As a result of this trading, Hull generated $18,500 in his wife’s IRA account. John Vincent Hull: Barred; Required to cooperate with NASD or any other regulator in any further investigation and hearing relating to his former member firm, including but not limited to, meeting with and being interviewed by NASD, without the need of NASD to resort to Rule 8210, and testifying at any hearing. |
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| Bill Singer's Comment: The underlying misconduct aside, the sanction is interesting. See the Zentz case for a similar requirement to cooperate. | |||||
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Jeffrey Scott Hart AWC/#2005001735401/September 2006 Hart failed to properly disclose an outside brokerage account held in his wife’s name at another member firm over which he had discretionary trading authority. Jeffrey Scott Hart: Fined $2,500; Suspended 10 business days in all capacities |
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Steven Emil Ennis AWC/#20050033860-01/September 2006 Ennis forged a public customer’s signature on a new account form and submitted it to his member firm. When Ennis was questioned about this signature, he claimed that the customer’s fiancé signed the form with her approval . Apparently, in an effort to provide verification for that claim, Ennis also impersonated the customer’s fiancé over the telephone. Steven Emil Ennis: Fined $5,000; Suspended 1 year in all capacities |
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Bill Singer's Comment:
"And then their dog ate all the original
paperwork. Then their grandmother died and the engaged couple had to
go to Europe, where they couldn't be reached. "
Oh, puhleease! Okay, so explain this to me: Davilla was barred but Ennis wasn't --- why? If it turns out that, in fact, the fiance' admitted to snookering Ennis (and the proffered explanation is actually true), wouldn't that have been a critical point for NASD to disclose in this decision? And if the stuff about the fiance' is nonsense, then why the hell wasn't Ennis barred? NASD probably has a legitimate explanation, but if we're left to guessing then that state of affairs undermines the value of these decisions. |
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Glen Steven Davis (Registered Principal) AWC/#EAF0400370004/September 2006 Davis approved new broker codes for brokers when, in fact, he knew that the brokers were engaging in extensive market-timing activity. Davis did not monitor the brokers’ activity to ensure that they did not use the new broker codes for illicit market-timing. The brokers used these broker codes for the purpose of evading potential monitoring by mutual fund companies to detect and prevent market-timing. Glen Steven Davis: Fined $25,000; Suspended 23 business days in supervisory/principal capacities |
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Miguel Angel Davilla AWC/#2005002588901/September 2006 In order to earn production credits so that he could attend an upcoming sales meeting, Davilla prepared Insurance Cover Memos and Allotment Authorization forms for public customers, falsely represented to his member firm that the customers wanted to buy insurance and forwarded the documents to his firm for processing without the customers’ authorization. Miguel Angel Davilla : Barred |
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| Bill Singer's Comment: Part of me merely smiles at cases such as this and I say "thank god they got this guy out of the business before he really got dangerous." I hope he at least got to attend the all-you-can-eat-buffet or got the free coffee mug before being barred. | |||||
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Nancy Gold D’Anna AWC/#2005002485302/September 2006 D'Anna signed public customers’ names to account-related documents without their knowledge or authorization. Nancy Gold D’Anna: Fined $5,000; Suspended 30 days in all capacities |
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| Bill Singer's Comment: Ohhhh . . . not again! Would someone at NASD PLEASE explain to me the difference between "forging" a customer's name on a document and "sign(ing) public customers' names to account-related documents without their knowledge or authorization." Please see Cook case immediately below and explain to me the difference. | |||||
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Brandon John Cook AWC/#2005003206201/September 2006 Without a public customer’s knowledge or authorization, Cook caused checks to be issued to the customer drawn against her securities account, forged her endorsement on the checks or caused her endorsement to be forged on them, negotiated the checks, caused the funds to be wired out of the customer’s account to an account he controlled at another institution and used them for his own benefit. Cook failed to respond to NASD requests to provide information and appear for testimony. Brandon John Cook: Barred |
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| Bill Singer's Comment: I'm not sure whether NASD meant that Cook "forged" the endorsement --- or meant that she merely signed without knowledge or authorization. You're puzzled by my question. Please see the D'Anna case immediately above. | |||||
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Chekelea Fikira Brazelton AWC/NASD Case #20050033691-01/September 2006 While taking the Series 6 examination, she took a piece of paper containing written formulae into her testing session and transferred the written formulae from the piece of paper to scratch paper the testing center distributed. Chekelea Fikira Brazelton : Barred |
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| Bill Singer's Comment: Ah, the old written "formulae" caper. Nice that someone uses "formulae" rather than "formulas" --- now, if only those NASD dictionary wizards would take a tad more time to better explain most of these monthly decisions. | |||||
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Cathy Louise Biehl AWC/#2005002294701/September 2006 Biehl photocopied signatures onto account-related documents for public customers without the customers’ authorization, knowledge or consent. Cathy Louise Biehl: Fined $8,000; Suspended 6 months in all capacities. |
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| Bill Singer's Comment: Surprising as it may seem, many associated/registered persons run afoul of this regulatory issue. More often than not, this type of violation is caused by the failure to get the initial documents properly filled out in the first place --- and then the client has left the office for a distant home (and that client is apt to be an elderly person). Folks, if you are not going to have the customer affix his or her original signature on any document, think carefully before you do anything other than sending the document to the client. That includes not reaching for the white-out. That includes not scanning the document and undertaking a clever computer alteration. That includes not photocopying signatures from another document onto the one before you. And --- to be extra cautious --- even if the client says to you "it's okay to do X," please speak to your supervisor before attempting to submit the form into the flow of commerce. Even if what you've done isn't a "forgery," it may still run afoul of your firm's policies. See the Cook and D'Anna cases two and three paragraphs above this for more confusion. | |||||
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Elias Emile Ashooh (Registered Principal) #2005000923801/September 2006 Ashooh borrowed $13,900 from a public customer despite his member firm’s written supervisory procedures prohibiting such conduct. Ashooh attempted to borrow an additional $10,750 from the customer, but his member firm did not process the customer’s request. Also, Ashooh falsely certified to his member firm that he had no outstanding loans or other financial dealings with customers. Elias Emile Ashooh: Barred; Ordered to pay $13,900 plus interest in restitution to a public customer |
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Gary Steven Artzt (Registered Principal) OS/#E102004103701/September 2006 Artzt failed to ensure that his member firm timely and completely complied with the undertakings specified in a previous Letter of Acceptance, Waiver and Consent. Gary Steven Artzt : Fined $10,000; Suspended 45 days in all capacities |
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| Bill Singer's Comment: One of the most elemental propositions on Wall Street is that if you get in trouble and enter into a settlement with the NASD, then you damn well better observe all the promises you enter into as part of that settlement. | |||||
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W.G. Nielsen & Co. AWC/#E3A20050033-01/September 2006 The Firm failed to implement its anti-money laundering (AML) compliance program when dealing with investors purchasing interests in private placements through the firm, in that it did not verify the investors’ identities as the joint Treasury-SEC rules pertaining to customer identification programs requires. W.G. Nielsen & Co.: Censured; Fined $10,000 |
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Keating Securities, LLC AWC/#E3A2005001301/September 2006 In connection with work being done on the Firm’s electronic mail backup system, it failed to preserve any of its internal | |||||