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
NASD CASES OF NOTE 

DEVELOPING ENFORCEMENT TRENDS AS NOTED BY BILL SINGER

ESCROW ACCOUNTS

BORROWING

EXPENSES

FINOP

E-Communications

TRUSTEES

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

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

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.

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.

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

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

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

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

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

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

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.

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

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

Buchalter borrowed $15,000 from a public customer and failed to 

• obtain his member firm’s written permission prior to borrowing the customer’s money; and
• disclose the loan when completing an annual compliance questionnaire that asked, among other things, whether he had ever accepted a loan from a customer. 

Daniel Alan Buchalter : Fined $7,500; Suspended 60 days in all capacities

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.

While engaging in option trading, the Firm failed to 

• assign and identify to NASD its senior registered option principal and its compliance registered options principal;
• maintain a separate file or log for complaints received involving options securities;  and 
• promptly report statistical and summary information regarding customer complaints to NASD. 

Also, the Firm published newspaper advertisements and did not retain evidence of principal approval. 

Track Data Securities Corporation : Censured; Fined $12,500

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

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. 

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.

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

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

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 

• give notice to the original investors that the offering maximum had changed;
• give the original investors the opportunity to reaffirm or rescind their purchases; and
• notify customers that the offering period had been extended.

The firm sent written requests to customers in the second offering requesting that the offering period be extended but did not 

• terminate the offering even after the original maximum had been raised to offer shares; 
• give notice to the original investors that the offering maximum had changed; and 
• give them the opportunity to reaffirm or rescind their purchases. 

The Oak Ridge Financial Services Group, Inc: Censured; Fined $50,00

Laurence Stuart Zipkin: Fined $20,000; Suspended 4 months in Principal capacity. 

Acting through Bauman, the Firm  

• failed to establish and maintain a supervisory system reasonably designed to ensure compliance with applicable laws, rules and regulations relating to the trading activity in a hedge fund account;
• failed to reasonably supervise the offering of the fund’s interest and the trading activity in the fund account to prevent violations; 
• approved and permitted the use of a brochure for the fund that 
  • contained statements and claims for which it failed to provide a sound basis, 
  • failed to disclose the inherent risks associated with the absence of an operating history for both the partnership and the general partner,
  • exaggerated the experience and services the registered representatives operating the fund offered, and
  • made false statements regarding the fund’s investment strategy;
• failed to establish and maintain a supervisory system reasonably designed to ensure compliance with applicable laws, rules and regulations in connection with a private offering.

In connection with the hedge fund offering, the Firm made improper use of a public customer’s funds by 

• permitting the deposit of customer subscription funds into the hedge fund account and permitting the funds to be used to meet margin calls without prior approval of the subscription by the Firm’s compliance department. and 
• failing to return the deposit to the customer in a timely manner after the firm rejected his subscription. 

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.

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)

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

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

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

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

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

RR's housekeeper posed as her aunt on a telephone call to obtain information about an insurance policy the aunt owned. RR misled her member firm about the phone call her aunt purportedly made. 

RR : Fined $7,500; Suspended 10 business days in all capacities

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)

Acting through Rosen, his member firm 

• served as a broker for transactions that involved unregistered securities for which Rosen received commissions;
• violated its membership agreement with NASD and effected material changes in his member firm’s business operations without filing an application for approval with NASD;
• effected securities transactions while failing to meet its minimum net capital requirement; 
• did not have an adequate system in place for the retention of electronic mail;
• failed to designate a FINOP for more than a year; and
• failed to create and maintain a general ledger, and to create records that reflected the firm’s assets and liabilities, income and expenses and capital accounts.

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

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

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

Naventi falsely notarized the signatures of persons on deeds and a mortgage document without having actually witnessed the signatures.

Mary Ann Naventi: Barred

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

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.

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

Hardaker

• acted as a broker-dealer without being registered with the SEC;
• participated in a private securities transaction, for compensation, without providing prior written notice to, and receiving prior written approval from, her member firm; 
• received $543,630 from public customers for the purchase of securities and commingled the monies with unrelated funds subjecting the customer funds to a risk of loss; and
• created and mailed confirmation statements to public customers purporting to evidence the securities purchases (the confirmation statements Hardaker provided to the customers failed to disclose that the price of the shares included a one cent per share markup).

Kimberly Pine Hardaker : Barred

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

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:

• failed to conduct internal inspections of its offices of supervisory jurisdiction in accordance with the requirements of NASD Rule 3010(c);
• failed to establish procedures for the review of transactions and its registered representatives’ correspondence with the public; and
• operated its business without a limited principal/financial and operations principal (FINOP). 

Timothy James Daly: Fined $15,000; Barred in Principal capacity

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.

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.

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. 

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

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

The Firm failed to timely and accurately 

• update the Uniform Termination Notice for Securities Industry Termination (Form U5) for former registered representatives for events that required regulatory disclosure; and
• report municipal bond transactions to the MSRB

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

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

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.

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 

• received checks payable to the firm rather than to its clearing firm;
• used the instrumentalities of interstate commerce to conduct a securities business while failing to maintain the minimum required net capital; and
• amended its membership agreement to prohibit its receipt of customer checks payable to the firm, but failed to enforce it and, as a result, continued to receive customer checks payable to the firm. 

Torrey Pines Securities, Inc. and Jack Clark Smith, Jr. (Principal): Cenusred; fined $15,000 joint/several

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.

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

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.

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

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

Garrity purchased and/or sold securities of companies that he was covering as a research analyst, but he failed to

• disclose in a research report that he had a financial interest in the securities of the company;
• notify his member firms, promptly and in writing, that he had opened accounts at other member firms; and 
• notify these firms when he became associated with his member firms. 

David Matthew Garrity : Fined $10,000; Suspended 45 days in all capacities.

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

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

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.

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

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

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. 

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

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

Acting under Hansen’s direction and control, the Firm 

• participated in a contingency offering and did not transmit investor funds it raised in the offering to an unaffiliated bank to hold in escrow for the investors until the contingency occurred, and instead, transmitted the funds directly to a business account for the issuer at a bank where Hansen acted as the sole control person and signatory on the account; and
• solicited investments in the contingency offering through the use of a private placement memorandum (PPM) that represented that all subscription monies raised would be deposited into a separate bank account and not transferred to the issuer’s trading account unless the contingency was met, but Hansen released the investor funds to the issuer’s control before the contingency was satisfied, rendering the foregoing representations in the PPM false and misleading.

Springboard Securities, Inc. and Jonathan McKee Hansen (Principal) : Censured; Fined $15,000 jt/sev

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

Acting through Flater, the Firm 

• utilized the instrumentalities of interstate commerce to engage in a securities business while failing to maintain the minimum required net capital; and
• failed to timely notify NASD regarding a 50 percent change in its ownership. 

MCL Financial Group, Inc. and Gary Lynn Flater (Principal): Censured; Fined $12,500 jt/sev

Acting through Conboy, the Firm failed to

• ensure that it had a properly designated Limited Principal-Introducing Broker/Dealer Financial and Operations. 
• comply with the claimed exemption in that it held public customers’ funds in its general bank account [the Firm operated its business as an Introducing Firm and claimed an exemption under Section 15(c) of the Securities Exchange Act of 1934, and Rule 15c3-3(k)(2)(i) thereunder, which prohibits the receipt of customer funds and/or securities]. 

Brighton Securities Corp. and George Thomas Conboy (Principal): Censured; Fined $15,000 jt/sev

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.

Acting through Asensio, the Firm 

• issued research reports that failed to define the meaning of each rating and that failed to disclose the distribution of the firm’s ratings; and
• made statements in research reports that were unwarranted or misleading. 

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

Acting through Saluk, the Firm 

• offered and sold shares of common stocks to public customers when there was no registration statement filed or in effect with the United States Securities and Exchange Commission (SEC) with respect to the common stocks, as Section 5 of the Securities Act of 1933 requires;
• made material misrepresentations or omitted material facts in the offer and sale of unregistered securities;
• failed to disclose the risks associated with investments in the stocks to customers;
• failed to provide any prospectuses, offering memoranda, audited financial statements or other written materials regarding the securities because none existed; and
• directed customers to send funds to the firm or another nonregistered entity that they led customers to believe was the firm’s clearing firm or bank, but the customers failed to receive any documentation that evidenced that stocks were purchased, and their funds were not returned. 

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 

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

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

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

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:

1. he pressured his customers to sign forms that falsely indicated that the transactions had not been recommended—an important factor because the penny stock rules in question only apply to recommended sales; and
2. he backdated the forms, giving the false impression that the customers had signed the forms contemporaneously with the transactions. The firm then provided the misleading forms to NASD as part of a document production. 

Michael Antoine Rooms : Bar

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

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

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

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.

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

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

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. 

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

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

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.

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

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

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

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

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

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.

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

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

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

In connection with work being done on the Firm’s electronic mail backup system, it failed to preserve any of its internal or external email communications.

Keating Securities, LLC : Censured; Fined $25,000

Credit Suisse Securities (USA) LLC published research reports that failed to clearly and prominently disclose the valuation methods used to determine price target valuation methods and the risks that might impede achievement of the price target. The Firm’s disclosures concerning risks that might impede achievement of the price target were comparably deficient. The Firm failed to establish, maintain and enforce its written supervisory procedures reasonably designed to ensure compliance with NASD rules concerning price target disclosures. 

Credit Suisse Securities (USA) LLC: Censured; Fined $225,000; "Required to review a meaningful sample of its research reports, and describe the methodology used to review this sample of reports and certify in writing to NASD that the firm is in compliance with NASD Rules 2711(h)(7) and 2711(h)(10) with respect to such sample, including the requirement that price target valuation methods and risks that might impede achievement of the price target be disclosed in a clear, comprehensive and prominent manner. "

Citigroup Global Markets Inc failed to include in its tech/quant research reports whether the analyst or a member of his household held a position as officer or director or whether the firm acted as a market maker for the stock. The reports also failed to include whether the firm or the analyst had 

• an ownership interest in the company, 
• a material conflict of interest, or
• received income from investment banking transactions with the company

None of the firm’s tech/quant research reports included 

• a description of the ratings used, 
• a distribution of the ratings, or 
• a price chart illustrating closing prices for particular stocks. 

The Firm failed to establish and maintain a supervisory system reasonably designed to detect and prevent the firm’s violations of Rule 2711(h) and failed to implement the Rule in a timely manner. 

Citigroup Global Markets Inc.: Censured; Fined $350,000; Required to undertake a comprehensive review of its disclosure in its technical and quantitative (tech/quant) research reports. 

A.G. Edwards & Sons, Inc. failed to 

• use reasonable diligence to ascertain the best inter-dealer market and failed to buy or sell in such market so that the resultant price to its customers was as favorable as possible under prevailing market conditions;
• establish, maintain and enforce written procedures for its fixed income department and supervise its associated persons’ activities that were reasonably designed to achieve compliance with applicable securities laws, regulations and NASD rules concerning best execution of debt securities; and 
• register individuals as the firm’s principals when each was actively engaged in the management of its securities business as supervisors.

A.G. Edwards & Sons, Inc.: Censured; Fined $125,000; Ordered to pay $17,017.50 in restitution to public customers.

A.C.R. Securities, Inc. did not have a system to retain electronic communications the firm or its registered representative sent or received, and failed to preserve copies of electronic communications relating to its business sent or received by the firm or its registered representative. 

A.C.R. Securities, Inc. : Censured; Fined $10,000; Required to certify to NASD that the firm has reviewed its procedures regarding email retention and has established systems and procedures reasonably designed to achieve compliance with the laws, regulations and rules concerning the retention of electronic mail communications.

Acting through Dratel, the Firm failed to timely:

• report statistical and summary information regarding a settlement with a public customer to NASD. 
• amend Dratel’s Form U4 to disclose a material fact; and
• obtain an opinion of counsel concerning a lawsuit asserting a claim that could have had a material impact on the firm’s net capital, failed to include the claim in the calculation of aggregate indebtedness and failed to timely notify the SEC or NASD of the deficiencies. 

The Dratel Group, Inc. and William Marshall Dratel:Censured; Fined $15,000 (jt/sev)

Acting through Carroll, the Firm 

• commenced a best efforts, “minimum-maximum” offering an affiliated company conducted, and failed to deposit the checks the first two public customers sent into a bank escrow account, and held the funds for a period of time before transferring them to an escrow account; 
• held customers’ funds by virtue of its failing to place the funds raised in the offering into a bona fide escrow account and instead, deposited the funds into an account on which Carroll had signature authority; and
• conducted a securities business while failing to maintain its required minimum net capital.

Cambridge Legacy Securities, LLC. and Oran Ben Carroll: Censured; Fined $10,000 (jt/sev)

Acting through Sands, the Firm 

• failed to file a continuing membership application with NASD seeking approval for the transfer of customer accounts and registered representatives to another firm Sands had founded; and
• permitted an individual to engage in the firm’s investment banking and securities business without the benefit of registration. 

Also, Sands failed to disclose a material fact on his Uniform Application for Securities Industry Registration or Transfer (Form U4). 

Sands Brothers & Co., Ltd.: Censured; Fined $150,000 ($100,000 of which jt/sev. with Steven Brett Sands) 

Steven Brett Sands: Fined $100,000 (jt. sev with Sands Bros); Suspended 60 days in principal capacity

Acting through Richards, Great American Investors failed to 

• adequately supervise a registered representative by allowing him to trade excessively in a public customer’s account when Richards knew, or should have known, that these transactions were unsuitable for the customer; and 
• make and maintain a memorandum of each transaction in the form that the SEC and NASD required. 

Great American Investors, Inc: Fined $12,500 (jt/sev with David Kennedy Richards)

David Kennedy Richards: Fined $12,500 (jt/sev with Great American Investors); Suspended 30 days in supervisory capacity

Weaver permitted an unregistered person who was also barred from the securities industry to engage in securities transactions. Weaver failed to maintain complete, accurate and current books and records. Weaver guaranteed a public customer against loss in his securities account. Weaver engaged in outside business activities, for compensation, without providing his member firm with prompt written notice. 

Brad Allan Weaver : Barred

Acting through Sutterlin, his member firm 

• failed to adequately ensure that the firm’s ledgers and other records accurately reflected all of the firm’s assets, liabilities and expenses, causing the firm’s records to be inaccurate, which violated Section 17 of the SEC Act of 1934 and Rule 17a-3 thereunder;
• filed inaccurate FOCUS reports; and 
• failed to maintain its minimum net capital requirement (as a result of failing to adequately track and book various incurred expenses) and to give timely notice to the SEC and NASD, pursuant to SEC Rule 17a-11. 

Raymond Henry Sutterlin: Fined $12,000; Suspended 15 business days in FINOP capacity

Rodriguez signed another member firm employee’s name on a verification of employment form without the employee’s knowledge or authorization, and Rodriguez also falsified his compensation figures on that form. 

Alfred V. Rodriguez: Barred

Panzarino received $877 from a public customer for the purpose of paying the premium on an automobile insurance policy, and rather than apply the funds to the policy, Panzarino kept and used the funds for his personal use and benefit without the customer’s knowledge or authorization. Panzarino failed to appear for an NASD on-the-record interview. 

Emil Brian Panzarino, Jr. : Barred

O'Brasky entered orders for, and caused the execution of, call options transactions in a public customer’s account that he was not authorized to trade pursuant to his member firm’s procedures and without approval from the trustees of the transactions prior to execution. O’Brasky provided to a principal of the firm an Options New Account Form for approval of options trading in a customer’s account without disclosing that the signatures were not genuine, causing one of his member firm’s required records to be falsified. 

Jeffrey Marc O’Brasky : Fined $20,000; Suspended 2 years in all capacities.

Newell borrowed funds totaling $45,000 from public customers and to fund these loans, she recommended and executed the liquidation of various mutual fund holdings in the customers’ accounts. Newell falsely represented to the customers that the funds would be used for real estate investments and she would pay the loans with interest. She never made any principal or interest payments on the loans. Newell did not have reasonable grounds for believing that the recommendation to liquidate and the resultant mutual fund sale transactions were suitable for the customers based on their financial situations, investment objectives or needs. In addition, Newell failed to respond to NASD requests for information. 

Nora Lynn Newell: No fine in light of financial status; Barred

On the other hand, come on . . . what the hell is not having "reasonable grounds for believing" that both the "recommendation to liquidate" and the "resultant" sales were suitable?  I mean, lemme see here for a minute --- like what?  you expected her to undertake a suitability assessment when she's conning folks out of their money for some bogus investment?  That strikes me as charging someone with murder because they fired a shotgun at pointblank range at the deceased; and then charging them with negligence because they did not have reasonable grounds to believe that a shotgun fired at pointblank range would be harmless. 

McBee opened a securities account with another NASD member firm and failed to disclose to that firm that he was associated with his member firm. He failed to give his member firm written notification that he opened a securities account with another member firm. McBee engaged in outside business activities, for compensation, without giving his member firm prompt written notice of his outside business activities. He failed to respond to NASD requests for information and documents. 

Stacey Joe McBee: Barred

Lubow entered into a settlement agreement with public customers in response to a complaint, failed to disclose the settlement agreement to his member firm, and further, failed to satisfy his obligations pursuant to the agreement. 

Nathan Edward Lubow : Fined $10,000; Suspended 1 year in all capacities

Kellog borrowed approximately $140,000 from public customers in violation of his member firm’s written procedures that prohibited its registered representatives from borrowing money from customers unless the customers are the representative’s immediate family members and the representative obtains the firm’s prior written permission. The findings stated that the customers were not related and Kellogg had not obtained written permission. 

Carl Phillip Kellogg : Fined $10,000; Suspended 60 days in all capacities

During a Series 7 qualification examination, Howell retained in her possession notes related to the subject matter of the qualification examination. Therefore, she violated the Rules of Conduct she had signified acceptance of prior to the examination.

Melanie Erin Howell : Barred

Fernandez induced public customers to participate in a new investment and to make their checks made payable to the firm, which he deposited into an unauthorized corporate bank account he had opened in the firm’s name by falsely identifying himself as the president of the firm. Fernandez wire transferred $1,500,000 from the unauthorized bank account to a bank overseas for his personal use. He failed to respond to NASD requests for information.

Jorge Guillermo Fernandez : Barred

Fatta improperly altered account transfer forms that had been signed and used by public customers from his previous firm as though they were new account transfer forms for purposes of transferring the customers’ accounts to his firm, thus causing his firm’s books and records to be inaccurate. Fatta charged customers unreasonable and excessive option commissions on covered call transactions. 

Philip Orezio Fatta: Fined $14,000 (which includes $4,000 in disgorgement of commissions); Suspended 3 months in all capacities

Burke, an associated person completed and submitted electronic applications for automobile insurance to an insurance company with false information, including Social Security numbers, to qualify the applicants for insurance at better rates. Burke failed to respond to NASD requests for documents and information. 

Kelly Ann Burke: Barred

Blackwell failed to establish and implement an AML compliance program reasonably designed to achieve compliance with the Bank Secrecy Act. 

Joseph Michael Blackwell : No fine in light of his financial status; Suspended 1 year in principal/supervisory capacity; Required to attend and satisfactorily complete 16 hours of continuing education concerning AML before he reassociates with any NASD member firm in any principal or supervisory capacity or as an AML compliance officer

Baker effected, or caused to be effected, securities transactions in public customers’ accounts without their prior authorization, knowledge or consent. In order to induce customers to make authorized purchases, Baker made baseless price predictions, used time sensitivity when recommending stocks and failed to disclose material facts such as risks and conflicts of interest associated with the stock purchases. 

Dean Russel Baker: Barred

The Firm failed to maintain and preserve all electronic communications relating to its business as SEC Rule 17a-4 requires. In determining the amount of the fine, NASD took into account the demonstrable corrective action undertaken by the firm before the staff commenced its examination. 

ING Investment Management Services LLC : Censured; Fined $50,000; Required to review its procedures regarding the preservation of electronic mail communications for compliance with NASD rules and federal securities laws and regulations.

Bear Stearns & Co. Inc. failed to submit options communications for review by a Compliance Registered Options Principal or an appropriate designee, and the firm’s educational material was not submitted to NASD or another self-regulator for review and approval at least 10 days prior to the firm’s use, as NASD Rule 2220 requires. 

The Firm’s options communications omitted material facts that made them false and/or misleading, suggested a certainty of future performance, used hedge clauses or disclaimers that attempted to disclaim responsibility for the communications, and included discussion of the advantages and opportunities presented by option investments without the proper disclosure of risks. The communications failed to include the required warning that options are not suitable for all investors, potential risks associated with options, the name and address of a person who could provide an Options Disclosure Document, relevant costs and a statement that supporting documentation for any claims made in the communication would be supplied upon request. 

The Firm’s research report failed to 

• define the meaning of the ratings used in the report, 
• disclose the distribution of ratings used in the firm’s rating system. and
• provide required disclosures or references to where the disclosures could be found on the front page of the research report. 

The Firm failed to establish, maintain and enforce a supervisory system and procedures reasonably designed to achieve compliance with certain federal securities laws and NASD rules regarding content standards and principal approval of options communications with the public. 

Bear Stearns & Co. Inc.: Censured; Fined $150,000

NASD Rule 2220 (b) states:  Association Approval Requirements and Review Procedures (1) In addition to the approval required by paragraph (b) of this Rule, every advertisement and all educational material of a member or member organization pertaining to options shall be submitted to the Advertising/Investment Companies Regulation Department of the Association* ("Department") at least ten days prior to use (or such shorter period as the Association may allow in particular instances) for approval . . .

One thing that puzzles me with this decision is why no individual was named?  I have to tell you --- seems to me that if the same violations had occurred at a smaller firm, we would have seen the name of the CROP and possibly another supervisor in the research area.  I'm not saying that larger firms get special treatment.  I'm not saying that smaller firms get hosed.  No, I'm not saying that --- but, gee, maybe some of these cases are saying that for me?

The Firm 

• failed to enforce its written supervisory procedures to ensure that it conducted its business in accordance with MSRB rules. 
• did not have a properly registered municipal securities principal, 
• failed to properly complete order tickets for municipal securities, 
• reported late its municipal securities transactions to the MSRB; and 
• failed to seek approval for a change to its membership agreement prior to engaging in business as a municipal broker or dealer.

Banorte Securities International, Ltd.,: Censured; Fined $17,500

Andrew Garrett, Inc. conducted a securities business when its net capital fell below the minimum amount required under SEC Rule 15c3-1. Acting through an individual, the Firm prepared inaccurate net capital computations. 

Andrew Garrett, Inc.: Censured; Fined $17,500 (of which $7,500 "was imposed jointly and severally with an individual")

Acting through Kambolin, the Firm published a Web site that contained inaccurate statements regarding 

• the trading volume the firm handled on behalf of customers, 
• the type of securities in which it conducted an active business and 
• the number of states in which it was currently registered. 

The Firm’s new account documentation for public customer accounts failed to include employment information, income information, net worth and investment objectives.

Thor Capital, LLC: Censured: Fined $15,000 ($10,000 of which is jt/several with Kambolin)

Peter A. Kambolin (Principal): Censured: Fined $10,000 (jt/several with Thor)

The other part of this case that I find amusing --- yeah, I'll be honest, I did chuckle at this one --- is how any member firm could have a new account form lacking a customer's employment, income, net worth, and investment objectives.  Wow!  Talk about throwing darts and totally missing the dartboard!

Shemano sold Corbett’s shares of a publicly traded company while Corbett was reviewing drafts of a pending research report on the company that contained mismanagement allegations, and Corbett, as lead banker, and McDonough, as Chief Compliance Officer, failed to detect and prevent the sales. 

The firm, Shemano and McDonough failed to establish, maintain and enforce a system of supervision and written supervisory procedures reasonably designed to prevent the misuse of material and nonpublic information.

Corbett 

• provided knowing and substantial assistance to his firm in violation of its written supervisory procedures; and
• knowingly hired, and the firm made payments to, an individual for consulting services relating to the issuance of research reports and investment banking activities who they knew to be statutorily disqualified from association with any NASD member, and failed to report the association to NASD.

The Firm 

• published research reports the barred individual wrote that deleted material risk disclosures and failed to disclose material facts, and McDonough failed to supervise the preparation of the research reports; and
• failed to reasonably supervise the firm’s research and investment banking departments and the barred consultant in connection with their activities relating to the issuance of research reports. 

The Shemano Group, Inc.: Fined $425,000 (jt/several with Gary Jay Shemano); Barred from publishing research reports as the term is defined in NASD Rule 2711(a); Required to hire an independent consultant to review the adequacy of the firm’s policies, systems, procedures and training

William David Corbett: Fined $150,000; Suspended 60 days in all capacities

Michael Keith McDonough (Principal): Fined $20,000; Suspended 9 months as a general securities principal

Gary Jay Shemano (Principal): Fined $425,000 (jt/sev with The Shemano Group); Suspended 90 days in all capacities; Barred from publishing research reports as the term is defined in NASD Rule 2711(a)

Acting through Lozinski, the Firm 

• operated a securities business without a properly registered financial and operations principal (FINOP);
• failed to timely file the Uniform Termination Notice for Securities Industry Registration (Form U5) concerning a registered person within 30 days from the date of termination; and
• conducted a securities business while failing to maintain its minimum net capital requirement.  

PGP Financial, Inc.: Censured; Fined $25,000 (jt/several with Lozinski)

Ellen Rose Lozinski (Principal): Fined $25,000 (jt/sev with PGP Financial); Suspended 10 business days in principal capacity

Greater Metropolitan Investment Services, Inc. and Patten falsely marked many customer order tickets as unsolicited orders when, in fact, they had solicited customers to buy or sell the stock. The respondents countenanced a supervisory system that did not apply or monitor procedures with regard to Patten’s trading activities, and thereby failed to establish, maintain or enforce a system to supervise the activities of each of the firm’s registered representatives and associated persons. Dalvi failed to establish, maintain and enforce written procedures designed to achieve compliance with anti-fraud and recordkeeping provisions. In addition, the Firm and Dalvi failed to reasonably supervise Patten’s trading activities in a security and his improper marking of customer order tickets in the security as unsolicited.

Greater Metropolitan Investment Services, Inc.: Expelled

Chintaman M. Dalvi (Principal): Barred

James Thomas Patten (Principal): Barred

Williams misled public customers into believing that he was a registered person with the firm when, in fact, he was not, and made recommendations regarding their investments, upon which the customers acted. The findings stated that Williams failed to disclose to a public customer that, in connection with the liquidation of her variable annuity, she would incur a surrender charge. 

LaCedric DeShawn Williams: Fined $10,000; Suspended 6 months in all capacities

Rivera effected unauthorized transactions in a deceased public customer’s account without authorization of the customer’s estate or the beneficiary of the account to engage in such transactions. Rivera did not adhere to his firm’s policies and procedures regarding the handling of an account upon notification of a customer’s death that required for the account to be frozen and that all pending transactions and outstanding orders be immediately canceled. 

Frank R. Rivera: Fined $7,500; Suspended 10 business days in all capacities.

Radez recommended purchases of an unseasoned OTCBB security through false representations and omissions of material facts as well as baseless and unrealistic price projections. He recommended the security without reviewing the company’s available current publicly filed financial statements and current material business information, and without determining if there was a reasonable basis for the recommendation. Also,  Radez made unauthorized purchases of the security in public customers’ accounts. Additionally, he engaged in a business activity outside the scope of his relationship with his member firm and failed to provide written notice to his firm.  Radez failed to respond to NASD requests for documents and to testify truthfully in NASD on-the-record interviews.

Richard William Radez: Barred

While associated with a member firm, Kim participated in securities transactions while he was suspended from association with any member firm. 

Young Min Kim: Fined $25,000; Suspended 3 months in all capacities; Barred in principal/supervisory capacities

Kendall entered into lending arrangements with customers and failed to inform his member firm or to obtain the firm’s permission, contrary to the firm’s written supervisory procedures that prohibit its representatives from borrowing money from customers. Also, Kendall failed to appear for an NASD on-the record interview. 

William A. Kendall : Barred

• engaged in excessive trading in public customers’ accounts in light of their objectives, financial situations and needs; 
• effected, or caused to be effected, unsuitable transactions or trading on margin in public customers’ accounts without their prior knowledge, authorization or consent; and
• settled a customer complaint without his member firm’s knowledge or consent. 

William Edward Kassar, Jr.: Fined $10,000; Ordered to pay $57,086.28 in restitution; Suspended 6 months in all capacities; Required to requalify by exam as a General Securities Representative

Jordan engaged in the unregistered offer and sale of securities he owned to public customers, and failed to prepare and preserve required books and records in connection with the unregistered offer and sale of securities. Jordan failed to reasonably supervise a representative’s sales activities to prevent fraudulent sales practices and ensure compliance with recordkeeping and confirmation requirements. 

Dennis Jordan: Fined $27,500; Required to pay $98,000 plus interest in restitution to customers; Suspended 18 months in all capacities; Required to requalify by exam in any capacity

Huang misrepresented his identity by using another registered representative’s computer password to complete a firm-required continuing education session for the other registered representative. Huang failed to respond to NASD requests for information. 

Michael Ta-Zen Huang: Barred

Without the customers’ knowledge or consent, Hinchliffe affixed or caused to be affixed public customers’ signatures, as trustees of a family trust, to a Request For Transfer of Assets, in order to effect the transfer of the trust’s assets from another broker-dealer to his member firm. 

Michael Todd Hinchliffe: Fined $5,000; Suspended 60 days in all capacities.

REDACTED participated in a private securities transaction without providing prior written notice to, and receiving prior written approval from, his member firm. Also, he effected securities transactions in a public customer’s account based upon the oral trading instructions he had received from a third party, and failed to provide prior notice to, or receive prior written approval from, his member firm to permit him to accept trading instructions from a third party. 

REDACTEDBarred

As a member firm’s research analyst, Galant prepared and issued research reports covering common stocks in which he held positions, and maintained buy recommendations in his reports even though he was selling the securities as they continued to increase in value. Galant prepared research reports for a member firm that failed to comply with the Regulation Analyst Certification Rule and failed to include the meaning of each rating the firm used in it is rating system, the distribution of its ratings and a price chart.

Jerome Louis Galant:Fined $35,000 (includes $25,000 disgorgement); Suspended 30 business days in all capacities

(3) No research analyst account may purchase or sell any security or any option on or derivative of such security in a manner inconsistent with the research analyst's recommendation as reflected in the most recent research report published by the member.

(4) Legal or compliance personnel may authorize a transaction otherwise prohibited by paragraphs (g)(2) and (g)(3) based upon an unanticipated significant change in the personal financial circumstances of the beneficial owner of the research analyst account, provided that [see extensive explanations that follow[

Doria aided and abetted the manipulation of securities by placing wash sales and matched trades in OTCBB stock in and between the group of interrelated accounts at his member firm at the direction of his customers. Doria knew, or was reckless in not knowing, that his customers were engaged in manipulating the stock. The matched trades Doria placed were reported to the OTCBB, grossly inflating and distorting the bona fide volume of trading in the OTCBB stocks, and created the false appearance of trading volume and market interest in the stocks. 

John Joseph Doria: Censured; Fined $35,000; Suspended 6 months in all capacities; Barred from participating, directly or indirectly, in any public or private offering or transaction involving a penny stock. 

Pursuant to a scheme to ultimately obtain money and property by false means, Bohlman forged a customer’s name on a Wire Funds Authorization form and wired $46,322 from the customer’s securities account to the customer’s checking account without the customer’s authorization. Then,  Bohlman contacted the customer and falsely advised him of a clerical error of $45,000- 50,000 on his monthly securities account statement and that he would resolve the issue, but he never returned the money to the customer’s account. Bohlman failed to respond to NASD requests for information. 

Neal Albert Bohlman: Barred

The Firm did not maintain and preserve all electronic communications as required by SEC Rule 17a-4.

Raymond James Ltd (USA), Inc.: Censured; Fined $50,000; Required to review its procedures regarding the preservation of electronic communications for compliance with federal securities laws, regulations and NASD rules.

The Firm failed to preserve, for a period of time, communications it sent and received relating to its business, and retain evidence that communications the firm sent were approved. 

Pyramid Financial Corp. : Censured; Fined $25,000: Required to establish and implement procedures reasonably designed to verify the adequacy and effectiveness of its system for retaining emails. 

The Firm utilized a vendor to maintain and preserve registered persons’ instant messages, but the vendor failed to capture and/or retain all of the messages. As such, the Firm failed to maintain and preserve all electronic communications as SEC Rule 17a-4 requires.

Pulse Trading, Inc. : Censured; Fined $50,000; Required to review its procedures regarding the preservation of electronic mail communications for compliance with NASD rules and federal securities laws and regulations.

The Firm permitted registered representatives to use instant messaging and wireless handheld devices to send electronic communications, but failed to preserve the communications as required by SEC Rule 17a-4.

Paradigm Capital U.S. Inc.: Censured; Fined $75,000; Required to review its procedures regarding the preservation of electronic mail communications for compliance with NASD rules and federal securities laws and regulations.

The Firm permitted its registered persons to use instant messaging to communicate with its institutional clients, but failed to maintain and preserve the communications. 

Orion Securities (USA) Inc. : Censured; Fined $50,000; Required to review its procedures regarding the preservation of electronic mail communications for compliance with NASD rules and federal securities laws and regulations.

The Firm failed to retain emails for required periods of time in violation of Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-4 promulgate thereunder. 

NYLife Securities Inc.: Censured; Fined $150,000

The Firm failed to 

• conduct independent testing for compliance with its anti-money laundering (AML) procedures, and
• designate independent individuals to conduct testing and failed to maintain evidence that it had filed one suspicious activity report (SAR). 

The Firm issued research reports that failed to 

• provide sound bases for evaluating the company as a potential investment by failing to discuss risk factors associated with the company, 
• disclose the time periods for the price targets indicated in the reports and 
• disclose the percentage of securities the firm rated as “buy,” “sell” or “hold.” 

Acting throug Jacobs, the Firm reduced the minimum for a private placement offering and provided for the offering to close when the reduced minimum was met, and after modifying the offering, the firm failed to afford existing investors the opportunity to withdraw their investments based on the offering’s modification. 

Capital Growth Financial, LLC: Censured; Fined $55,000 ($10,000 of which jt/several with Jacobs)

Michael Scott Jacobs (Principal): Fined $10,000 (jt/several with Capital Growth Financial)

(4) Meaning of Ratings
A member must define in its research reports the meaning of each rating used by the member in its rating system. The definition of each rating must be consistent with its plain meaning.

(5) Distribution of Ratings

(A) Regardless of the rating system that a member employs, a member must disclose in each research report the percentage of all securities rated by the member to which the member would assign a "buy," "hold/neutral," or "sell" rating.
(B) In each research report, the member must disclose the percentage of subject companies within each of these three categories for whom the member has provided investment banking services within the previous twelve months.
(C) The information that is disclosed under paragraphs (h)(5)(A) and (h)(5)(B) must be current as of the end of the most recent calendar quarter (or the second most recent calendar quarter if the publication date is less than 15 calendar days after the most recent calendar quarter).

Biondo served as the firm’s president and a member of the Board of Directors without registering as a principal by taking and passing the appropriate qualification examination. 

Pyramid Funds Corporation: Censured; Fined $10,000 (joint/several with Biondo)

James Thomas Biondo: Fined $10,000 (jt/several with Pyramid); Barred in principal/supervisory capacity 

1021. Registration Requirements
(a) All Principals Must Be Registered
All persons engaged or to be engaged in the investment banking or securities business of a member who are to function as principals shall be registered as such with NASD in the category of registration appropriate to the function to be performed as specified in Rule 1022. Before their registration can become effective, they shall pass a Qualification Examination for Principals appropriate to the category of registration as specified by the Board of Governors. A member shall not maintain a principal registration with NASD for any person 

(1) who is no longer active in the member's investment banking or securities business, 
(2) who is no longer functioning as a principal, or 
(3) where the sole purpose is to avoid the examination requirement prescribed in paragraph (c). A member shall not make application for the registration of any person as principal where there is no intent to employ such person in the member's investment banking or securities business. A member may, however, maintain or make application for the registration as a principal of a person who performs legal, compliance, internal audit, back-office operations, or similar responsibilities for the member or a person engaged in the investment banking or securities business of a foreign securities affiliate or subsidiary of the member.

(b) Definition of Principal
Persons associated with a member, enumerated in subparagraphs (1) through (5) hereafter, who are actively engaged in the management of the member's investment banking or securities business, including supervision, solicitation, conduct of business or the training of persons associated with a member for any of these functions are designated as principals. Such persons shall include:
(1) Sole Proprietors
(2) Officers
(3) Partners
(4) Managers of Offices of Supervisory Jurisdiction, and
(5) Directors of Corporations...

Strahan obtained authorization from a public customer to withdraw $750 from the customer’s account to pay for legal and/or accounting advice he had recommended, and instead, without the customer’s knowledge or consent, deposited the funds into his personal bank account and used the funds for his own benefit. 

Leif Christian Strahan: Barred

Steele pled guilty to participating in a scheme to defraud mortgage lenders, in that he received $15,000 for assisting an impostor with obtaining a fraudulent mortgage when he knew that the impostor was not an authentic purchaser of the property.

Epko Anthony Steele: Barred

Schlesinger purchased a municipal bond and engaged in a fraudulent and manipulative scheme in which he orchestrated prearranged non-bona fide sales and purchases of the bond by setting a same-day settlement when he sold the bond, and an extended settlement date when he repurchased the bond.  Schlesinger promised a profit to contra parties of the transactions and assured them they were exposed to no risk of loss, although he knew the prices he predicted did not reflect the actual market value of the bond. Schlesinger knew that the purchases and sales of the bond he arranged caused the publication and distribution of reports that were fictitious and in furtherance of his fraudulent, deceptive and manipulative purpose. Schlesinger made false and misleading statements under oath during an NASD interview.

Steven Lawrence Schlesinger: Barred

Lee signed the customer’s name to a policy change form after determining that the customer had signed the wrong form.

Young Hui Lee: Fined $5,000; Suspended 60 days in all capacities

Julian prepared a falsified account statement for a public customer that misrepresented the account’s net worth and securities positions for the purpose of misleading the customer as to the actual value of the investments. 

William Joseph Julian : Barred

Jalomo instructed an employee at her member firm to sign, on behalf of the firm, an incomplete Request for Verification of Deposit Form.  Jalomo completed the form with false information that overstated the value of her personal account with the firm, and transmitted the form to a mortgage broker in connection with her pending application for a home mortgage loan. 

Lisa Marie Jalomo: Barred

In his capacity as a trustee of a public customer trust, Hughes opened an account in the name of the trust, took loans for himself from the trust account, and as a result, the assets of the trust account were substantially depleted. In order to distribute the income or principal of the trust account to the customer, Hughes made quarterly distributions totaling $11,727.42 from the trust account to the customer’s bank account without the customer’s knowledge, authorization or consent, thereby making improper use of customer funds. Hughes drew checks totaling approximately $9,582 from the trust account to pay for personal expenses without the customer’s knowledge, authorization or consent. During the same time period, Hughes deposited approximately $9,014.70 of his own funds into the trust account. Hughes thereby misused $9,014.70 in customer funds without the customer’s knowledge, authorization or consent, and did not account for approximately $567.30 in customer funds, which Hughes thereby converted for his own use and benefit. Hughes affixed, or caused to be affixed, a customer’s signature to letters purporting to authorize transfers totaling $5,858.16 from the customer’s trust account to the customer’s bank account without the customer’s knowledge, authorization or consent.

Paul Howard Hughes : Barred

Gilmore violated an NASD suspension order by engaging in securities activities during his suspension. He attempted to conceal his active role at the firm from NASD, therefore violating the suspension order. 

Kenneth Joseph Gilmore : Fined $40,000; Suspended 6 months in Principal/Supervisory Capacity; Required to sell his ownership interest in his firm within 6 months.

Figliolini permitted a statutory disqualified individual to be associated with an NASD member firm. 

Johnny Phillip Figliolini, Jr.: Barred.

While acting on behalf of her member firm, Eidarous conducted a securities business while failing to maintain the minimum net capital required by SEC Rule 15c3-1. 

Reyheena Maria Eidarous: Fined $15,000; Suspended 15 business days as a FINOP

Corsino deliberately falsified the results of his Series 7 qualifications examination in an effort to mislead his firm about his qualifications to serve as a registered representative.

Manuel Marcelo Corsino: Barred

Anthony borrowed money from a public customer in violation of his member firm’s written procedures and NASD rules. 

LaMarr Andrew Anthony : Fined $5,000; Suspended 10 business days in all capacities

The Firm failed 

• to implement and enforce its Customer Identification Program, failed to establish an independent testing function to review and assess the adequacy of and level of compliance with its own anti-money laundering (AML) compliance program, and failed to conduct AML training;
• (acting through an individual)  conduct required annual compliance meetings with each of its registered representatives, and failed to enforce its written supervisory procedure requiring their attendance; and
• have a written needs analysis and a written training plan in order to achieve compliance with the Firm Element of the Continuing Education Rule.

Research Capital USA Inc. : Censured; Fined $20,000 ($5,000 of which joint/several with unnamed individual)

The Firm paid commissions to an individual in connection with public customer equity transactions during a time period in which the individual was suspended from associating with the firm. The Firm's supervisory system failed to provide for reasonable follow up and review to ensure that an individual would not receive compensation for customer equity transactions during his or her suspension. 

Centaurus Financial, Inc.: Censured; Fined $15,000

Acting through Frith, the Firm 

• utilized the instrumentalities of interstate commerce, or the mails, to effect transactions in non-exempt securities when it failed to maintain the minimum required net capital;
• prepared inaccurate month-end net capital computations and filed inaccurate quarterly Financial and Operational Combined Uniform Single (FOCUS) reports. 

The Firm, acting as a placement agent for the distribution of securities, deposited the funds it received from securities purchasers into a separate bank account it owned and controlled rather than handling the funds as required under the provisions of SEC Rule 15c2-4 applicable to the respective offerings. In one contingent offering, the firm released funds to the issuer before the amount required to satisfy the offering minimum had been received. 

Acting through Fisk, the Firm failed to establish and enforce written supervisory procedures reasonably designed to achieve compliance with applicable rules and regulatory requirements pertaining to the firm’s participation in best efforts and contingent securities offerings.

Philadelphia Brokerage Corporation : Censured; Fined $15,000 (jointly/severally with Fisk); Fined $10,000 (jointly/severally with Frith)

Robert Albert Fisk (Principal) : Fined $15,000 (jointly/severally with Philadelphia Brokerage)

Brinton Wesley Frith (Principal) : Fined $10,000 (jointly/severally with Philadelphia Brokerage)

Firm permitted Bullaro—the firm’s president and sole executive officer, Chief Compliance Officer and Financial and Operations Principal—to conduct securities business while his securities registration was inactive due to his failure to timely satisfy the Continuing Education/Regulatory Element requirement. Acting through Bullaro, the Firm failed to include in its trial balances any of the firm’s proprietary positions and related haircut charges associated with its substantial American Stock Exchange floor business that resulted in its net capital computations being inaccurate. 

Bullaro Securities Corp.: Censured; Fined $10,000 (joint/several with Bullaro)

Sal Stephen Bullaro (Principal):  Fined $10,000 (jt/sev with Bullaro Securities); Suspended 30 days in FINOP capacity

Baclet and Uberti 

• issued research reports on reporting companies that failed to disclose material information and contained misleading, exaggerated and false statements, and
• intentionally or recklessly failed to disclose material information on research reports issued to the public, and failed to disclose that the firm had received compensation for preparing and disseminating them. 

The Firm and Baclet failed to

• obtain signed approval of research reports prior to their dissemination;
• establish, maintain and enforce adequate written supervisory procedures reasonably designed to achieve compliance with applicable securities laws and NASD rules concerning research reports. 

Uberti and Runyon fraudulently failed to disclose material negative financial information, and included exaggerated and misleading information in their research reports. 

Donner Corporation International nka National Capital Securities, Inc : Expelled

Jeffrey Lyle Baclet (Principal): Barred 

Paul Alan Runyon (Principal): Fined $20,000; Suspended 6 months in all capacities; Requalify as General Securities Representative and General Securities Principal

Vincent Michael Uberti (Principal): Barred

Acting through Lindros, an unidentified member firm failed to properly escrow investor funds in accordance with SEC Rule 15c2-4.

Carl Edward Lindros : Censured; Fined $10,000

Walker changed the address of record on the account of the estate of a deceased public customer to an address under his control, and issued a debit card and checks to this new address. Using the fraudulently obtained debit card and checks, Walker made purchases totaling $9,689.11, thereby, converting the funds for his own use and benefit. Walker converted funds belonging to his member firm by depositing checks totaling $1,092.30 into his own personal account. Walker failed to respond to NASD requests for information. 

Kai Richardson Walker : Barred

While acting as trustee for a trust, Vaughan purchased a condominium for himself using $75,000 that he borrowed from one of the trust’s accounts, and did not disclose this loan to the trust’s beneficiaries. Vaughan withdrew an additional $247,000 from the trust’s bank accounts and used the funds to pay for personal expenses, and failed to keep any records or documents detailing such withdrawals. Vaughan failed to provide the beneficiaries with an account containing details of all disbursements from the trust assets, and kept no records detailing the amount of fees he paid to himself. 

Otto Keith Vaughan, Jr. : Ordered to pay $129,348 in restitution to public customers; Barred

Van Taseel affixed a public customer’s signature to a letter removing the customer’s deceased husband from an account, and submitted the document even though Van Tassel’s member firm had written supervisory procedures stating that registered representatives were not permitted to sign documents on behalf of clients, even if the clients instructed them to do so, as was the case in this instance. In spite of firm policy to the contrary, at the request of public customers, Van Tassel affixed their signatures on a Third Party Check Request form and an Authorization to Change form and submitted the documents to his member firm. Van Tassel affixed a public customer’s signature at her request, and submitted the document to his member firm although the firm’s supervisory procedures required that all client signatures be original. 

Thomas Robert Van Tassel : Fined $5,000; Suspended 60 days in all capacities

Acting individually and as members of a sales group, Sanducci and Featherstone participated in a fraudulent scheme to sell shares of a security to public customers, utilizing classic, boiler-room techniques to induce customers to purchase the security and to dissuade them from selling it. Sanducci and Featherstone used high-pressure sales pitches, material misrepresentations, omissions of fact and unauthorized transactions in customer accounts. They failed to provide customers with disclosures concerning the risks associated with investing in penny stocks. Sanducci provided false and misleading sworn testimony denying his role at the member firm. 

David Joseph Sanducci (Principal) and Brian Che Featherstone: Barred

Raney induced public customers who received rebate checks from his member firm to send checks payable to Raney, claiming he was owed 10% of the rebate for lost commissions, or that the funds were needed to pay for attorney fees incurred as a result of obtaining the rebates. Raney induced customers to send him checks by falsely claiming that fees were owed for compliance with the “Privacy Act,” the “Patriot Act,” or that new annual fees were due for various administrative reasons. Finally, he made the claims knowing them to be false, cashed the checks, and converted $4,370 for his personal benefit. 

Jonathan Charles Raney : Barred

Patel completed and affixed public customers’ signatures, with their knowledge and consents, on Financial Planning Services Agreements and Financial Planning Services Agreement Special Redemption Request forms, even though his member firm’s written supervisory procedures stated that representatives should not sign clients’ names to any document—even pursuant to the clients’ request.

Sanjay Chatur Patel: Fined $5,000; Suspended 60 days in all capacities.

Acting through Groth, a member firm used the means or instrumentalities of interstate commerce or the mails to effect transactions in nonexempt securities while failing to maintain the minimum required net capital;and filed FOCUS reports that were materially inaccurate in that they failed to include amounts in the firm’s liabilities relating to an outstanding loan balance with a bank. 

John Henry Groth: Fined $5,000 joint/several with unnamed individual/entity; Suspended 30 days in FINOP capacity

Gilmore violated an NASD suspension order to not engage in securities activities during his suspension by performing work-related duties on the firm’s premises, communicating with employees regarding work-related matters, providing instruction to the firm’s employees, meeting with public customers and soliciting business from customers. Moreover, Gilmore attempted to conceal his active role at the firm from NASD in violation of the suspension order. 

Kenneth Joseph Gilmore: Fined $40,000; Suspended 6 months in all capacities; Barred in principal/supervisory capacity; Required to sell his ownership interest in his member firm within 6 months.

Michael Frank Dispenza
AWC/#E052004030201/May 2006 

Dispenza purchased municipal securities from public customers at prices that were not fair and reasonable, resulting in losses for the customers. Further, Dispenza accepted reimbursement for one of the losses from the broker’s broker for a portion of the price differential without his member firm knowledge or approval. 

Michael Frank Dispenza: Fined $5,000; Suspended 10 business days in all capacities

Davis executed transfers totaling $65,000 from a public customer’s investment account to bank accounts Davis and his wife owned and controlled, without the customer’s knowledge, consent or authorization. Davis borrowed $102,500 from public customers in contravention of his firm’s written procedures prohibiting registered persons from borrowing money from customers. Davis failed to respond to NASD requests for information. 

Ron Davis: Barred

Castro withdrew and converted $47,000 from deceased public customers’ accounts; and he then failed to respond to NASD requests for an on-the-record interview. 

Daniel Castro: Barred

Boston served as a public customer’s treasurer and financial representative and wrote checks totaling $23,000 payable to another individual and himself on the customer’s account without the customer’s authorization, thereby converting the funds for his own use. Boston failed to respond to NASD requests for information. 

Gregory Thomas Boston: Barred

Ahmad knowingly and intentionally entered small-lot orders through his own customer account into NASDAQ’s SuperMontage to sell (buy) NASDAQ securities to NASDAQ market makers at the inside bid (offer) when the market participant was quoting 100 shares at the NASDAQ Best Bid and Offer (QBBO) and received executions for the orders. Ahmad was aware that after his small-lot orders were executed, the relevant market makers utilized automatic quoting systems designed to keep a consistent spread between their bid and offer, and that this activity created a new QBBO with quotes more favorable to Ahmad, and resulted in more favorable executions of his orders.

Imran Ahmad: Fined $20,000; Required to pay $1,372 plus interest in restitution to market makers; Suspended 2 months in all capacities.

While suspended in any capacity from NASD association with a member firm, Abney continued to solicit an individual to become a customer. Abney refused to appear at NASD and give testimony. 

Maurice Wayne Abney: Barred

The Firm

• failed to establish and maintain a supervisory system reasonably designed to achieve compliance with applicable securities laws and regulations, and NASD rules to detect and prevent excessive trading;
• permitted an associated person to effect transactions in government securities on its behalf while not being properly registered with NASD;
• permitted misleading advertisements and sales literature to be disseminated to the investing public by its former branch office;
• permitted 
  • registered representatives to utilize a name that was not a bona fide division of the firm;and
  • the branch office to post a sign with the same name that incorrectly indicated that it was a division of the firm when, in fact, there was no bona fide business distinction to form the basis for the divisional classification; and
• conducted a securities business while failing to maintain its minimum required net capital.

S.W. Bach & Company: Censured; Fined $40,000

The Firm did not maintain and preserve all email and instant messaging communications, as required by SEC rule 17a-4. The Firm failed to complete an annual training needs analysis and to develop and implement its written training plan to achieve compliance with the Firm Element of the Continuing Education Rule. 

Desjardins Securities International, Inc.: Censured; Fined $130,000; Required to revise its procedures with respect to applicable securities laws and regulations, and NASD rules concerning the preservation of electronic communications. 

Acting through Ross, the Firm failed to disclose material facts in a private placement memorandum (PPM) to investors. 

Franklin Ross, Inc.: Censured; Fined $20,000 (joint/several with Ross); Suspended from from engaging in any offering of securities on behalf of the firm or any of its affiliates for one year

Mark Gerald Ross, Jr.:  Fined $20,000 (joint/several with Franklin Ross, Inc); Suspended 10 business days in principal capacities.

RichMark Capital Corp. 

• manipulated the market and the price of a common stock by permitting a registered representative to buy and sell shares of the stock in his personal accounts to mislead the investing public and market participants, and to give the false appearance of market interest in the stock at the arbitrary price created;
• made unsuitable recommendations and intentionally or recklessly made material misrepresentations and omissions to public customers in connection with the securities sale;
• permitted an unregistered person to associate with the firm and to trade the firm’s proprietary account, and prior to letting the person engage in securities business, failed to determine that he had a significant disciplinary history and was subject to statutory disqualification; and
• failed to 
  • establish an adequate supervisory system, 
  • establish and implement adequate written supervisory procedures, and 
  • enforce written supervisory procedures that would comply with securities laws and regulations to prevent the manipulation, unsuitable recommendations and registration violations that occurred at the firm

RichMark Capital Corporation: Expelled

Takacs prepared and submitted requests for reimbursements of business travel expenses that he had not incurred to his member firm, and accepted the funds knowing that he had not incurred them. Takacs failed to respond to NASD requests for information and to provide testimony. 

Scott Frederick Takacs: Barred

Parker distributed, or caused to be distributed, sales literature to public customers that did not conform to the applicable standards for communications with the public NASD requires. 

James Ronald Parker: No fine in light of financial status; Suspended 1 month in all capacities

MacDuff engaged in private securities transactions outside the regular course of his employment with a member firm, failed to provide prior notice to his firm describing in detail his proposed transactions and his role therein, and failed to receive written approval from his firm. Also, he prepared and distributed sales literature in the form of newsletters to public customers without the knowledge or consent of registered principals of his member firms, and some of these materials contained statements that were unwarranted and misleading, and failed to name the member firm with which he was associated, and failed to file the sales literature with NASD’s Advertising Department. 

Richard Lawrence MacDuff: Barred

Formy-Duval 

• allowed an individual to function as a registered person with his member firm without the benefit of registration, despite the fact that the individual was serving an NASD suspension;
• failed to ensure that his member firm maintained its required minimum net capital;
• caused his firm to prepare inaccurate net capital computations and to file inaccurate FOCUS reports;
• failed to use a proper escrow account in connection with a securities offering;
• failed to close the offering and return funds to customers at the offering’s expiration when the minimum contingency had not been met; 
• failed to reasonably supervise his member firm and its representatives to prevent and detect sales practice violations; 
• failed to enforce his firm’s supervisory procedures; and
• failed to establish and enforce an adequate supervisory system in that he failed to ensure that all covered employees attended annual compliance meetings, failed to ensure that the principal of the firm reviewed correspondence, advertising and sales literature, and failed to establish any written procedures for sales of private placements. 

William Hall Formy-Duval: Barred in principal/supervisory capacities; No monetary sanction in light of financial status

Cassano borrowed $15,500 from public customers in contravention of his member firm’s written procedures prohibiting registered representatives from borrowing money from customers. Cassano failed to respond to NASD requests for information. 

Michael Joseph Cassano: Barred

Black altered handwritten notes of meetings with a public customer to remove personal comments about the customer and to add information regarding conversations he claimed to have had with the customer about the customer’s financial situation, holdings, margin and option strategies. Black placed the altered notes in the customer’s file, subsequently provided the altered notes to his member firm during discovery in an arbitration hearing, and failed to timely notify his firm that the notes had been altered. 

Christopher Wilson Black: Fined $25,000; Suspended 1 year in all capacities

In connection with a public customer’s life insurance application, Battista requested that a co-worker impersonate the customer during a personal history interview his member firm conducted. Battista failed to respond to NASD requests for information.

Sammy Battista: Barred

In connection with 

• share transactions, Rance King Securities paid, or caused to be paid, $29,000 in commissions to real estate brokers who were not registered persons;
• tenant-in-common transactions, paid, or caused to be paid, $294,000 in commissions to real estate brokers who were not registered persons. 

Rance King Securities: Censured; Fined $10,000

Acting through Hockanson, the firm permitted associated persons to engage in the securities business of the firm while their registrations were inactive as a result of the firm’s failure to timely submit appropriate and complete fingerprint cards to NASD. 

Firm and Individual Fined Integrity Trading, Inc. and Jeffrey Wade Hockanson (Principal): Censured; Fined $15,000 joint/several

Cruikshank recommended unsuitable investment transactions to a public customer and guaranteed the customer against losses, (to partially fulfill his guarantee, he gave the customer a $1,000 check drawn from his personal bank account). Also, he made unwarranted or misleading written claims, made predictions or projections of performance, and failed to provide a sound basis for evaluating facts regarding recommended investment products. 

Acting through Itzen, the firm failed to establish procedures reasonably designed to achieve compliance with applicable securities laws, regulations and NASD rules addressing how a supervisor conducts a suitability review of customer transactions. Itzen failed to supervise Cruikshank’s securities recommendations to a public customer, and failed to enforce the firm’s written supervisory procedures regarding the approval of new customer accounts. 

Choice Investments, Inc: Censured; Fined $10,000 joint/several with Itzen; Ordered to pay $9,048 plus interest joint/several with Cruikshank in restitution to public customer

Donald Arthur Itzen (Principal):Fined $10,000 joint/several with Choice; Suspended 10 days in principal/supervisory capacities

Jean Paul Cruikshank: Fined $15,000; Ordered to pay $9,048 plus interest joint/several with Choice in restitution to public customer; Suspended 1 year all capacities.

Acting through Jacobs, Capital Growth Financial sold securities that were not registered with the SEC. In connection with the securities offering, the firm used general solicitation sales techniques and sold the securities to non-accredited investors, thereby eliminating the offering from any registration exemption. 

Acting through Falken, Capital Growth approved the use of letters and invitations to seminars to be sent to prospective clients of the firm that failed to disclose that the referenced securities were subject to a high degree of risk, failed to disclose risks specific to the securities, were misleading by being promissory of successful investment results, and otherwise made exaggerated, unwarranted or misleading statements. 

Jacobs prepared and approved a PowerPoint presentation that was misleading and inconsistent with the private placement memorandum, and made other statements concerning market conditions that were without a reasonable basis. Acting through Jacobs, Capital failed to establish, maintain and enforce an adequate supervisory system, including written procedures, reasonably designed to achieve compliance with applicable rules and regulations related to the sale of private offerings. 

Finally, the firm failed to establish anti-money laundering (AML) procedures reasonably designed to achieve compliance with the US Patriot Act and the Bank Secrecy Act. 

Capital Growth Financial, LLC: Censured: Fined $45,000 ($10,000 joint/several with Falken); Required to 

• file all NASD Conduct Rule 2210(a) sales literature and advertisements with NASD (except for PowerPoint presentations used by the firm in public seminars) at least 10 days to their first use; 
• provide a copy of its proposed PowerPoint presentations to NASD at least 30 days prior to conducting any such seminar, so as to allow NASD sufficient time to review and approve the proposed public communication; and

Agrees not to conduct any public seminar for 30 days from the date of acceptance of this AWC. 

Michael Barry Falken (Principal): Fined $10,000 joint/several with Capital Growth Financial; Suspended  10 business days in principal capacities  

Michael Scott Jacobs (Principal): Fined $10,000; Suspended 45 days in principal capacities  

The NASD sanctions in this case are interesting in that they are somewhat tailored to the unique nature of the violation.  Not only must the firm submit all sales lit and ads to NASD at least 10 days before their use, but their is a specific embargo of 30 days on the use of PowerPoint presentations.  Note that the requirement is to "file" all Rule 2210(a) materials (which apparently doesn't require waiting for the Staff to approve) but the PowerPoint sanction imposes an obligation to allow NASD time to "review and approve."  Also note that the firm cannot conduct any public seminar for 30 days after the acceptance of the AWC.

Morris prepared and submitted research reports containing price targets, research ratings and/or research summaries to companies whose equity securities were the subjects of the respective research reports, before publication of the reports and without providing complete drafts of them to his member firm. Morris published research reports he had prepared and that did not disclose the valuation methods used to determine price targets contained within.  

James Geoffrey Morris: Censured: Fined $15,000

Merwe created false and inaccurate books and records by falsifying expense reports reflecting $96,000 in personal and duplicate expenditures as legitimate business expenditures, and provided violative gifts and gratuities to municipal bond traders and other employees of municipal securities broker-dealer firms with whom he conducted business. 

Carl Van der Merwe: Barred

Valois failed to reasonably supervise registered representatives’ activities, and failed to enforce his member firm’s written supervisory procedures regarding heightened representative supervision and the handling of customer complaints. 

Anthony Peter Valois: Fined $5,000; Barred in principal/supervisory capacity. Suspended 30 days in all capacities

Sussman charged a personal expense to a business credit card his member firm had issued to him for business use only, and submitted a written request for reimbursement of the expense, representing it as business-related when he knew it was not. 

Ronald Mark Sussman: Barred

While impersonating a public customer, he contacted an outside brokerage firm by telephone and requested the liquidation of the customer’s account at such firm without the customer’s authorization to do so. 

Ernie Preston Simmons, III: Barred

Without informing his member firm, Scheurich settled a complaint directly with a public customer on the condition that the customer would retain Scheurich as the broker of record.  Scheurich guaranteed another public customer that her total account value would equal or exceed $50,000, and that he would credit any deficiencies to the account. 

Michael Ray Scheurich: Fined $7,500; Suspended 5 months in all capacities

Rosa received $13,200 from a public customer for investment purposes, but did not invest the funds as agreed. Instead, he converted the funds for his own use and benefit. Subsequently, prompted by his member firm’s investigation of the conversion, Rosa prepared a fictitious letter addressed to himself that the customer purportedly had sent to him regarding the customer’s investment, forged the customer’s signature and provided a copy to his member firm as if it was genuine. 

Pierre Samuel Rosa: Barred

Reiss borrowed $10,000 from public customers in contravention of his member firm’s written procedures prohibiting representatives from borrowing money from customers. 

Leonard Joseph Reiss: Fined $5,000; Suspended 30 business days in all capacities.

Using his firm's proprietary trading account, Murphy knowingly and intentionally entered one-share orders through the NASDAQ National Market Execution System (NNMS) to market makers in NASDAQ securities at prices that he knew would receive an execution and improve, and were intended to improve each market maker’s bid or offer in the subject security. 

Immediately after receiving executions on the one-share orders (which updated both the bid and offer), Murphy knowingly and intentionally entered larger orders on the other side of the market to buy and sell shares of securities in a firm proprietary trading account to receive a more favorably priced execution at the new inside bid or offer Murphy caused to be created. 

Raymond Jude Murphy: Fined $10,211.21 (includes $211.21 disgorgement); Ordered to pay member firm $1,526 plus interest in restitution; Suspended 3 months in all capacities; 

Although his member firm prohibited its representatives from borrowing or accepting funds from customers, Martin obtained $50,000 from a public customer for his own use and benefit . Martin deposited the $50,000 into the customer’s checking account, prepared a $50,000 check drawn on the customer’s account payable to Martin’s wife, which the customer signed, deposited the check into a bank account in his wife’s name, and used the funds in the account for his benefit—not the customer’s. Martin made a written entry in the customer’s check register falsely identifying the $50,000 check as payable to a company and not his wife. Martin prepared and provided the customer with a promissory note to repay the $50,000, but failed to adhere to the note’s terms.

Timothy Merril Martin: Barred

Luxenberg altered a registered representative’s lapsed insurance license by changing the dates to falsely reflect proper state registration without the representative’s knowledge, authorization or consent. 

Marc Alan Luxenberg: Barred

Logan settled a complaint with a public customer by paying the customer $500 without her member firm’s knowledge or approval.

Rena Logan: Fined $5,000; Suspended 2 months in all capacities

Jurica repeatedly misused a public customer’s funds, in that he transferred funds and securities proceeds from the customer’s accounts to an account he controlled for his own use and benefit without the customer’s knowledge, authorization or consent. Jurica willfully failed to provide written notification to his member firm that he opened securities accounts at other broker-dealers, and failed to advise the other broker-dealers of his association with his member firm. Finally, he failed to respond to NASD requests for information. 

Brett Aaron Jurica: Barred

Acting through Galeotafiore, a Financial and Operations Principal (FINOP), his firm conducted a securities business when its net capital fell below the minimum amount required by SEC Rule 15c3-1; and also failed to prepare and file accurate FOCUS Reports. 

Louis Joseph Galeotafiore, Jr.: Fined $7,500; Suspended 10 business days as a FINOP

Dua forged a supervisor’s signature on a letter containing an apology for providing false information, and sent it to a public customer without the supervisor’s knowledge or authorization. Also,  Dua failed to respond to NASD requests for information.

Jatinder Dua: Barred

Collins did not promptly perform his supervisory responsibilities, altered the dates of the firm’s mutual fund exception reports and added inaccurate information to surveillance reports. Collins failed to disclose the alterations to the exception reports to his member firm and, as a result, caused the firm to provide NASD with inaccurate information.

Frank Collins: Barred

Alfonsi failed to 

• establish and maintain a supervisory system and written supervisory procedures for his member firm that were reasonably designed to achieve compliance with the applicable securities laws, regulations and NASD rules; 
• establish a system to ensure that the firm maintained 
  • correspondence, 
  • internal communications, 
  • complete customer complaint files, and
  • customer new account information; 
• ensure that the firm filed customer complaints in a timely manner under NASD Rule 3070; and 
• ensure that Forms U5 were timely amended. 

Marco Alfonsi: Fined $25,000; Suspended 1 year in all principal capacities.

The firm failed to reasonably and promptly respond to “red flags” raised by customer complaints, written communications and telephone conversations regarding possible use of discretion by a registered representative and failed to institute heightened supervisory procedures targeting possible use of discretion by the representative. 

Merrill Lynch: Censured; Fined $20,000

Freedom Investments failed to 

• conduct an independent test of its AML program;
• have written procedures to address the firm’s obligation to provide prompt notification to NASD regarding changes to their AML contact information;
• enforce its Suspicious Activity Reports (SARs) procedures, in that the firm rejected at least seven questionable transactions involving ACH deposit requests which were classified as “fraudulent” on its internal books and records. The firm subsequently restricted and closed the accounts but never filed SARs for these transactions. 

Also, the firm improperly extended credit in violation of Reg. T, by failing to promptly cancel or liquidate the transactions in cash accounts where customers had used ACH (Automated Clearing House) deposits to pay for securities transactions, but their deposits failed to clear. 

Freedom Investments, Inc.: Censured; Fined $20,000

Acting through Hedeker and Kozak, Certes Capital Securities, LLC 

• permitted an individual to act in a capacity requiring registration when he was not registered;
• allowed the individual to exert control and/or direct certain of its operations, including participating in employment-related decisions and coordinating the firm’s private placement offerings;
• failed to amend the firm’s Form BD to disclose the individual’s role there; and
• failed to supervise the associated unregistered individual. 

Also, the respondents engaged in violations in connection with two private placements by not properly escrowing funds and prematurely releasing funds before the minimums were met. 

Certes Capital Securities, LLC, Dean Richard Hedeker (Principal), and James Patrick Kozak (Principal): Censured: Fined $40,000 joint/several

Acting through Brooks, the firm violated the supervision rule by failing to commence and complete compliance inspections that were undertakings in the firm’s membership agreement. 

First Securities USA: Censured; Fined $60,000 joint/several with Brooks

Stanley Clifton Brooks:Fined $60,000 joint/several with First Securities; Suspended 2 years in supervisory capacity

In connection with securities transaction referrals, Graboyes paid an unregistered person $12,700 in commissions. 

Frederick E. Graboyes: Censured; Fined $10,000

Zimmerman knowingly or recklessly prepared and disseminated misleading offering materials, monthly statements and newsletters to investors in that he made exaggerated, unwarranted and/or misleading statements concerning, among other things, the performance of a private limited partnership compared to the S&P 500, the accuracy of market predictions, the purchasing of insiders compared to sales, the effectiveness and understanding of trading strategies, and indicators of market peaks. Finally, Zimmerman failed to fully testify at an NASD on-the-record interview. 

Scott Martin Zimmerman; Barred

White manipulated the market for, and the price of, a company’s common stock. He engaged in a series of wash trades in the company’s stock at arbitrary and artificial prices, which were misleading to the investing public and market participants in that they gave the false appearance of market interest in the stock at the arbitrary prices White had created. White permitted an unregistered person to associate with a member firm. Also, White failed to notify member firms of his association with his member firm and failed to notify his member firm of his accounts at other member firms. Finally, he failed to update his Form U4 with material facts. 

Doyle Mark White: Barred

XXXXX borrowed money from public customers without first obtaining his member firm’s written approval. 

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

Rowlett affixed, or caused to be affixed, the signatures of public customers on a mutual release that he delivered to attorneys representing his former member firm in defense of an arbitration claim brought by the customers. 

Kenneth Robert Rowlett: Barred

Lurry received a loan from a public customer and did not obtain his member firm’s written approval to borrow the customer’s funds. 

Gordon Scott Lurry: Fined $5,000; Suspended 10 business days in all capacities

Krey affixed a public customer’s signature on a change of broker-dealer authorization Form without the customer’s knowledge or consent.

Vincent Alan Krey: Fined $5,000; Suspended 1 year all capacities

Hanke borrowed funds from a public customer without obtaining his member firm’s written pre-approval. 

Stephen Craig Hanke: Suspended 20 business days in all capacities; no fine in light of financial status

Grimm altered the date on a previously signed automated customer account transfer (ACAT) form in order to effect a transfer of a public customer’s account from his former employing firm to his new employing firm without the customer’s authorization. 

Thomas Edwards Grimm: Fined $5,000; Suspended 60 days in all capacities

Gassoso effected unauthorized transactions in public customers’ accounts without their prior knowledge, authorization or consent. Gassoso failed to forward incoming and outgoing electronic correspondence for his member firm’s review that prevented his firm from discharging its supervisory obligation. 

Gregory Gassoso: Fined $6,000; Suspended 30 days in all capacities

English was in possession of unauthorized materials and cheated during a qualifications examination, which violated Registration Rule 1080 and Conduct Rule 2110. 

Joyce Lynn EnglishL Barred

Drawbaugh failed to make and keep accurate financial records. On behalf of his member firm, utilized instrumentalities of interstate commerce to engage in a securities business while failing to maintain the required minimum net capital. Drawbaugh submitted FOCUS reports on behalf of his firm, which contained materially inaccurate net capital computations. 

Daryl Irvin Drawbaugh: Fined $5,000; Barred in FINOP capacity

Conte borrowed funds from a public customer without providing notification of such borrowing to his member firm. He failed to respond to NASD requests for information or to appear for testimony. 

Frank Joseph Conte: Barred

Carter circumvented a heightened supervision plan by falsely representing that other registered representatives were the representatives on public customer accounts, when, in fact, Carter was the representative on the accounts and the one effecting the trades. 

Richard Dean Carter: Barred

Wave Securities LLC did not make and annotate an affirmation determination prior to accepting customer short sale orders; it relied upon a document that did not meet the requirements that any hard to borrow list include securities that are restricted pursuant to Uniform Practice Code Rule 11830, and the creator of the list attest in writing that the NNM or listed security not on the list is easy to borrow or available for borrowing; and the firm did not limit its use of the list to NNM and listed securities. 

The firm incorrectly classified a hedge fund customer account as a broker-dealer account, and accepted short sale orders from the hedge fund customer and failed to make/annotate an affirmative determination. In addition, the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with respect to marking customer order tickets, bid test, prompt receipt and delivery of securities and ACT reporting. 

Wave Securities, LLC: Censured; Fined $125,000; Required equired to revise its written supervisory procedures with respect to applicable securities laws and regulations concerning marking customer order tickets, bid test, prompt receipt and delivery of securities and ACT reporting.

Acting through an unnamed individual, Southwest Texas Capital conducted a securities business while failing to maintain its required minimum net capital. The firm failed to establish and maintain a supervisory system that was reasonably designed to achieve compliance with applicable securities laws and regulations and with NASD rules. Specifically, the firm's procedures stated that the firm and its associated persons could take possession of and promptly forward customer funds and securities, when in fact, based on its net capital requirement, the firm could not take possession of customer funds or securities, not even to forward the funds or securities to the firm's clearing firm on the same business day. 

Southwest Texas Capital, LLC: Fined $10,000 ($5,000 of which is joint/several with unnamed individual)

Sky Capital LLC acted as a placement agent in private placement offerings involving minimum-maximum contingencies, and was not included as a party in any written agreement with a bank under which the bank agreed to hold all money or other consideration received in escrow for the persons who had the beneficial interests therein, and to transmit or return such funds directly to the persons entitled thereto when the appropriate event or contingency had occurred. The firm permitted an individual to act in a capacity that required registration while his NASD registration status was inactive due to his failure to complete the Regulatory Element of NASD’s Continuing Education Requirement. 

Sky Capital LLC: Censured; Fined $15,000

Bisys' written supervisory procedures were not reasonably designed to ensure compliance with email retention requirements in that they did not provide for adequate follow-up and review to ensure that hard copies of all email communications were being retained. 

Bisys Fund Services Limited Partnership: Censured; Fined $50,000; Required to revise its email communication preservation procedures. NOTE: In determining the fine, the NASD took into account the "demonstrable corrective actions undertaken by the firm before the staff commenced its examination).

Acting through Yrshus, D.E. Wine Investments, Inc. failed to 

• deposit customer funds received in connection with a network offering into a bank escrow account as required by SEC Rule 15c2-4; and
• terminate the offering and return investor funds when the minimum offering amount was not obtained. 

Acting through an unnamed individual, D.E. Wine Investments, Inc. failed to 

• terminate another offering and return investor funds after failing to raise the minimum offering amount during the offering period; and 
• make any computations or deposits into a special reserve bank account for the exclusive benefit of the offering’s customers. 

Also, the firm filed inaccurate FOCUS reports, and (acting through Yrshus) conducted a securities business while failing to maintain its required minimum net capital. 

D.E. Wine Investments, Inc: Censured; Fined $20,000 ($15,000 of which joint/several with Robert Yrshus and $5,000 of which is joint/several with unnamed individual)

Robert Anthony Yrshus: Censured; Fined $15,000 joint/several with D.E. Wine Investments, Inc.

American Eastern Securities engaged in securities business while failing to have and maintain sufficient net capital. 

Acting under Hung’s direction and control, the American Eastern participated in a contingency securities offering issued by a company, which it intended to operate as a hedge fund. The firm did not transmit investor funds it raised in the offering to an unaffiliated bank to hold in escrow for the investors until the contingency occurred. Further, the firm solicited investments in the contingency offering through the use of a private placement memorandum, which represented the offering would not be funded unless a minimum dollar amount was received by the specified date --- but, when the contingency deadline was not met, it was not extended and the investors’ funds were not returned. The release of investor funds to the control of issuer before the contingency was satisfied rendered the foregoing representations in the private placement memorandum false and misleading. 

American Eastern Securities, Inc.: Censured; Fined $15,000 jointly/severally with Hung; Fined an additional $5,000

Charles Trangchong Hung: Censured; Fined $15,000 jointly/severally with American Eastern Sec. Inc.

Acting through Durant, Tejas 

• provided a copy of a research report to an issuer without redacting all necessary information, including analyst’s opinions, estimates and other nonfactual information; and
• allowed an analyst to purchase warrants, at a discount, from an issuer Durant covered within two days following the issuance of a research report on that issuer 

Acting through Durant, Tejas failed to 

• disclose its ratings distribution and the meaning of those ratings on research reports; 
• include a required price chart on research reports; 
• disclose the receipt of investment banking compensation on a research report; 
• disclose its market making status on research reports; 
• ensure that research reports contained analyst certifications;
• ensure that all principals were appropriately registered;
• establish a system to maintain and preserve all emails;
• maintain emails, and failed to implement a system to monitor, archive and retrieve instant messages;
• evidence email reviews, and failed to provide notification of retention of electronic correspondence by means of electronic storage media; and
• maintain records evidencing that the firm prepared a written needs analysis and training plan for the firm element of the continuing education program. 

In addition, Tejas failed to 

• report corporate bond trades through TRACE; 
• accurately report the execution time and/or quantity or price; 
• timestamp municipal trade order tickets with the receipt time, entry and execution; and
• maintain municipal trade order tickets; and failed to reflect all required information on order tickets. 

Tejas Securities Group, Inc.: Censured; Fined $225,000

Arnold Reed Durant: Fined $10,000; Barred in principal/supervisory capacities

Acting through Brooks, Brookstreet failed to establish, maintain and enforce a system of supervisory control policies and procedures reasonably designed to prevent the firm from issuing payments to non-registered recruiters. 

Brookstreet Sec. Corp and Stanley Clifton Brooks: Censured; Fined $25,000 jointly and severally

Farber failed to supervise a registered representative. Acting through Gautney, Aura Financial Services, Inc. failed to establish, maintain and enforce a system to supervise registered representatives’ activities that was reasonably designed to achieve compliance with applicable securities laws and regulations, and NASD rules. 

Aura Financial Services, Inc.: Censured; Fined $15,000 (jointly and severally with Gautney)

Leonard Peter Farber, (Principal): Fined $7,500; Suspended 20 business days in principal capacity

Timothy Michael Gautney (Principal): Fined $15,000 (jointly and severally with Aura Financial); Suspended 5 business days in principal capacity

Zenta exercised discretionary power in a public customer’s account without customers’ prior written authorization, or without written acceptance approval from his member firm. Also, he failed to reasonably supervise registered representatives with respect to discretionary trading.

Roy Clifton Zentz: Censured; Fined $10,000; Required to cooperate with NASD in any further investigation and hearing relating to his former member firm and/or any current or former registered or associated persons of the 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. 

Tancredi took the NASD Series 7 examination and received a failing grade, then altered the proctor’s report to reflect that he had received a higher score than the one he had actually received. Tancredi presented the altered report to his member firm. 

Joseph T. Tancredi: Fined $5,000; Suspended 6 weeks in all capacities

Persaud received simultaneous buy and sell instructions from companies that instructed him to sell a total of two million shares for one company and purchase two million shares at $0.05 a share above the initial transaction price for the other. He was also instructed not to cross the trades between the two accounts. Persaud offered an individual at another company an opportunity to purchase shares with the understanding that the individual would be able to sell those shares almost immediately at $0.05 a share above his purchase price. The transaction was executed as planned and the unnamed individual realized approximately $100,000 in profits.

Harrichand Persaud: Censured; Fined $50,000 (includes $1,600 disgorgement of commissions); Suspended 2 months in all capacities

Kumar received $30,000 in gifts and gratuities for his efforts in facilitating the conversion of funds held by his member firm in its related suspense accounts to be improperly diverted to outside parties. He also failed to respond to NASD requests for documents and information. 

Anil Parbhubhai Kumar: Barred

Guasconi provided false information concerning a customer’s brokerage account to another financial institution. 

Joseph Paul Guasconi: Fined $10,000; Suspended 7 months in all capacities

When an investment Goodridge had recommended became insolvent and stopped making payments of quarterly dividends, she began making deposits of her own money into a public customer’s bank account on a quarterly basis (without the customer's and her member firm’s knowledge). Goodridge’s actions prevented the customer from discovering that the preferred stock was worthless and potentially complaining to her firm --- and also precluded a timely analysis of whether her initial recommendation was suitable for the customer. 

Christina Wood Goodridge: Fined $5,000; Suspended 15 business days in all capacities

Faulring failed to take appropriate action to supervise a registered representative that was reasonably designed to prevent his violations and achieve compliance with applicable securities rules, regulations and NASD rules. 

Roger Martin Faulring: Fined $10,000; Suspended 6 months in principal/supervisory capacity; Requalify by examination as principal/supervisor.

While employed with a member firm, Congdon engaged in outside business activities, in that he received a check from a public customer for “financial counsel services” without giving his firm prompt written notice of these outside business activities. 

Stephen James Congdon: Fined $5,000; Suspended 10 business days all capacities

Chi 

• participated in private securities transactions for compensation, and failed to provide written notification or receive express written authority from her member firm;
• failed to maintain documentation adequately evidencing how she invested $550,000 received from public customers for investment purposes, and commingled portions of these funds into a bank account under her control;
• established brokerage accounts at two other broker-dealers, placed orders in a public customer’s discretionary account at another broker-dealer, and failed to notify these broker-dealers in writing that she was associated with her member firm (and did not notify her member firm in writing of the existence of these accounts). 

Angel Chi: Barred

Cheesman sought and accepted reimbursement from his member firm for inaccurate business expense claims. 

Jay Frederick Cheesman: Barred

Carlson affixed a public customer’s signature to money orders purchased with Carlson’s personal funds without the customer’s consent or authorization. 

Kenneth Anton Carlson: Fined $5,000; Suspended 60 days in all capacities.

Brown charged excessive mark-ups and mark-downs in connection with transactions in a public customers’ account. Bellia failed to adequately supervise Brown in that he knew or should have known of the excessive charges. 

Robert Anthony Bellia, Jr: Fined $5,000; Suspended 30 business days in principal capacity.

James Robert Brown: Fined $5,000; Suspended 20 business days in all capacities

Bailye borrowed $3,000 from a public customer in violation of his member firm’s written procedures prohibiting registered persons from borrowing money from customers. 

Lawrence Bruce Bailey: Fined $5,000; Suspended 20 business days in all capacities.

The Firm did not enforce its Customer Identification Program (CIP) in that 

• the firm did not follow its CIP procedures, 
• the CIP was not implemented with respect to customers who purchased interests in a private placement, and 
• the CIP was not implemented with respect to a customer who participated in an income fund offering through the firm.

As to the private placement/fund customers noted above, prior to the establishment of their accounts, the Firm did not provide the required written notice that the firm is requesting information in order to verify identity. 

Also, the Firm's written AML program was not reasonably designed to report suspicious activity because the procedures referred to prospective reporting rules, and had not been updated upon effectiveness. Further, the Firm’s written AML program was not reasonably designed to cause the firm to comply with its obligation to review and respond to requests for information from the Financial Crimes Enforcement Network (FinCEN). 

Finally, the Firm’s customer account records did not include all of the information required by NASD and SEC books and records rules. 

Keating Secs,LLC: Censured; Fined $25,000

In connection with a contingency private placement offering of securities, the Firm violated the escrow agreement in that amendments to the offerings were not compliant with  Rule 10b-9. When the minimum offering was reached pursuant to the amended offering documents, the funds were released from the escrow account to the issuer; however, the original escrow agreement had never been properly amended --- thus, pursuant to the escrow agreement in place, the funds were released early. 

The Firm amended the terms and conditions of a second offering to 

• reduce the maximum from $2.3 million to $1.2 million (the minimum was $1 million), and 
• extend the termination date from June 30 to July 19, 2002

However, the escrow agreement was not amended, so when the funds were disbursed to the issuer on July 23, 2002, in accordance with the terms of the amended offering, it was inconsistent with the terms of the escrow agreement, under which the funds should have been returned to the customers when the minimum had not been met by June 30. 

Also, the Firm failed to timely file or ensure the timely filing of amendments Forms U4 and U5 to report complaints received by the firm. In addition, while conducting a securities business, the firm failed to maintain the required minimum net capital required by SEC Rule 15c3-1. 

Joseph Gunnar & Co LLC: Censured; Fined $20,000

The Firm 

• permitted an individual to actively engage in the management of the firm’s securities business without being properly registered in that capacity: 
• operated a securities business without having at least two registered principals or without obtaining an NASD waiver; and
• failed to implement policies, procedures and internal controls reasonably designed to achieve and monitor its compliance with the requirements of the Bank Secrecy Act 

Good Morning Shinhan Sec. (USA) Inc.: Censured; Fined $10,000

Acting through Thieme, the Firm 

• operated without a registered Financial and Operations Principal (FINOP) from February 2002 to September 2004; and 
• failed to develop an annual written training plan for Firm Element/Continuing Education requirement for 2000 to 2004; and
• failed to maintain monthly bank reconciliations. 

Thieme Securities and Heiko Helmut Thieme: Censured; Fined $15,000 (joint/several)

Acting through Drejza, the Firm failed to 

• establish, maintain and enforce a supervisory system reasonably designed to achieve compliance with the plan of supervisory procedures and operating restrictions, and 
• properly supervise the statutorily disqualified registered representative to ensure compliance with the heightened supervision that was specifically ordered in a notice. 

Royal Alliance Assoc, Inc.: Censured; Fined $100,000

Jeffrey Scott Drejza: Fined $5,000; Suspended 2 weeks in supervisory capacity

Acting through Currier, the Firm 

• received customer complaint notices, arbitration claims and settlements that were subject to NASD reporting requirements, but failed to report these events to NASD; 
• failed to timely file amendments to the Forms U4 and U5; and
• failed to enforce its written supervisory procedures to ensure compliance with NASD rules. 

Leonard & Co: Censured; Fined $40,000

James Sylvester Currier: Fined $5,000; Suspended 10 business days in principal capacity; Required to requalify as Principal per Series 24

Respondents engaged in a scheme to create and maintain short positions in Over-the-Counter (OTC) equity securities on behalf of the firm’s client hedge funds, in that they willfully and intentionally effected short sale transactions. The Firm failed to report option positions to NASD, and failed to report transactions and reported incorrect information to the Automated Confirmation Transaction Service (ACT). In addition, the Firm reported non-bona fide wash sale transactions to ACT, and failed to provide for supervision reasonably designed to detect and prevent NASD rule violations.

Ryan & Co, LP: Expelled

Scott William Ryan: Barred

Acting through Goldstein, the Firm failed to 

• establish, maintain, and enforce an adequate supervisory system that included written procedures reasonably designed to achieve compliance with industry rules and regulations related to sales practices;
• ensure that disclosable events, such as customer complaints and securities related civil lawsuits and arbitration claims, were reported, or reported timely, through the Uniform Application of Securities Industry Registration (Form U4), the Uniform Termination Notices for Securities Industry Registration (Form U5) and amendments as appropriate;
• report summary and statistical information for customer complaints (and reported some customer complaints late); and
• develop and implement a written anti-money laundering program (AML) reasonably designed to achieve compliance with the requirements of the Bank Secrecy Act and the implementing regulations promulgated thereunder. 

Delta Asset Mgmt Co, LLC: Expelled

Adam Robert Goldstein: Fined $10,000; Suspended 2 years in principal/supervisory capacities