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NOTE: Stipulation of Facts and Consent to Penalty (SFC), 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.

2004
Continuing Education

STANDARD DESCRIPTION	KEY
Permitted individuals to perform duties as registered persons for compensation, while their registration status was inactive due to their: failure to timely complete the Regulatory Element of NASD's Continuing Education Requirements failure to satisfy the Regulatory Element of NASD's Continuing Education Requirements	REXT$ RE$
Permitted individuals to act in capacities requiring registration while their NASD registrations were inactive due to a failure to complete in a timely manner the Regulatory Element of the Continuing Education Requirement	REXT
Failed to establish, maintain, and enforce written supervisory procedures designed to fulfill its obligation to comply with the Regulatory Element of NASD's Continuing Education Requirements	REWSP

World Group Securities, Inc.
(AWC/C07040082/December 2004)

The Firm permitted representatives to act in registered capacities while their registrations were inactive due to their failure to satisfy the Regulatory Element of NASD’s Continuing Education Requirements; and failed to establish and maintain a supervisory system reasonably designed to assure compliance with the Regulatory Element of the Continuing Education Requirement by its registered representatives.

World Group Securities, Inc.

Censured; Fined $15,000

Hunter, Keith, Marshall & Co. and Henry C. Marshall, Jr.
(AWC/C10040102/December 2004)

Acting through Marshall, the Firm

maintained registrations for employees who were not active in the firm’s securities and investment banking business and who ceased to function as principals and/or representatives; and
permitted an individual to perform in a capacity requiring registration while he was deemed inactive due to his failure to complete timely the Regulatory Element of NASD’s Continuing Education Requirements

Hunter, Keith, Marshall & Co. and Henry C. Marshall, Jr.

Censured; Fined $12,500 jointly and severally

Huntingdon Securities Corporation and Roger William Domres
(AWC/C04040045/November 2004)

Acting through Domres, the firm generated approximately $11,899 in revenue from the sale of options without having at least one properly qualified options principal. The firm permitted Domres to perform in a capacity requiring registration while he was deemed inactive due to his failure to complete timely the Regulatory Element of NASD’s Continuing Education Requirements. The firm failed to establish and maintain an effective supervisory control system and supervisory procedures designed to ensure compliance with the Regulatory Element of NASD’s Continuing Education Requirements.

Huntingdon Securities Corporation and Roger William Domres

Censured: Fined $10,000 jointly and severally

REDACTED;
(OS/C07040055/October 2004)

REDACTED caused his member firm to fail to maintain a continuing and current education program for its registered persons in that the firm failed to evaluate and prioritize its training needs and develop a written training plan. REDACTED caused his member firm to fail to keep accurate and current its Form BD, and failed to develop and implement a written anti-money laundering program reasonably designed to achieve and monitor its compliance with the requirements of the Bank Secrecy Act. REDACTED caused his member firm to conduct a securities business without a properly qualified and registered FINOP and to file its 2002 annual audited financial report late.

Eric REDACTED;

Fined $10,000; Suspended for 5 business days in principal capacity.

Bill Singer's Comment:

If you haven't figured it out by now, the NASD is focusing on the status of your continuing education programs. Moreover, you really need to do at least an annual check of your Form BD to make sure it's updated and accurate --- you'd be surprised how easy it is for things to get out of whack here; especially when you "think" that someone else was staying on top of the document. And, finally, hello!!!, but the regulators are checking to see that you have an anti-money laundering program. Of course, it would also help if you had a FINOP on board.

Cardinal Capital Management, Inc., and Christopher Alan Sweeney
(AWC/C07040073/October 2004)

Acting through Sweeney, the Cardinal

failed to prepare a written needs analysis and training plan for the calendar year 2000;
permitted at least two representatives to act in registered capacities while their registrations were inactive due to their failures to satisfy the Regulatory Element of their Continuing Education Requirements; and
filed five quarterly reports in an untimely manner.

Cardinal failed to maintain correspondence of its registered representatives relating to its investment banking or securities business. The Firm conducted a securities business while it failed to maintain its required net capital, inaccurately calculated its net capital, maintained inaccurate books and records, and filed inaccurate FOCUS reports.

Cardinal Capital Management, Inc., and Christopher Alan Sweeney

Censured; Cardinal Fined $18,500 joint/several with an undisclosed party(s) and $12,500 of which is jt/sev with Sweeney

Bill Singer's Comment:

Hard to believe that in this day and age a firm would miss such basic compliance obligations. Once again, folks, make sure you prepare your written needs analysis and training plan. If you haven't figure it out by now, that's one of the things the NASD routinely seeks. Also, the NASD will check to see that everyone has satisifed their CE requirements. Finally, you have to have a correspondence file.

Austin Securities, Inc. and Brian Robert Mitchell
(AWC/C10040094/October 2004)

Acting through Mitchell, the firm permitted

an individual to act in a capacity that required registration while the individual's registration status with NASD was inactive due to his failure to complete the Regulatory Element of NASD's Continuing Education Requirement;
another individual 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.

Austin Securities, Inc. and Brian Robert Mitchell

Censured and Fined $14,000 jt/sev

Blaylock & Partners, L.P
(AWC/C10040080/September 2004)

Blaylock & Partners, L.P. permitted an individual to act in a capacity that required registration while the individual's registration status with NASD was inactive due to his failure to complete the Regulatory Element of NASD's Continuing Education Requirement. The firm allowed its compliance director to perform the duties of a chief compliance officer while he was not registered as a general securities principal.

Blaylock & Partners, L.P

Censured and Fined $17,500

FIRST UNION SECURITIES, INC.
n/k/a WACHOVIA SECURITIES, LLC
(SFC/HPD 04-115/July 2004)

First Union Securities, Inc. (the Firm) became a NYSE member organization in October 2000 following its acquisition of Everen Securities, Inc. (“Everen”), a member organization. Everen had been the successor to Kemper Securities, Inc., also a member organization. During 2000 to 2001, the Firm was primarily engaged in securities brokerage, trading and investment advice. In 2001 First Union Securities, Inc. merged with Wachovia Securities, Inc. In 2003, Wachovia Securities, Inc. became Wachovia Securities LLC.

Previously, in NYSE Hearing Panel Decision 01-232, the Firm consented to a censure and $145,000 fine for violating Exchange Rules 410 and 440 and SEC Regulations 240.17a-3 and 17a-4 by failing to make and preserve required records; violating Rule 351 by failing to promptly report certain customer complaints; and violating Rule 342 by failing to reasonably supervise and provide appropriate procedures of supervision and control with respect to, among other things, assuring compliance with NYSE Rules to promptly and accurately report customer complaints and/or settlements to the NYSE.

NYSE Rule 345(a) requires registered persons to fulfill a Continuing Education program, consisting of two elements:

Regulatory Element, which requires registered persons to periodically complete a computer-based training program, and
Firm Element, which requires registered persons to complete ongoing training, provided by their member firms, tailored to their specific business.

Any registered person in non-compliance with this section shall have his or her registration deemed inactive and must cease all activities as a registered person, and is prohibited from performing any duties and functions requiring registration.

NYSE Rule 345(a)
“no member or member organization shall permit any natural person to perform regularly the duties customarily performed by a registered representative … unless such person shall have been registered with, qualified by and is acceptable to the Exchange.”

NYSE Information Memorandum 96-35
(November 11, 1996)
While a person’s license has been suspended for non-compliance with NYSE 345(a), a member firm may not pay him or her compensation, including commissions or salary, for activities requiring a securities registration.

During 1999 to 2000, the Firm employed five “inactive” employees, who acted in a registered capacity and/or had not completed their Regulatory Element requirements within the prescribed time frames and each of whom had generated commissions during their inactive period. During 1999 to 2001, the Firm failed to ensure that its employees were in compliance with their continuing education requirements and permitted a Retail Compliance Manager to supervise ten or more individuals who acted in a compliance capacity even though the Retail Compliance Manager was not Series 14 qualified. In addition, in several instances, the Firm failed to promptly and accurately report customer complaints, failed to maintain accurate books and records relating to customer complaints and reporting requirements, failed to properly review certain communications with the public, failed to properly supervise customer accounts and failed to provide for appropriate procedures of supervision and control of the business activities detailed above.

NYSE Rule 345.17(a) requires member organizations to submit a Uniform Termination Notice for Securities Industry Registration (“Form U-5”) to the Exchange within 30 days of the termination of employment of any registered person.	A review of sales practices complaints and Forms U-5 and RE-3 filings for the period March 2000 to July 2001 disclosed that: • Nine complaints were not reported; • Ten complaints were reported late; • Three complaints were misreported; • 15 Forms U-5 were not promptly reported; and • One Form RE-3 was not filed as required.
NYSE Rule 351(a) requires each member organization to promptly report to the Exchange any matter reportable under that Rule.
NYSE Information Memo 90-17, dated April 30, 1990 defines “prompt” filing as occurring within 30 days of the reportable event.
NYSE Rule 440 requires every member organization to make and preserve books and records as the Exchange may prescribe, and as prescribed by SEC Regulations 240.17a-3 and 240.17a-4. 15

Exchange Rule 405, in pertinent part, requires every member or member organization to

“exercise due diligence to learn the essential facts relative to every customer, every order, every cash or margin account accepted or carried by such organization…”

A review of accounts serviced by a registered representative of the Firm’s Carlsbad office for the period August 2000 to July 2001 disclosed that nine accounts had engaged in inappropriate short term trading of mutual funds which included switching between different mutual fund families and classes. 19. The holding periods for these mutual funds ranged from two months to nine months with most of the accounts sustaining losses as a result of fees incurred by switching mutual find investments. Although switch letters were sent to the customers, they were form letters and not explicit as to the individual fees that would be incurred. These fees incurred by the customers ranged from $7,377 to $129,532.

Where a customer liquidates one mutual fund to purchase another in a different family of funds or in an investment similar to a mutual fund, such as an annuity or closed-end fund, the customer may incur additional costs or fees. In those instances, the Firm requires the client to complete a Mutual Fund/Annuity Switch Form or switch letter, in which the additional charges, if any, are disclosed and the client acknowledges that he or she may have been able to switch within the existing mutual fund family.

Exchange Rule 342 requires in pertinent part that a member organization (a) provide for appropriate procedures of supervision and control; (b) delegate to qualified individuals responsibility and authority for supervision and control of each office, department and business activity and provide for appropriate procedures of supervision and control; and (c) establish a separate system of follow-up and review to determine that the delegated authority and responsibility is being properly exercised.	During 2000, a registered representative of the Old Greenwich branch office was found to have placed personal and/or family related trading in front of customers trading in the same security on 31 occasions out of 65 trading days reviewed. In 19 instances, the registered representatives or his family received better executions than his other customers. During 2000, 21 discretionary accounts at the Firm’s Boston branch office were not receiving appropriate supervisory review. One account was not approved for discretion and one account failed to list the registered representative as agent on the trading authorization. Further, all of the 21 discretionary accounts were not on the Firm’s master discretionary account list. During 2000, three research reports did not contain a disclosure in clear, positive language in securities in which the Firm was making a market. The securities were: one in which the Firm acted as a market maker as of July 21, 2000; one in which the Firm acted as a market maker as of August 17, 2000; and another in which the Firm acted as a market maker as of August 17, 2000. As set forth in detail above, the Firm failed to reasonably supervise and control certain of its business activities and failed to reasonably supervise and provide appropriate procedures of supervision and control. In addition, the Firm failed to establish a system of follow-up and review with respect to assuring compliance with Exchange Rules regarding continuing education and registration, reporting requirements, books and records, review of certain customer accounts and research reports so as to prevent the violative conduct described above and remedy it in a timely manner.
NYSE Rule 342.16 provides, in pertinent part, that supervision of registered representatives “[w]ould ordinarily include… reasonable procedures for review of registered representatives’ communications with the public relating to their business…. Such policies and procedures should be in writing and be designed to reasonably supervise each registered representative. Evidence that these supervisory policies and procedures have been implemented and carried out must be maintained and made available to the Exchange upon request.”
NYSE Rule 342.21 requires that each member review trades in Exchange listed securities and related financial instruments effected for the accounts of his or her employees to identify trades that may involve insider trading or other manipulative or deceptive devices.
NYSE Rule 472 governs communications with the public, including requirements relating to research communications and research reports.

Accordingly, the NYSE found that the Firm:

I. Violated Exchange Rule 345A and 345(a) by permitting employees to act in a registered capacity and generate commissions while their registration status was inactive; and permitting a Retail Compliance Manager to supervise ten or more individuals who acted in a compliance capacity even though the manager did not possess the required qualification;

II. Violated Exchange Rules 345 and 351 by failing to report, and/or promptly and accurately report, customer complaints as required; and failing to file, and/or promptly file, Forms U-5 and a Form RE-3 with the Exchange;

III. Violated Exchange Rule 440 and SEC Rules 240.17a-3 and 17a-4 by failing to maintain accurate books and records in connection with the reporting of customers’ complaints and filing of Forms U-5 and a Form RE-3;

IV. Violated Exchange Rule 405 by failing to ensure that customers received mutual fund switch letters disclosing specific fees incurred by customers;and

V. Violated Exchange Rules 342 and 472 in that the Firm failed to reasonably supervise and control and provide appropriate procedures of supervision and control and establish a system of follow–up and review with respect to: assuring compliance with Exchange Rules regarding continuing education and registration requirements; assuring compliance with Exchange Rules to promptly and accurately report customer complaints and file Forms U-5 and a Form RE-3; assuring that certain discretionary accounts were receiving the appropriate supervisory review; monitoring customer accounts to ensure that customers received better execution prices than registered representatives; and ensuring that research reports contained clear, positive language in securities in which the Firm was making a market.

FIRST UNION SECURITIES, INC.
n/k/a WACHOVIA SECURITIES, LLC

Censure; Fined $250,000

Bill Singer's Comment:

The first thing that strikes me about the Wachovia case is that it largely involves conduct that is now at least three years old, and in some cases older. Whatever shortcomings may be rightfully placed at the firm's doorstep, one must legitimately wonder as to what took NYSE so long? More to the point, isn't this type of case a fair indictment of the entire system of self regulation? The violations are breath taking in their scope and longevity --- they involve continuing education, trading, discretionary accounts, research, and supervision. Frankly, what's left? Further, if a firm with the financial resources and manpower of Wachovia can't get it right, what hope is there for smaller firms" Finally, spare me --- a fine of $250,000 is hardly going to cause Wachovia to flinch.

Max International Broker/Dealer Corp. and Nigel Gilbert
AWC/10040039/May 2004)

The firm, acting through Gilbert

permitted individuals to act in capacities that required registration while their registration status with NASD was inactive due to their failure to complete the Regulatory Element of NASD's Continuing Education Requirement.
failed to report settled arbitration cases to NASD and failed to report to NASD, pursuant to NASD Rule 3070, that an individual was terminated by the firm for failing to disclose outside trading accounts.
failed to file with NASD statistical and summary information regarding customer complaints.

Max International Broker/Dealer Corp. and Nigel Gilber

Censured and fined $12,500 jointly and severally; Max International fined an additional $2.500

Peregrine Financials & Securities, Inc and Thomas Eugene Pearson AWC/C8A040015/April 2004)
Peregrine had no preservation system to store electronic mail communications records in a non-rewritable, non-erasable manner for the required time period as required by SEC Rule 17a-4(f). Also, the firm engaged in activities that required it to be registered as a municipal securities dealer, while it failed to employ any individual who was registered as a municipal securities principal. Moreover,the firm permitted registered persons employed by the firm to perform duties as general securities representatives while their registration status with NASD was inactive due to their failure to complete timely the Regulatory Element of NASD's Continuing Education Rule. Peregrine failed to adequately and properly supervise the transactions in that they permitted the charging of unfair and excessive commissions. preserve copies of some electronic mail communications for the required three-year period and/or to maintain electronic communications for two years in an accessible place. Peregrine, acting through Pearson: charged public customers excessive and unfair commissions for listed options transactions; entered into an agreement with a foreign broker to pay a finder's fee for opening option contracts for listed options transactions and failed to satisfy all of the conditions of NASD Membership and Registration Rule 1060(b).
Peregrine Financials & Securities, Inc. Peregrine was censured and fined $251,100, including disgorgement of $211,022.48 in commissions retained.	Thomas Eugene Pearson Pearson was censured and fined $25,000.
Bill Singer's Comment An interesting reminder. You must store email records in a manner that does not permit them to be altered or deleted. The attendant registration issues are also a wake-up call to all member firms to make certain that your business segments are properly overseen by registered principals and CE compliant staff.

Wellington Investment Services Corp.
(AWC/C8A040008/March 2004)

Wellington Investment Services, acting through an individual, failed to provide a needs analysis, training plan, and proof of attendance for its Firm Element of Continuing Education for the years 2001 and 2002, and failed to establish, maintain, and enforce adequate written supervisory procedures designed to achieve compliance with applicable securities laws, regulations, and NASD rules with respect to the Firm Element of Continuing Education and the Anti-Money Laundering Compliance Program. Furthermore, the firm failed to submit timely to NASD its quarterly customer complaint summary and failed to report timely to NASD customer complaints on its quarterly customer complaint summary. Firm failed to maintain a Checks Received and Forwarded Blotter for a real estate lease offering.

Wellington Investment Services Corp.

Censured; Fined $13,500 ($7,500 of which was jointly and severally).

Dome Securities Corp. and Gregory Alan Joseph
(AWC/C10040015/March 2004)

Firm acting through Joseph, permitted Joseph and another individual to REXT, and permitted an individual to park his registration with the firm when he was not actively involved in the firm's securities business or otherwise functioning as a representative of the firm.

Dome Securities Corp. and Gregory Alan Joseph
Censured and fined $10,000, jointly and severally.

Day International Securities, Douglas Conant Day and Ronald Winston Wood (C01020023/March 2004)
Acting through Day and Wood, the firm held customer funds and securities, failed to establish a Special Reserve Bank Account for the Exclusive Benefit of Customers, and failed to make computations of the amounts of funds required to be deposited in such an account. Respondents engaged in a securities business without maintaining the required minimum net capital. In addition, Wood performed, and the firm and Day permitted him to perform, duties requiring registration when he was deemed inactive for failing to complete NASD's Regulatory Element of Continuing Education.
Day International Securities Fined $53,000, jointly and severally with Day and Wood	Douglas Conant Day Day was fined $33,000, jointly and severally, and suspended 60 business days in all capacities	Ronald Winston Wood Wood was fined $53,000, jointly and severally, and suspended 90 business days in all capcities.

Hornblower Fischer & Co. and Richard Francis Morgan
(AWC/C3A040003/February 2004)

Acting through Morgan, the firm REXT and REWSP

Hornblower Fischer & Co. and Richard Francis Morgan

Fined $15,000, jointly and severally.

Greenhill & Co., LLC
(AWC/C10040001/February 2004)

REXT

Greenhill & Co., LLC

Censured; Fined $20,000 (including $5,000 joint and severally with unidentified individual)

Cary Edwin Grant
(OS/C8A030013/February 2004)

Grant performed duties as a general securities principal and was the president of his member firm while REXT. In contravention of his member firm's NASD membership agreement:

Grant failed to file timely a written application for change in ownership of his member firm, and
Acting through Grant, his member firm opened a branch office and failed to properly notify NASD of its intent.

Grant failed to establish and maintain a supervisory system over the activities of a branch office of his member firm reasonably designed to achieve compliance with applicable securities laws, regulations, and NASD rules in that Grant permitted his NASD Electronic Signature and password to be used by an individual at the firm who was not a registered principal and permitted new accounts to be opened and orders executed without the approval of a firm principal. Finally,Grant failed to respond promptly to NASD requests for information and
documentation.

Cary Edwin Grant

In light of the financial status of Grant, no monetary sanction has been imposed. Suspended 3 months all capacities and for 6 months thereafter suspended in principal/supervisory capacities.

Bill Singer's Comment

So many violations and so little time. Wow . . . where to begin? This is almost a classic case-study for Compliance professionals. First, make sure that your CE program is up to date. Second, ownership changes likely require a formal modification of your NASD Membership Agreement. Third, under the Safe Harbor provisions of the NASD's membership rules you may be able to open a branch office without approval but you should also double-check your membership agreement before embarking upon such a prospect. Fourth, generally, when NASD gives you a password, the regulator expects you to guard it with your life. And finally, the ever-popular make sure you respond (or at least timely respond) to all regulatory requests.

Stone & Youngberg LLC
(OS/CC01030024/January 2004)

RE$ (MSRB transactions totalling $33,389,407.05)

Stone & Youngberg LLC

Censured; Fined $15,000

Ryan Beck & Co.
(AWC/C9B030083/January 2004)

REXT; The findings also stated that the firm failed to promptly display customer limit orders and failed to disclose the markup/markdown charged to the customer in principal transactions. NASD also found that the firm failed to establish, maintain, and enforce written supervisory procedures reasonably designed to ensure compliance with SEC Rule 10b-10 (review of confirmations). In addition, NASD determined that the firm's order tickets for equity trades reflected the incorrect time of execution, or failed to record any execution time.

Ryan Beck & Co.

Censured; Fined $25,000

Greystone Securities Corporation and Alan Kent Suiter
(AWC/C04030063/January 2004)

REXT$. REWSP. Also, BD acting through Suiter, participated in a private placement contingency offering, failed to deposit investor funds in an appropriate escrow account before the minimum contingency was met, and released funds to the issuer before the minimum contingency was met, rendering false and misleading the representations in the placement memorandum that investor funds would be released only if the minimum contingency was met and would be returned if it was not reached.

Greystone Securities Corporation and Alan Kent Suiter

Censured; Fined $13,000 joint and severally

Empire Securities Corporation of Southern California
(AWC/C02030069/January 2004)

REXT

Empire Securities Corporation of Southern California

Censured; Fined $20,000

RRBDLAW.COM AND SECURITIES INDUSTRY COMMENTATOR™ © 2004 BILL SINGER

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