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.

2007

FINRA
NASD CASES OF NOTE 

DEVELOPING ENFORCEMENT TRENDS AS NOTED BY BILL SINGER

REGISTRATION

BORROWING

AWAY ACCOUNTS

E-COMMUNICATIONS

MEMBERSHIP ISSUES

Nagler borrowed $3,000 from a public customer contrary to his member firm ’s written procedures prohibiting its registered representatives from borrowing or lending money from or to a client under any circumstances. Nagler failed to request or obtain his firm ’s permission to borrow money from a public customer.  He misled another member firm during the hiring process when he failed to advise the firm that he had been permitted to resign from a previous firm for violating its policy prohibiting borrowing funds from customers. 

David Anthony Nagler: Fined $10,000; Suspended 20 business days in all capacities

Freed engaged in private securities transactions by selling $185,000 in promissory notes to public customers without prior written notice to his member firm of the sales or his role therein. 

Maurice Duane Freed: Fined $10,000; Suspended 6 months

Flitt borrowed $2,660 from a public customer without his member firm ’s approval and contrary to his firm ’s written procedures prohibiting representatives from borrowing money from customers; and then failed to respond to FINRA requests for information.

Daniel Stephan Flitt: Barred

Colletti submitted timesheets for certain individuals that were false when he executed them, in that he knew the individuals did not work the hours that the timesheets presented.

Michael R. Colletti: Barred

Castro asked an unregistered employee of her member firm or its affiliate to place Castro’s initials on numerous pieces of branch correspondence as evidence that she had reviewed the correspondence, although she had not done so. Castro falsely certified in monthly reports submitted to her member firm that a supervisor had reviewed daily trade blotters when many had not been reviewed. 

Therese C. Castro (Principal): Fined $15,000; Suspended 1 year; Barred in Supervisory/Principal capacities

Bullock held several seminars to promote the sale of equity indexed annuities and fixed annuities to retirees, promoted the seminars through  the use of invitations and used a presentation that contained unwarranted, misleading, unsubstantiated and promissory statements, including false assurances of riskless investing and guarantees that the retirees would never run out of money. 

Bruce David Bullock: Fined $10,000; Suspended 20 business days.

Bianchi obtained possession of an automatic teller machine (ATM) card for a public customer’s account and, without the customer’s knowledge or authorization, used the ATM card to make unauthorized cash withdrawals from the customer’s bank account, and unauthorized purchases totaling $68,000 for her own benefit. 

Ramona Marie Bianchi : Barred

Amsler engaged in private securities transactions for compensation; failed to give his member firm written notice; and his member firm did not authorized Amsler to engage in such activities. The firm ’s written procedures specifically prohibited representatives from becoming involved with the sale of promissory notes. 

Barry Lynn Amsler : Fined $50,000 (including $31,860 in disgorged benefits from sale of promissory notes); Suspended 24 months

The Firm permitted an associated person to engage in proprietary equity trading on the firm ’s behalf without being properly registered. While serving as the placement agent for an issuer conducting a private placement, the Firm instructed the escrow agent bank for the private placement to release funds to the issuer before the contingency amount set forth in the escrow agreement had been received in the escrow account.

Pali Capital, Inc. : Censured; Fined $35,000

The Firm failed to maintain and preserve copies of internal and external electronic e-mail communications as Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-4 require; and failed to implement and enforce an adequate supervisory system governing the review of external communication. 

K-One Investment Company, Inc. : Censured; Fined $50,000

Some of the Firm's registered representatives sent business-related e-mail through  external electronic servers without first obtaining firm approval; and in some of those instances, the Firm:

• failed to provide for reasonable follow-up and review upon learning that the registered representatives were using external e-mail accounts, 
• did not timely detect and prevent such use; and 
• did not effectively enforce its procedures relating to external e-mail accounts. 

The findings also stated that the firm failed to retain certain business-related e mails its registered representatives sent and received using external accounts and, as a result, it failed to maintain and preserve all of its electronic communications as the Securities Exchange Act of 1934 and Rule 17a-4 requires. 

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

Now, to be fair, the decision does note that "upon learning that the registered representatives were using external e-mail accounts" the firm failed to provide reasonable follow-up and review.  If that's the case, then some fine is likely appropriate.  The problem is that we are left to guess at the extent of the violation, we are left to guess at what the firm could have done to detect the external server use, we are left to guess at how much of the fine was attributed to failures upon notice of the violation.

That's lousy regulation.  Help us to do things better.  Teach us.

The Firm's order tickets for corporate bond transactions were deficient, in that the order tickets failed to identify the terms and conditions of the order; did not contain the time of receipt and did not indicate whether the order was solicited or unsolicited. 

First Montauk Securities Corp.: Censured; $10,000

Acting through Weller, the Firm failed to terminate the “minimum-maximum” offering memorandum and return investor funds after failing to raise the minimum offering amount represented by the offering memorandum during the offering period, thereby rendering the representations in the memorandum false. The offering memorandum represented that investor funds would be deposited into a bank escrow account until the minimum offering amount was raised, and that investor funds would be promptly returned if the minimum offering amount was not raised during the offering period. Also, acting through Weller, the Firm failed to establish and maintain supervisory system reasonably designed to achieve compliance with applicable securities, laws, regulations and NASD rules regarding contingent securities offerings.

Weller, Anderson & Co., Ltd. and Fenner Reese Weller Jr. (Principal): Censured; Fined $10,000 jt/sev

Acting through  Olivier, the Firm 

• filed late Financial and Operations Combined Uniform Single (FOCUS) Reports and failed to timely file its Schedule I Report on Revenue and Expenses; and
• failed to maintain a fidelity bond and failed to notify FINRA on the termination of the fidelity bond. 

Olivier acted in a capacity at the firm that required registration, while his registration status with FINRA was iinactive due to his failure to complete the Regulatory Element of the Continuing Education Requirements. 

Dublind Securities, Inc. and Nestor Joseph Olivier (Principal): Censured; Fined $15,000 jt/sev

Acting through Wall, a member firm failed to adopt a supervisory system and written procedures reasonably designed to ensure that the firm obtained and retained the required written consent for Web CRD searches. As a result of the supervisory deficiencies, Wall failed to obtain and/or retain the required written consent in connection with Web CRD searches for individuals who were not seeking employment with the firm . Wall affirmed to Web CRD that he had obtained and would keep on file the required written consent in connection with the pre-registration searches of the individuals. 

Harvey A. Wall: Fined $4,000; Suspended 30 days in all capacities

Without his member firm 's approval, Tsamalas borrowed $453,000 from public customers, contrary to his member firm 's written procedures that prohibit representatives from borrowing money from customers. Subsequently, Tzamalas failed to respond to NASD requests for documents and information. 

Peter Tzamalas: Barred

To plagiarized the content of a research report another member firm issued and internally circulated the report, indicating that he was its author. The report was published by To's member firm as a research report written by the firm 's lead analyst and To. 

Jackie Gee-Kit To: Fined $7,500; Suspended 60 days; Required to requalify by exam as a Research Analyst Part II-Regulations Mode within 90 days of reassociation with a member firm . If To fails to requalify as a Research Analyst Part II-Regulations Mode within the 90 day period, he will be suspended from acting in such capacity until the examination is successfully completed. 

Separately, and more to the point, I invite you to look at many of the other cases I have reported on this page for 2007 -- or even go back over the years of my website's content.  I want you to carefully consider the types of matters that result in lesser sanctions than that imposed upon Mr. To.  For example, look down two cases to the Solash matter.  There FINRA imposed a $7,500 fine and only a 45-day suspension on someone who effected unauthorized trades in an account related to a deceased customer.  Is it truly fair to suggest that sending out a plagiarized report is a worse violation than unauthorized trading?   Ultimately, you want to make Mr. To requalify, go ahead -- makes sense to me.  You want to fine him a few thousand dollars on top of that?  Okay, not much quibble from me on that too.  However, at some point enough is enough -- did he really need to be suspended for two months AND required to requalify?

Thayer withdrew $2,000 from a public customer's bank account for his own use and benefit. In an attempt to conceal his wrongdoing, Thayer transferred $2,000 from another customer's account to replace the funds taken from the first customer and then transferred $2,000 from a third customer's account to restore the funds taken from the second customer's account. Subsequently,  Thayer failed to respond to NASD requests for information. 

Richard Adam Thayer: Barred

Solash effected unauthorized sale transactions in a deceased customer's corporate brokerage account. 

Robert Howard Solash: Fined $7,500; Suspended 45 days in all capacities

Pollard solicited and received payment on her member firm 's behalf from issuers in exchange for making markets in the issuers' stock and submitting Form 211 applications.

Florence Sarah Pollard: Fined $5,000; Suspended 6 months in Principal capacity

Following the disciplinary hearing relating solely to Pollard, the Hearing Panel issued an order on August 27, 2004, granting Pollard’s motion for summary disposition and dismissing the Complaint, based on a finding that Pollard did not receive any compensation or benefit, directly or indirectly, from filing the Form 211 applications. On September 17, 2004, Enforcement appealed the Hearing Panel’s decision to the National Adjudicatory Council (“NAC”). On December 30, 2005, the NAC issued an Amended Decision Ordering Remand. In its decision, the NAC (i) reversed the Hearing Panel’s findings, (ii) granted Enforcement’s motion for summary disposition, holding that Pollard’s actions violated NASD Conduct Rules 2460 and 2110 because but for her actions Equitrade would not have received compensation for filing Form 211 applications in violation of Rule 2460, and (iii) directed the Hearing Panel to hold a hearing to determine appropriate sanctions for the violations. The NAC expressed no view on what sanctions would be appropriate.

Following a hearing -- let me repeat that: FOLLOWING A HEARING -- the Hearing Panel granted Pollard's motion to dismiss.  And after all of that, the NAC entertains an appeal by Enforcement and reverses the Panel and finds Pollard guilty.  Honestly, what the hell is the point of OHO?  

Lewis borrowed $18,367 from a public customer even though his member firm 's written procedures prohibited registered persons from borrowing from customers, and Lewis neither disclosed the loans to his firm nor obtained consent from the firm to borrow from the customer. 

Ralph Curtis Lewis: Barred; Required to pay $18,367 plus interest in restitution to public customer

Johnson converted $42,000 from a church while serving as its treasurer. 

Richard James Johnson: Barred

Hintze signed a branch manager's name on account-related documents and signed his name using a medallion guarantee stamp without his permission or authority. Hintze signed a public customer's name on name change forms without the customer's permission or authority. 

Erica L. Hintze: Barred

Hiller failed to disclose in writing to her member firm the existence of outside brokerage accounts in which she held a beneficial interest. She also failed to notify one of the member firms at which she had an account that she was associated with an NASD member firm . Hiller failed to respond to NASD requests to provide sworn testimony. 

Lisa M. Hiller: Barred

Without a public customer's written authorization, Goldman affixed the customer's signature to a 403(b) payroll deduction application for purposes of increasing her retirement account contribution. Goldman did not provide any notation evidencing his signature on the document and did not notify his member firm that he was signing on the customer's behalf. 

David S. Goldman: Fined $5,000; Suspended 90 days in all capacities

Gaskill borrowed $3,000 from a public customer, contrary to his member firm 's written policies and procedures prohibiting representatives from borrowing money from customers; and he subsequently failed to respond to NASD requests to appear for an on-the-record interview and to provide documents.

Tearle Guy Gaskill: Barred

Cataldo falsely represented to a public customer that he had listened to a recorded conversation his member firm maintained of an earlier conversation between the customer and another firm representative indicating that the customer had been advised that he would be charged a contingent deferred sales charge if he liquidated his mutual fund before a certain date, when no such recording existed. 

Christopher Patrick Cataldo: Fined $5,000; Suspended 6 months in all capacities

Brinlee misappropriated funds from public customer's estate by writing a $9,045 check against the customer's bank account in order to make a tuition payment for a family member's benefit.

Michael Forrest Brinlee: Barred

Acting through Brennan and Conroy, the Firm 

• failed to establish, maintain and enforce taping procedures for the supervision of all of its registered persons' telemarketing activities; and
• transferred more than 25 percent of its assets or brokerage business to another member firm without filing an application for the transfer with NASD. 

Kevin Patrick Brennan and John Joseph Conroy: Fined $20,000 jt/sev; Suspended 60 days in Principal capacity only.

Borsky initially provided and caused his firm to provide false information to NASD although shortly thereof he corrected the false information. 

Mark Allen Borsky: Fined $5,000; Suspended 2 years in all capacities

The Firm sent draft research reports to approximately 200 subject companies prior to publication that contained analyses, estimates, projections and conclusions; and one of the research reports contained a price target and research rating.

Sidoti & Company, LLC : Censured; Fined $25,000

The Firm ignored red flags indicating that a registered representative under heightened supervision was circumventing this supervision by engaging in a scheme with another registered representative who was his brother-in-law. 

National Securities Corporation: Censured; Fined $20,000

While it maintained and preserved communication sent through its Bloomberg system which was the predominant means by which its representatives communicated with the firm 's clients, the Firm failed to preserve properly in a non-rewriteable and non-erasable format email communications sent to and from its email addresses as well as personal email addresses three firm representatives used. The Firm lacked fully compliant systems and procedures for the preservation of all of its electronic mail communications. 

Mischler Financial Group, Inc. : Censured; Fined $10,000; Required to review its procedures regarding the preservation of electronic mail communications for compliance with applicable NASD rules, and federal securities laws and regulations, and certify to NASD (and now, FINRA) in writing that it has established systems and procedures reasonably designed to achieve compliance with those rules, laws and regulations. 

The Firm failed to establish and maintain a system to supervise the activities of each registered and associated person in a manner reasonably designed to achieve compliance with applicable securities laws and regulations, including email retention and review of correspondence. The Firm failed to establish, maintain and enforce adequate written supervisory procedures regarding electronic mail retention. 

Midas Securities, LLC: Censured; Fined $14,000 (Pursuant to the General Principles Applicable to all Sanction Determinations contained in the Sanction Guidelines, NASD imposed a lower fine in this case after it considered, among other things, the firm 's revenues and financial resources. See Notice to Members 06-55.); Required to review its procedures regarding the preservation of electronic mail communications for compliance with applicable NASD rules, and federal securities laws and regulations, and certify to NASD (and now, FINRA) in writing that it has established systems and procedures reasonably designed to achieve compliance with those rules, laws and regulations.

The Firm failed to maintain and preserve all of its electronic communications as required by SEC Rule 17a-4. The Firm electronically "backed-up" electronic communications at the end of each day, but failed to capture, maintain and preserve any electronic communication deleted from user's deleted items folder during the day. 

Georgeson Securities Corporation : Censured; Fined $30,000

The Firm failed to purchase municipal securities for its own account from public customer or sell municipal securities for its own account to a customer at an aggregate price that was fair and reasonable, taking into consideration all relevant factors, including 

• the best judgment of the firm as to the fair market value of the securities at the time of the transaction, and of any securities exchanged or traded in connection with the transaction;
• the expense involved in effecting the transaction;
• the fact that the firm was entitled to a profit;  and 
• the total dollar amount of the transaction. 

The Firm bought/sold corporate bonds for its own account from /to another broker-dealer and failed to sell/buy the security to/from firm customer at a price that was fair, taking into consideration all relevant circumstances noted above.

The Fiirm failed to report the lower of yield to call or yield to maturity for transactions in TRACE-eligible securities to TRACE and the Firm 's supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable securities laws, regulations and Municipal Securities Rulemaking Board (MSRB) rules concerning municipal bond pricing, and NASD rules concerning corporate bond pricing and TRACE reporting. 

Dougherty & Company LLC: Censured; Fined $167,500; Required to revise its written supervisory procedures regarding municipal bond pricing, corporate bond pricing and Trade Reporting and Compliance Engine (TRACE) reporting.

The Firm bought/sold securities for its own account from /to another broker-dealer and failed to sell/buy the securities to/from firm customers at prices that were fair and reasonable, taking into consideration all relevant circumstances, including market conditions with respect to the securities at the time of the transactions, the expense involved, and that the firm was entitled to a profit. The Firm failed to adequately enforce its written supervisory procedures to ensure compliance with applicable securities laws, regulations and NASD rules concerning fair pricing and markups. 

Dominick & Dominick, LLC: Censured; Fined $18,000

The Firm permitted an individual subject to a statutory disqualification to be associated with the firm.

AIG Financial Advisors, Inc. : Censured; Fined $15,000

The Firm and Yoshikawa executed short sales without making and annotating the affirmative determinations required for each short sale. Acting through Yoshikawa, the Firm failed to maintain a record of the terms and conditions, time of entry and execution time for each customer order. 

Ko Securities, Inc. and Terrance Yutaka Yoshikawa: Fined $147,450.81 jt/several; Firm fined $15,000 for recordkeeping violation.

Acting through Testaverde, the Firm solicited one of its customers, who was a controlling shareholder of a company, to sell the firm shares of a common stock in amounts that exceeded the limits that a controlling shareholder could sell in public transactions. The Firm purchased these shares with the intent to distribute them through its market making activities and then resold them to the public. 

Acting through Hunt, the Firm failed to establish, maintain and enforce a supervisory system, including written procedures, reasonably designed to ensure compliance with the requirements of Section 5 of the Securities Act of 1933, and failed to reasonably supervise Testaverde's activities in connection with soliciting the customer to sell large blocks of stock to the Firm.

Network 1 Financial Securities Inc.: Censured; Fined $100,000; Required to retain an independent consultant to conduct a comprehensive review of the adequacy of its policies, systems, procedures (written and otherwise) and training relating to market making and retail activity. 

Richard William Hunt: Fined $25,000; Suspended 45 days in Principal capacity only

Damon Domenic Testaverde: Fined $50,000; Suspended 4 months in all capacities

Acting through Cupples and Ohab, the Firm 

• conducted a securities business while failing to maintain the minimum net capital requirement; 
• prepared and submitted materially inaccurate Financial and Operations Combined Uniform Single (FOCUS) reports; and 
• prepared and maintained materially inaccurate net capital computations. 

The Firm 

• implemented material change in business operations by materially increasing the number of equity securities in which it made market without filing an application for approval with FINRA;
• failed to maintain electronic correspondence; 
• failed to conduct an independent testing of its Anti-Money Laundering (AML) compliance program;
• failed to develop and implement an adequate supervisory system for detecting and reporting suspicious activity;
• failed to establish and implement policies, procedures and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act, including an adequate Customer Identification Program (CIP);
• failed to report a disclosable matter;
• failed to timely report disclosable matters;
• reported municipal securities transactions late, without a price and with an incorrect price. 

Empire Financial Group, Inc.:Fined $145k,000 ($10,000 jt/sev with Cupples; $10,000 jt/sev with Ohab)

George Randy Cupples: Suspended 30 business days in FINOP capacity only

Pamela Cathy Ohab: Suspended 30 business days in FINOP capacity only 

Beerbaum & Beerbaum Financial and Insurance Services, Inc. and Hans Norman Beerbaum (Principal)
#C0120040019/September 2007 Securities and Exchange Commission imposed sanctions on appeal from National Adjudicatory Council, on appeal from Office of Hearing Officers Decision.

Beerbaum, while suspended as a principal of the firm , actively engaged in the management of the firm 's securities business, and performed executive and supervisory responsibilities despite his suspension as a principal. See SEC decision at http://sec.gov/litigation/opinions/2007/34-55731.pdf

Beerbaum & Beerbaum Financial and Insurance Services, Inc.: Fined $15,000

Hans Norman Beerbaum: Barred

Acting through Mills and in participation with other registered representatives of the firm, the Firm sold common stock iin contravention of the terms of the private placement memoranda.  Specifically, public customers who participated in the offering were instructed to make their checks payable to a company Mills owned and controlled that was not a FINRA member firm, or to wire transfer funds directly to the company's bank account. By directing customer funds to the company's account, the customer funds were commingled with funds unrelated to the offering.  Further, acting through Mills, the Firm used the proceeds in a manner contrary to the representations made to the customers in the private placement memoranda. The firm and Mills failed to fully respond to NASD requests for information and documents. 

Griffin, Mills & Long, LLC : Expelled

and Walter Andrew Mills: Barred

Although Wise acted as the escrow agent for money-market escrow accounts, he did not disburse the additional interest earnings that were received into the escrow account after the transaction closed and escrowed funds had already been disbursed to the parties. Without the authorization or consent of the affected parties, Wise transferred $44,000 in post-closing earnings to a single consolidated account in his name, with his member firm identified as the registered dealer on the account statements. 

Wise guaranteed his own signature on wire transfer instruction letters he transmitted to mutual fund companies which required him to obtain a signature guarantee for letters that requested transfer of funds held in escrow in order to verify the authenticity of the escrow agent’s signature. Wise fabricated a signature guarantee on wire transfer instruction letters by altering the appearance of his signature and applying the bank's medallion guarantee stamp. Wise opened securities accounts at other brokerage firms without notifying his member firming writing that he had opened the accounts and also failed to disclose his affiliation with his member firm to the other brokerage firms. 

John Griffin Wise: Fined $8,500; Suspended 9 months 

Thomas accepted $2,600 in loans from a public customer (not an immediate family member) in violation of his member firm’s written procedures prohibiting registered persons from borrowing from customers, except for immediate family members for non-securities purposes. The  customer was not an immediate family member. 

William Edward Thomas: Fined $5,000; Suspended 10 business days

While taking the Regulation Element of NASD's Continuing Education Requirement exam at a testing center, he reviewed email messages and made telephone calls on his wireless hand-held device contrary to the exam instruction's Rules of Conduct. Nguyen failed to respond to an NASD request for information. 

Long Hoang Nguyen: Barred

Murphy aided and abetted an individual's fraudulent and manipulative bond parking scheme involving pre-arranged, non-bona fide sales and purchases of zero coupon subordinate municipal bonds with a face value of two million dollars. Murphy obtained permission from his member firm to make a proprietary purchase but did not inform his supervisor that he would hold the bonds as a favor until his friend repurchased the bonds and did not disclose that he had been guaranteed a profit when the bonds were repurchased. Murphy was directed to purchase the bonds from a third party with a same-day settlement rather than the standard settlement of three business days after the trade, and did not inform his supervisor that he made the purchase from a third party instead of his friend. The bonds were repurchased at an increased price generating a profit to the firm and Murphy. 

Peter John Murphy: Fined $10,000 (but consideration given to his financial status); Suspended 90 days in all capacities

Martin borrowed $10,000 from public customer in contravention of her member firm's written supervisory procedures prohibiting borrowing money from customers, absent written authorization. 

Dawn Anita Martin: Fined $5,000; Suspended 90 days in all capacities

Lynch received an insurance application from joint applicants who signed their names on the wrong line of the application, crossed out the misplaced signatures, signed the customers' names on the correct line of the application, without the customers' authorization or consent, and submitted the application to the insurance company. 

Andrew Joseph Lynch : Fined $5,000; Suspended 3 months in all capacities

Lumpuy shared in a public customer's loss without prior written authorization from his member firmer the customer before making the deposit into the customer's bank account. 

Frank Enrique Lumpuy: Fined $5,000; Suspended 10 business days in all capacities

Kuzma conducted financial services workshops and engaged email house to mail workshop invitations to prospective customers without advising his member firm that he was conducting the workshops or having invitations sent. Kuzma failed to request approval for the invitations by a registered principal of his firm prior to use; and the workshop invitations did not include all relevant information, were incomplete, and were not fair and balanced. 

Alan Edward Kuzma: Fined $5,000; Suspended 20 business days in all capacities

Jarnoti signed a family member's name on change of address forms for individual accounts she held at his member firm without her permission or knowledge.  Jarnot was attempting to change her home address to his address. 

David S. Jarnoti : Barred

Grossman churned and excessively traded public customers’ accounts that resulted in commission-to-equity ratios in excess of 30 percent. Grossman recommended and effected securities transactions in customers’ accounts without reasonable grounds for believing that the transactions were suitable in view of the size and frequency of the transactions, nature of the accounts and the customers’ financial situation, investment objectives and needs. Grossman altered his member firm’s record relating to a joint account of customers by deleting certain securities positions from the customers’ Form 1099 and provided the altered document to their accountant. Grossman created a schedule of gains and losses for the customers’ account that contained false information.

Steven Wayne Grossman: Barred

Faiola and another registered representative sold $2,050,000 worth of limited partnership interests in a hedge fund that Faiola co-owned and controlled to public customers without prior written notice to, or prior written approval from, his member firm. 

Anthony Mario Faiola : Barred

Eugster participated in a private securities transaction for compensation without prior written notice to, and written permission from, his member firm. 

John William Eugster: Fined $10,000; Suspended  2 months in all capacities; Required to demonstrate to FINRA that he has relinquished his entitlement to any profits realized by a limited liability company (LLC) he formed and managed upon the distribution to its members securities acquired in a private placement and any document pertaining to the LLC requiring revision or amendment to effect his relinquishment of his entitlement to any portion of profit has been revised or amended as evidenced by the submission to NASD of the document(s) in their original and revised or amended forms.

Ehrenberg borrowed $120,000 from a public customer and failed to inform his member firm. Ehrenberg willfully failed to amend his Form U4 to disclose material information. Ehrenberg failed to respond to NASD requests for information. 

Donald Fred Ehrenberg Jr. : Barred

Dunn submitted false expense reports to his member firm and was reimbursed for the expenses, thereby converting firm funds for his own use. Dunn failed to respond to NASD requests for information.

Brian James Dunn : Barred

Cahn borrowed funds from a public customer in violation of his firm’s policy prohibiting registered employees from borrowing from, or lending to, public customers with the limited exception of immediate family members. Cahn settled a customer complaint without his member firm’s knowledge or authorization. The sanction was based on findings that Cahn failed to respond to NASD requests for information and documents. 

Jeffrey Jay Cahn: Barred

Burch deposited $6,000 into a bank account for purposes of avoiding a transaction reporting requirement under federal law, knowing that the property involved in the financial transaction represented the proceeds of some form of unlawful activity. 

John Charles Burch : Barred

Bingham and Butts failed to cause their member firm to maintain its required minimum net capital. They prepared and/or were responsible for the preparation of inaccurate net capital computations, trial balances and general ledgers for their member firm. They prepared and/or caused the preparation of inaccurate FOCUS reports for their member firm and filed the inaccurate reports with NASD. Bingham and Butts failed to submit timely notice to NASD of their firm’s net capital deficiency. Bingham failed to file his member firm’s annual audit report in a timely manner. 

Porter Bernard Bingham: Fined $10,000; Suspended 1 year in Principal capacity; Required to requalify as Principal

Hal Butts Jr.: Fined $5,000; Suspended 15 business days as FINOP

Acting through Best, the Firm used the instrumentalities of interstate commerce to conduct a securities business while failing to maintain its minimum  required net capital. 

Glenn Edward Best: Fined $5,000; Suspended 30 business days in FINOP capacity; Required to requalify as a FINOP

Behrend created phony correspondence and forged signatures on requests for disbursements of funds from insurance and investment accounts held at his member firm and its affiliate in order to obtain money and property by false means. Behrend requested that checks drawn on customer accounts be sent directly to him, forged the customers’ signatures on the back of the checks and added his own signature on the back of the checks. He deposited $20,460.99 into his own bank accounts through this scheme and never returned any of the funds to customer accounts. Behrend failed to respond to NASD requests for information. 

Michael Clark Behrend: Barred

The Firm effected both a 100 percent change in its direct ownership and a material expansion of its business operations without seeking and obtaining approval for these changes as NASD Rule 1017 required. The Firm added branch offices without notifying NASD within 30 days of their opening as NASD By-Laws required, and failed to have reasonably written supervisory procedures in place to ensure compliance with NASD Rule 2711. The Firm conducted a securities business when the firm’s capital was below the minimum amount required. The Firm failed to timely report customer complaints and did not report additional complaints as NASD Rule 3070(c) required; and failed to amend, and timely amend, Forms U4 or U5 for registered representatives to reflect customer complaints. The Firm conducted an options business at a branch office with a supervisor who was not registered as either an options principal or as a limited principal – general securities sales supervisor. 

Westrock Advisors, Inc.: Censured; Fined $42,000

The Firm failed to report, or to timely report, to NASD statistical and summary information relating to customer complaints the firm received. 

Perrin Holden and Davenport Capital Corp. aka PHD Capital: Censured; Fined $12,500

The Firm permitted associated persons to function as research analysts without being properly registered with NASD and issued research reports the unregistered analysts prepared. The Firm’s written supervisory procedures were not reasonably designed to achieve compliance with NASD Rule 2711 in that the procedures did not include steps to monitor and achieve compliance with the rule. 

The Firm failed to 

• retain its emails in an easily accessible place;
• implement its CIP in connection with new customer accounts as part of the firm’s compliance with the requirements of the Bank Secrecy Act, and the firm’s written supervisory procedures relating to the CIP did not accurately describe its AML program as implemented. (The Firm’s implementation of its independent testing was inadequate in that it failed to retain all documentation evidencing areas that had been reviewed and tested, and it failed to detect the deficiencies with its CIP. The Firm’s written procedures did not address how often its independent tests needed to be conducted and did not address how the firm would handle situations in which independent testing was conducted by a person who reported to a person whose activities he or she was testing).

Janco Partners, Inc. : Censured; Fined $60,000

The Firm participated in private placement offerings of stock and failed to transmit investor funds to an unaffiliated bank to hold in escrow until the offering contingency was met but, instead, investor checks were either made payable to and held by a law firm as escrow agent or were made payable to the firm and deposited into a bank account without a written agreement with the bank to hold the funds in escrow. The Firm the instrumentalities of interstate commerce to engage in the securities business while failing to maintain required minimum net capital. 

Grant Bettingen, Inc. : Censured; Fined $10,000

The Firm failed to 

• implement an adequate AML compliance program in that it failed to provide, or to document that it had provided, adequate AML training for either the firm’s designated AML officers or the firm’s employees;
• establish and implement an adequate customer identification program (CIP);
• independently test its AML compliance program; 
• establish and implement an adequate CIP in that the firm did not establish or implement adequate policies or procedures to conduct additional due diligence for their higher risk accounts, including foreign account-holders;
• establish and implement adequate suspicious activity reporting (SAR) procedures in that it failed to monitor for, identify and analyze unusual activity for possible SAR filing. 

In addition, the Firm’s procedures identified various AML “red flags,“ including large wire transfers and deposit of large amounts of low-priced securities, but failed to identify and analyze these transactions to determine if they were in fact suspicious and were required to be reported on a SAR-SF. 

First American Capital and Trading Corporation fka STC Securities, Inc: Censured; Fined $30,000; Required to have all its registered persons register for three hours of anti-money laundering (AML) training.

The Firm executed transactions in municipal securities that were not reported to the MSRB within 15minutes of execution time, and transaction information was reported inaccurately. The Firm failed to 

• establish written supervisory procedures to ensure the timely and accurate reporting of municipal securities transactions within 15 minutes of trade execution;
• enforce its written supervisory procedures that required that a 
  • principal of the firm print and review all incoming electronic correspondence; 
  • the firm provide notifications to NASD prior to implementing electronic storage media for primary record retention purposes for its electronic correspondence; and 
  • the firm capture, retain and preserve, in a readily accessible location, originals of all electronic communications originating from and received by one of its branch offices; and 
• enforce its written supervisory procedures regarding email retention and review at one of its branch offices. 

brokersXpress, LLC : Censured; Fined $50,000

The Firm failed to maintain and preserve all of its electronic communications as SEC Rule 17a-4 requires. The findings stated that the firm’s supervisory system  and procedures were not reasonably designed to ensure that the required written consent for Web CRD searches was retained by the firm.

American Skandia Marketing, Inc.: Censured; Fined $75,000; Required to review its procedures regarding Web CRD searches and the preservation of electronic mail communications for compliance with federal securities laws, regulations and NASD rules. 

Acting through Blankenship, the Firm sent drafts of a research report prior to its issuance to the subject company that included the research summary, research rating and price target. Blankenship, as the author of the research report, was restricted from purchasing the company’s stock 30 days prior to the issuance of the report but acquired stock from the company prior to issuance. Inconsistent with his buy recommendation in the research report, Blankenship then sold his shares. Acting through Blankenship, the Firm issued the research report and failed to disclose Blankenship’s acquisition of the shares of stock from the company. 

Acting through Boesel, the Firm failed to implement the firm’s written supervisory procedures to ensure that the firm and its employees complied with the provisions of NASD Rule 2711. 

Source Capital Group, Inc.: Censured; Fined $20,000 ($10,000 jt/sev with Boesel, and another $10,000 jt/sev with Blankenship) 

John Philip Boesel III: Censured; Fined $10,000 jt/sev with Firm

Joseph Ezekiel Blankenship II: Censured; Fined $10,000 jt/sev with Firm; Fined additional $5,000 

The Firm and Marquez failed to employ a registered Financial and Operations Principal (FINOP). The Firm was deficient in that it had failed to employ at least two registered general securities principals with respect to each aspect of the firm’s investment banking and securities business for more than two years and 10 months  before applying for a waiver of the requirement. The Firm failed to timely file a Financial and Operational Combined Uniform Single (FOCUS) report. 

Gem Advisors, Inc. and Julio Alfonso Marquez (Principal): Censured; Fined $15,000 jt/sev (Firm fined an additional $2,500)

Acting through Chancler, the Firm permitted Still to head its Investment Banking Department and to engage in conduct that required registration as a general securities principal, even though he was not registered with NASD in any capacity. The Firm failed to timely report transactions in Trade Reporting and Compliance Engine (TRACE) eligible securities. 

Boenning & Scattergood, Inc., Thomas John Chancler (Principal) and James Still (Principal): Censured; Firm fined $20,000 (Chancler and Still jointly and severally liable for $15,000)

The Firm failed to file, in a timely manner, Form U4/U5 amendments and initial Form U5 termination filings, and did not have adequate policies or procedures designed to ensure reportable items were forwarded to the firm’s registration department and filed in a timely manner with NASD. The Firm's policies and procedures failed to enumerate which types of events are reportable, had no system to monitor timely filing of Forms U4/U5 and to provide for supervisory reviews for compliance. Brooks and McPherson had assigned responsibility for filing amendments to a non-registered clerical employee, and the firm did not have adequate policies or procedures with respect to the individual’s duties. The Firm submitted Form U4/U5 amendments with electronic signatures before a registered principal of the firm received, reviewed and approved the amendments. Brooks signed U4/U5 amendments although he did not supervise registration functions related to filing of Forms U4/U5 or amendments, and approved of the firm’s registration department submitting Form U4/U5 filings with his electronic signature before he received, reviewed or signed these filings. 

Brookstreet Securities Corporation: Censured; Fined $200,000 ($25,000 jt/sev with McPherson); Required to retain an independent examiner to conduct an audit to assess the effectiveness of its system and procedures for ensuring the timely filing of amendments to Uniform Applications for Securities Industry Registration or Transfer (Forms U4) and Uniform Termination Notices for Securities Industry Registration (Forms U5) and initial U5 termination filings, and required to implement and certify changes in its supervisory system and personnel. 

Stanley Clifton Brooks" Fined $35,000; Suspended 60 days in supervisory capacity 

Kathleen Margaret McPherson" Suspended 45 days in principal capacity

Yura instructed another supervisory principal to create a document stating that a registered representative had been suspended for resolving an incident with a public customer by paying the customer money when he had not been suspended. The document was to be placed in the representative’s file at a branch office. Yura falsely advised his firm’s chief compliance officer that the representative had been suspended. 

Martin Yura: Fined $10,000; Suspended 1 year in all capacities

In order to transfer a public customer’s account to her member firm from another broker dealer, Whittle contacted the other broker dealer and impersonated the customer over the telephone without the customer’s knowledge or consent. 

Abigail Mann Whittle : Fined $5,000; Suspended 20 business days in all capacities

Westfall borrowed $30,000 from a public customer in violation of his member firm’s written procedures and failed to request an exception from his firm. 

Steve Brian Westfall: Fined $7,500; Suspended 30 days in all capacities

Vaughn falsely represented to an insurance company that a public customer had not received $74,240.41 due to him from the liquidation of his fixed annuity when in fact, the customer had received the payment and used these proceeds to purchase a fixed annuity through another insurance company. The insurance company mailed a second check to Vaughn, who forged the customer’s endorsement to the check and deposited the check to his personal bank account, thereby converting the funds to his own use and benefit. Vaughn failed to respond to NASD requests to appear for an on-the record interview; and willfully failed to amend his Form U4 to disclose material information. 

Ronald Vaughn: Barred

Tejeda provided a company with letters on his member firm’s letterhead that contained false and misleading representations confirming the company’s credit line and funds availability, although he knew the company planned to use the letters in an attempt to secure a loan, the company had no credit line at the firm and had not established an account with the firm. 

Eduardo M. Tejeda: Barred

Roberts borrowed $3,500 from a public customer without providing notice to, or obtaining approval from, his member firm. Roberts refused to submit to an NASD on-the-record interview. 

Wilbert Kneeland Roberts: Barred

Kavalec borrowed $25,000 from a public customer in contravention of his member firm’s written supervisory procedures specifically prohibiting borrowing money from customers. 

John Francis Kavalec : Barred

Holtsclaw falsified business expense reports, receiving $282.72 to which he was not entitled, because he requested reimbursement for restaurant gift cards or meals for unauthorized guests in addition to reimbursement for actual meal expenses in violation of his member firm’s written supervisory procedures.  Holtsclaw failed to appear for an NASD on-the-record interview. (NASD Case )

Kenneth Cecil Holtsclaw : Barred

Guzman borrowed $3,000 from a public customer in violation of her member firm’s written procedures that prohibited borrowing money from customers under any circumstances. 

Adeline Aguilon Guzman : Fined $5,000;Suspended 10 business days in all capacities

Francis opened brokerage accounts on a foreign citizen’s behalf without disclosing that the citizen was the accounts’ true beneficial owner. Francis failed to disclose to the member firms at which the accounts were opened that he was a registered representative of another firm and lied to a representative of one firm about the source of the funds he used to open the account. Francis failed to properly notify his member firm of the existence of the outside securities accounts. Francis engaged in an outside business activity without notifying his member firm. 

Joseph Marshall Francis Jr. : Barred

By passively participating in a company’s recruitment of new investors, opening new accounts for them, accepting customer funds and orders, and later complying with the stock promoter’s instructions on when public customers were to purchase stock in the company, Foster negligently assisted the promoter in artificially increasing the company’s stock price. 

Marlene Hall Foster: Fined $10,000 (includes $2,459 disgorgement); Suspended 6 months in all capacities

Despite knowing an individual was not registered with NASD, Dykes instructed the individual to contact public customers and discuss investments with them. The individual gave Dykes an application and other documents for the transactions involving a public customer, Dykes assigned the accounts to other registered representatives who had no involvement with the transactions and instructed one of the registered representatives to give the unregistered individual a $2,000 personal check as compensation for the sale of the annuities. 

Carliss Donald Dykes: Fined $10,000; Suspended 3 months in all capacities 

Doraine effected securities transactions in a public customer’s account pursuant to instructions from a third party who, although verbally authorized to trade the account, was not authorized in writing to execute transactions in the account. 

Charles Lawrence Doraine: Fined $5,000; Suspended 5 business days in all capacities

DeAngelis engaged in private securities transactions and maintained an outside securities account without prior written notice to his member firm. DeAngelis failed to respond to NASD requests for information. 

Kayel Guy DeAngelis: Barred

Day engaged in outside business activities without prompt written notice to his member firm. Day accepted $35,000 in loans from public customers without his member firm’s approval. 

James Russell Day: Fined $10,000;Suspended 2 months in all capacities

Copeland 

• effected trades in public customers’ accounts pursuant to discretionary trading arrangements without obtaining 
  • written authorization from the customers, and 
  • his member firm’s acceptance of the accounts as discretionary;
• recommended unsuitable transactions in fee-based customer accounts and engaged in improper short-term trading in Class B shares of mutual funds and shares of new-issue, closed-end investment companies;
• recommended the purchase of new-issue, closed-end fund shares to customers and then within two weeks or less, recommended their sale to purchase other securities (which experienced immediate price declines); 
• sold the funds before the price had a chance to recover, causing the customers to suffer losses from this unsuitable short-term buying and selling activity; and
• engaged in unsuitable short-term trading of Class B shares of mutual funds resulting in the customers having to pay CDSC. 

Customers suffered $88,242 in losses from this unsuitable short-term buying and selling activity, while Copeland received net commissions of $37,000.

Robert Scott Copeland: Fined $7,500;Suspended 6 months in all capacities; Ordered to pay $88,242 in restitution

Casella caused his member firm to charge customer accounts a $150 fee for the costs associated with his firm changing clearing firms, although none of the firms actually incurred the costs. Casella’s firm would not have met its net capital requirement but for the $91,950 capital infusion obtained through the assessment of the $150 fee. 

Paul Jude Casella: Fined $10,000; Suspended 1 year in all capacities

Carlton submitted forged and falsified documents to his member firm, causing its records to be falsified. Carlton misused $33,000 of public customers’ funds by causing unauthorized transfers from the customers family trust account to other customer accounts; and he engaged in unauthorized trading in a public customer’s account without the customer’s knowledge, authorization or consent. Carlton forged, or caused to be forged, customers’ signatures on a letter of authorization that directed transfer of $5,250 out of the customers’ family trust account. 

Eric Whetham Carlton: Barred

Capella  received a completed application for an insurance policy from a public customer that was signed incorrectly. Capella crossed out the misplaced signature, signed the customer’s name on the correct line of the application without the customer’s authorization or consent and then submitted the application to the insurance company. T

Stephen Ennio Capella: Fined $5,000; Suspended 3 months in all capacities.

Bruno improperly obtained $193.50 from a bank at which she was employed by submitting expense reports that overstated her actual expenses. 

Anna Bruno: Barred

While working in a branch bank affiliate of her member firm, Bremmer "removed $7,800 in cash from the vault and her cash drawer without authority and converted the funds to her own use."

Shannon Lynn Bremmer: Barred

Behany improperly obtained contingent 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. As such,  several mutual fund companies were deprived of fees to which they were otherwise entitled; and his member firm’s books and records relating to redemptions to contain false and misleading information regarding the customers. 

Timothy Behany: Fined $40,000; Suspended 2 years in all capacities and required to requalify

August performed Web CRD searches on individuals who were not seeking employment with his member firm and falsely affirmed to Web CRD that he had obtained and would keep the required written consent in connection with those searches on file. Augusta failed to comply with his member firm’s written supervisory procedures to retain hard copies of business-related email correspondence from outside email accounts in a file at his member firm. Augusta permitted associated persons to act in the capacity of research analysts without being properly registered with NASD. Finally, Augusta failed to review registered representatives’ business-related email correspondence when they used outside email accounts. 

Ruben Francisco Augusta: Fined $25,000;Suspended 1 year in Principal capacity; Suspended 1 month in all capacties.

In letters and emails sent to the public, he used the phrase “guarantee” or “guaranteed” regarding specified rates of return without making the necessary commensurate disclosures about the issuer’s claims-paying ability or that there might be holding periods to obtain the rates of return. Andrew’s communications compared variable annuities and mutual funds without the necessary disclosures that there are numerous mutual funds available and other costs and restrictions associated with variable annuities that might not apply to mutual funds. 

Flynn Lambert Andrew: Fined $10,000; Suspended 10 business days in all capacities

The Firm's written supervisory procedures were not reasonably designed to ensure that the firm obtained and retained the required written consent for pre-registration searches on Web CRD and because of its deficiencies, the firm failed to obtain and/or retain the required written consent in connection with Web CRD searches of at least eight individuals. The Firm’s written supervisory procedures were not reasonably designed to ensure compliance with the email retention and review requirement, and that it failed to maintain and preserve all of its business-related electronic communications as SEC Rule 17a-4 requires. The findings also stated that it failed to implement a written AML program reasonably designed to achieve compliance with the requirements imposed by the Bank Secrecy Act and the regulations promulgated thereunder and specifically failed to establish and implement an adequate Customer Identification Program. The findings also included that the firm permitted associated persons to act in the capacity of research analysts without being properly registered with NASD, and issued several research reports the associated persons prepared. (NASD Case )

White Mountain Capital, LLC: Censured; Fined $100,000; Required to review its supervisory system and procedures concerning preservation of electronic communications, registration of representatives and pre-registration Web CRD searches for compliance with federal securities laws, regulations and NASD rules. 

The Firm failed to preserve copies of internal and external electronic mail communications. The Firm failed to timely report 

• statistical and summary information regarding customer complaints; f
• report settlements in excess of $25,000 of customer claims against the firm and people associated with the firm; and f
• the settlement of a customer claim in excess of $15,000 against people associated with the firm. 

Finally, the Firm failed to amend, or ensure the amendment of, Forms U4 and U5 to disclose customer complaints and the resolution of the complaints. 

Sandgrain Securities, Inc. : Censured; Fined $50,000; Required to provide to NASD written certification and documentation that any filings required under NASD Rule 3070 and amendments to Uniform Applications for Securities Industry Registration or Transfer (Forms U4) or Forms U5 and are the subject of this NASD disciplinary action have been completed.

The Firms committed numerous separate violations of NASD rules, including failures to

• file advertisements and sales literature in a timely manner with NASD;
• have a registered principal approve advertisements and sales literature prior to use with the public;
• comply with their recordkeeping obligations for communications with the public;
• establish, maintain and enforce supervisory systems and procedures reasonably designed to achieve compliance with NASD rules governing filing, approval and recordkeeping with respect to advertising and sales literature;
• file pieces in a timely manner with NASD (and lacked adequate systems and procedures to monitor the timeliness of NASD filings);
• take sufficient remedial actions in response to written warnings from NASD that its filings were not timely. 

The firms used advertisements with the investing public before a registered principal approved the sales literature for use that went largely undetected by the firms, as they had no systems or procedures to record when advertisements were first used with the public, and their systems and procedures to detect when advertisements were used prior to the requisite internal approval were not adequate. The Firms failed to create and maintain reliable records of when advertisements were approved by a principal, and a flaw in their computer system caused inaccurate approval date records to be created and maintained. Finally, the Firms failed to retain records of filings with NASD’s Advertising Department and filed inaccurate dates of principal approval with NASD.

Pruco Securities, LLC and Prudential Investment Management Services LLC: Censured; Fined $525,000 jt/sev; Required to conduct an audit and prepare written findings regarding their compliance with NASD rules relating to the filing, approval and recordkeeping requirements for advertisements and sales literature.

The Firm’s system and procedures were not reasonably designed to ensure that all registered representatives used the firm’s electronic server for business-related electronic communications. The Firm failed to provide for reasonable follow-up and review on indications that some of its registered representatives were using external email accounts;and as the result of the supervisory deficiencies, the firm failed to maintain and preserve certain of its electronic communications as SEC Rule 17a-4 requires. The Firm failed to implement a reasonable supervisory system and written procedures for follow up and review to ensure that a registered representative conducting business at a bank location completed forms required in accordance with NASD Rule 2350(c)(3) and provided the forms to public customers. 

Legend Equities Corporation: Censured; Fined $110,000; Required to review its procedures regarding required disclosures to customers and the preservation of electronic mail communications for compliance with federal securities laws, regulations and NASD rules

The Firm permitted an individual to maintain his registration as a general securities representative through his purported association with the firm, when in fact he was not actively involved in the firm’s securities or investment banking business, or otherwise functioning as a firm representative. 

Certain communications with the public contained several deficiencies in that: the firm failed to 

• provide evidence that a registered principal approved its Web site prior to use; 
• file communications that contained discussions of options, mutual funds and U.S. government securities; 
• state the name and address of the person from whom current options disclosure documents could be obtained on pieces of the firm’s promotional materials that contained discussions of options;
• supplying a sound basis for evaluating the statements made in some of the firm’s communications; and
• meet the disclosure and content requirements in NASD Conduct Rule 2711(h) in research reports that it prepared and distributed.

Joseph Gunnar & Co. LLC : Censured; Fined $35,000

The Firm held customer stock certificates in a safe on its premises, despite a provision in its membership agreement requiring that the firm not safe keep customer securities. As a result of the firm holding customer securities, it conducted a securities business while failing to maintain its minimum net capital requirement. The Firm caused draft research reports containing price targets and/or ratings to be sent to companies that were the subjects of the reports when they should not have been sent. 

Griffin Securities, Inc.: Censured; Fined $20,000

The Firm failed to 

• retain a copy of a discretionary authorization agreement for a customer’s discretionary account;\
• maintain a copy of a customer’s written complaint;
• adequately and properly supervise unregistered associated persons who were permitted to receive and direct the correspondence the firm received; and 
• provide training to properly identify customer complaints related to securities activities and to forward them to the firm’s appropriate registered principals so they could be properly reviewed, maintained and timely reported to NASD. 

Gregory, Zent & Swanson, Inc.: Censured; Fined $10,000

The Firm's supervisory system and written policies and procedures did not adequately ensure compliance with NASD rules relating to the payment or reimbursement of non-cash compensation. The firm’s associated persons received non-cash compensation from insurance companies in connection with the sale of variable annuities and investment company securities that violated NASD rules, but the firm approved or failed to detect non-cash compensation programs. The Firm failed to properly preserve emails in its home office and failed to properly journal email for custodians in its Office of Supervisory Jurisdiction (OSJ).

Equity Services, Inc. Censured; Fined $350,000; Required o review its policies and procedures concerning non-cash compensation. 

The Firm failed to 

• perform an annual evaluation and prioritization of its training needs and failed to develop a written training plan;
• have a reasonable system for email review although it had established parameters through an automated system to flag emails that required review (The firm actually reviewed only some of the emails that met the parameters);
• timely conduct branch office inspections for the branch offices that did not supervise non-branch locations; and
• failed to report many of its municipal securities transactions to the MSRB. 

Colonial Brokerage, Inc. : Censured; Fined $25,000

The Firm failed to timely report statistical and summary information for customer complaints as NASD Rule 3070(c) requires. The Firm and its associated persons made numerous calls to people who had previously requested to be placed on the firm’s do-not-call list, and the firm failed to adequately train its personnel in the procedures it had established to avoid violations of do-not-call rules. 

Casimir Capital L.P. : Censured; Fined $37,500

Acting through Philipps, the Firm 

• permitted a registered person to continue to perform duties that require registration while his NASD registration was inactive due to his failure to satisfy the regulatory element of his continuing education requirements;
• failed to develop an anti-money laundering (AML) program reasonably designed to achieve and monitor compliance with the requirements of the Bank Secrecy Act and the implementing regulations promulgated thereunder;
• permitted an individual to park his registration with the firm;
• failed to establish, maintain and enforce an adequate supervisory system and written supervisory procedures reasonably designed to achieve compliance with applicable securities laws, regulations and NASD rules concerning annual compliance meetings, customer complaint reporting, designation of titles, registration status and location of supervisory personnel, private securities transactions, outside business activities and review of correspondence;
• did not have a system to retain email communications relating to its business that Philipps sent or received using his personal email account, and failed to preserve copies of such electronic communications; and
• failed to maintain net capital, in the amount of $5,000, and actually had negative net capital. (NASD Case )

Pension Fund Evaluations, Inc.: Censured; Fined $7,500 jt/sev with Philipps; Fined $18,500 

and Gregory George Philipps (Principal): Censured; Fined $7,500 jt/sev with the Firm; Fined $2,500

Acting through Hopper, the Firm issued sales literature to its public customers that omitted material facts and failed to file the newsletters, which discussed registered investment companies, with NASD’s Advertising Department 10 days prior to first use. 

First Citizens Financial Plus, Inc.and James Thomas Hopper (Principal): Censured; Fined $10,000 jt/sev.

Acting through Mathis, the Firm 

• directly or indirectly, by the use of means or instrumentalities of interstate commerce or of the mails, negligently made untrue statements of material facts or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading by 
  • distributing, or causing to be distributed, to investors or potential investors, private placement memoranda (PPM) that contained material misrepresentations or omissions, and 
  • failing to supplement or amend the PPMs during periods in which each remained in effect so that they did not contain material misrepresentations or omissions of fact that occurred after the PPMs were issued. 
• offered and sold securities without registration statements filed with the Securities and Exchange Commission (SEC). 

Acting through Geraghty, the Firm 

• failed to report a written customer complaint; 
• failed to timely report a written customer complaint; and 
• failed to report the settlement of customer complaints to NASD that involved payments in excess of $25,000;
• failed to implement, maintain and enforce an effective supervisory system that would have enabled the firm to comply with federal securities laws and NASD rules;
• failed to implement, maintain and enforce reasonable systems and procedures to ensure that PPMs did not contain material misrepresentations and omissions; 
• failed to ensure that the accounts used for deposit of contingency offerings the firm conducted complied with SEC Rule 15c2-4; and 
• failed to retain email records related to its business in compliance with Rule 17a-4 of the Securities Exchange Act and NASD Rule 3110. 

Acting through Robbins, Mathis and Geraghty, the Firm 

• violated NASD Membership and Registration rules by permitting Robbins to engage in activity requiring registration as a general securities principal and a general securities representative without obtaining the required registrations;
• failed to establish qualified escrow accounts on contingency offerings as required by SEC Rule 15c2-4 and failed to maintain its minimum net capital;
• failed to preserve complete electronic mail communications by routinely deleting the contents of electronic mail folders of all employees who left the firm and deleted portions of the contents of current employees’ electronic mail folders. 

Investprivate, Inc.: Censured; Fined $205,000 ($67,500 of which is jt/several with Mathis; $40,000 jt/sev with Mathis and Geraghty; and $15,000 jt/sev with Geraghty); Suspended 60 days from seeking or accepting new engagements to conduct or participate in the offer or sale of unregistered securities through any private offering, private placement or private investment in public equity (PIPE) transactions for 60 days (ED: the double reference to "60 days" is in the original). The firm was also required to retain an independent consultant to conduct a comprehensive review of the adequacy of the firm’s policies, systems and procedures (written or otherwise) and training relating to the offer or sale of unregistered securities through any private offering, private placement or PIPE transactions. 

Donald Geraghty (Principal): Fined $40,000 jt/sev with Mathis and the Firm; and $15,000 jt/sev with the Firm; Suspended 30 days in principal capacity

Scott Lee Mathis (Principal): Fined $67,500 jt/several with the Firm; $40,000 jt/sev with Geraghty and the Firm; Suspended 30 days in principal capacity

Ronald S. Robbins: Fined $10,000; Suspended 10 business days in all capacities

Roseman failed to establish and maintain a supervisory system and written supervisory procedures reasonably designed to achieve compliance with his member firm’s obligation to preserve electronic communications related to its business. Roseman failed to establish and maintain written supervisory procedures reasonably designed to achieve compliance with the firm’s obligation to conduct an annual inspection of each OSJ, to supervise the activities of each registered representative, in that the firm’s procedures did not address the circumstances that would warrant heightened supervision of a representative after the representative was hired, and to amend its registered persons’ Forms U4 if the information previously provided became inaccurate.  Roseman did not evaluate and prioritize the firm’s training needs or develop a training plan. 

Arnold Ira Roseman : Censured; Fined $15,000

Taylor submitted falsified documents to the insurance division of a state regulator that represented that her insurance licenses were in good standing when in fact they were inactive due to her failure to complete continuing education. Taylor failed to timely amend her Form U4 to disclose material information and that she failed to respond truthfully during an NASD on-the-record interview. 

Marylan Katherine Taylor: Barred

Taylor failed to reasonably and adequately supervise registered representatives who violated various provisions of NASD Rule 2210 and SEC Rule 482 in their communications with the public. Taylor approved some of the public communications. Taylor failed to reasonably and adequately supervise a registered representative with respect to a customer complaint for a loss relating to an investment that the representative settled away from the firm, and Taylor failed to create a written record that there was a problem with the account or to follow-up with the representative prior to his decision to send a letter to the customer and make payment to the customer directly. Neither Taylor nor the representative notified the firm of the issue before payment was made and the letter was sent. 

Alison Esther Taylor: Fined $5,000; Suspended 15 business days in principal capacity only

Tansil made an improper guarantee to public customers, misused customer funds to cover a shortfall regarding the guarantee, made material misrepresentations to customers that their funds would be used for investment purposes, and settled a customer complaint without his member firm’s knowledge or consent. 

Plase Michael Tansil : Barred

Robson signed a deceased customer’s name to multiple Individual Retirement Account (IRA) Distribution Request Forms and checks without the knowledge and consent of the customer or his widow. After forging the customer’s signature, Robson made checks totaling approximately $31,240 payable to himself and deposited the funds into his personal bank account without the customer’s or his widow’s knowledge or authorization, thereby converting the customer’s funds. Robson failed to respond to NASD requests for information. 

James Everett Robson Jr.: Barred

Palmieri knowingly submitted a false claim to an insurance company requesting payment for the theft of his automobile when he was aware that the vehicle had not been stolen. 

Fredric Joseph Palmieri: Barred

Nelson submitted a handwritten note to a public customer in which he made a false, exaggerated, unwarranted and/or misleading claim and an impermissible performance prediction or projection regarding a variable annuity he recommended to the customer. 

Phillip Earl Nelson: Fined $7,500; Suspended 60 days in all capacities

While registered with his member firm, Lerner did not conduct any firm business but parked his license with the firm. Lerner engaged in outside business activities and private securities transactions while his license was parked.  Lerner failed to disclose a material fact on his Form U4 and provided false testimony under oath during an NASD on-the-record interview. 

Darrell Craig Lerner : Barred

While acting on his member firm’s behalf, Korybut failed to 

• ensure that his firm complied with an independent consultant’s recommendations to remedy the deficiencies identified in the firm’s prior NASD settlements;
• implement the various procedures recommended in the consultant’s reports; 
• establish and implement adequate systems and procedures for monitoring the activities of the firm’s producing branch managers who approved account documentation and reviewed account activity and correspondence for their own customer accounts; 
• designate a registered principal as an office of supervisory jurisdiction (OSJ) supervisor; 
• establish and implement procedures for monitoring activities such as excessive “cancels and rebills“ that might serve as “red flags“ for detecting possible unauthorized transactions; and 
• establish procedures in an OSJ for ensuring a registered principal reviewed outgoing and incoming branch correspondence. 

Alexis Casimir Korybut: Fined $25,000; Suspended 15 business days in all capacities; Suspended 60 days in principal capacity.

Cuozzo falsified dates and information on numerous Regulation 60 annuity replacement forms and inserted a false statement on a public customer’s Regulation 60 annuity replacement form, which resulted in the falsification of a firm document. 

Charles James Cuozzo Jr. : Fined $5,000; Suspended 1 year in all capacities; Required to requalify as General Securities Representative.

Cirillo employed fraudulent sales practices when, in a private placement, he recommended and sold to public customers units of a company that had minimal assets and no business operations and was owned and controlled by his family member. Cirillo guaranteed a customer against loss. 

Carl Thomas Cirillo: Fined $12,000; Suspended 60 days in all capacities.

Bertholic engaged in private securities transactions without prior notice to, or approval from, his member firm. TBertholic received $435,000 from public customers to purchase a promissory note from which the proceeds were to be invested in real property or to maintain and improve real property and, instead, Bertholic used the funds for his personal benefit. Bertholic published newspaper advertisements, a brochure and a flier, and developed a Web site that did not disclose his firm’s name and were not approved by a registered principal of the firm. The brochure and Web site did not provide a balanced discussion of the risks involved in real estate lending; did not disclose risks and contained false, exaggerated, unwarranted and/or misleading statements. The Web site presented testimonials from purported customers who, in fact, had never transacted any business with Bertholic. 

Francis Bart Bertholic Jr.: Barred

Alldredge borrowed money from public customers while registered with a member firm. Alldredge submitted false and misleading documentation to his member firm concerning variable annuity switch transactions, in which he concealed the fact that the funds for the new annuity purchase were the proceeds of the liquidation of an existing variable annuity, and failed to process the transactions as Section 1035 exchanges. Alldredge failed to respond to an NASD request to give testimony. 

James Wayne Alldredge : Barred

The Firm's anti-money laundering (AML) compliance program and written procedures were not reasonable designed to achieve and monitor compliance with the Bank Secrecy Act in that

• the AML compliance program as a whole was not “risk-based“ when viewed in the context of the firm’s business, and 
• the geographic locations of its customers and the procedures for monitoring accounts for suspicious activity were not reasonably designed to detect such activity in light of the nature of the firm’s business and its customer base. 

The Firm failed to implement its AML compliance program, in that the procedures required annual training and no annual training was provided between April 2002 and September 2004, and the firm did not include all information required by the Bank Secrecy Act, the regulations promulgated thereunder and its AML procedures on documentation pertaining to wire transfers and other fund transmittals. 

The Firm failed to retain all electronic communications related to the firm’s business and did not have a supervisory system or written procedures reasonably designed to detect and prevent failures to retain required communications. 

The Firm’s supervisory system and written supervisory procedures, and its enforcement thereof, were not reasonably designed to achieve compliance with applicable laws, rules and regulations regarding 

• the payment of transaction-based compensation to foreign finders; 
• compliance with the requirement to conduct an annual compliance interview with each registered representative; 
• providing account records to customers when an account is opened and at specified intervals thereafter; 
• compliance with SEC Rule 17a-3(a)(6) concerning the completeness of order memoranda; conducting required reviews for compliance with “best execution“ requirements; 
• marking order memoranda to identify discretionary transactions; and 
• compliance with NASD rules pertaining to communications with the public in light of the various methods and languages the firm’s representatives used in such communication. 

The Firm paid transaction-related compensation to a foreign entity not registered as a broker-dealer and permitted its affiliated individuals who handled the referral business to function as firm representatives without registration. The Firm met some, but not all, of the conditions in NASD Rule 1060(b) for such payments to be permissible. 

White Pacific Securities, Inc. : Censured; Fined $125,000

The Firm failed to enforce its written supervisory procedures requiring annual reviews of its fee-based retail customer brokerage accounts to review the appropriateness of the compensation structure for each customer and documentation of the reasons customers choose a fee-based account. 

Taglich Brothers, Inc. : Censured; Fined $25,000

The Firm failed to implement an adequate supervisory system and written procedures designed to ensure that all electronic communications relating to its business as a broker-dealer are captured and retained. The firm’s supervisory system failed to provide for effective follow-up and review or other monitoring of instant message (IM) usage at the firm to ensure that all IM users had properly synchronized their network login passwords and that all electronic communications were being retained. The Firm failed to maintain and retain all business-related IM communications its registered representatives sent and received. 

State Street Global Markets, LLC : Censured; Fined $100,000; Required to review procedures regarding the preservation of electronic mail communications for compliance with NASD rules and federal securities laws and regulations

The Firm prepared and issued research reports to public customers that violated NASD rules governing the content and disclosures required for equity research reports and rules governing content standards for communications with the public. The reports failed to disclose the firm’s actual, material conflicts of interest, the percentage of all securities rated by the firm to which is would assign a “buy,” “hold/neutral” or “sell” rating, the risks that may impede the achievement of cited price targets. The firm also failed to provide clear and comprehensive disclosures, used appropriately conditional and/or indefinite language in disclosures, and failed to provide readers with a sound basis from which to evaluate a potential investment. 

New York Global Securities, Inc: Censured: Fined $45,000; Suspended from issuing any research reports for six months. 

The Firm issued research reports that (i) did not contain any disclosures concerning the risks that might impede achievement of a price target; (ii) contained price target-risk disclosures, but such disclosures were not presented in the required form; and/or (iii) failed to disclose the percentage of all securities the firm rated to which it had assigned a buy, hold or sell rating, and the percentage of companies within each category for which the firm had provided investment banking services within the preceding twelve-month period. 

Coker & Palmer : Censured; Fined $10,000

Signer sent and received electronic correspondence related to the firm’s securities business using his own email provider and failed to copy the firm on all email communications as required by the firm’s procedures. The Firm failed to retain and preserve all of Signer’s business-related email and to preserve all of it in a non-erasable and non-rewritable format. The Firm's supervisory systems and procedures were not reasonably designed to achieve compliance with SEC Rule 17a-4 since they did not adequately provide for capturing, retaining and preserving Signer’s business related emails when he failed to copy or forward them to the firm. Finally, the Firm failed to conduct an annual inspection of Signer’s branch office pursuant to NASD Rule 3010(c) and its own written procedures. 

Bathgate Capital Partners LLC: Censured; Fined $50,000

Steven Charles Signer (Principal): Censured: Fined $15,000

The Firm failed to timely report municipal securities transactions to the MSRB. In contravention of NASD Rule 2711(g)(3) trading restrictions in a “research analyst account,“ Brown effected securities transactions in accounts he owned, each of which involved securities issued by a company he followed as a research analyst (moreover, the transactions were inconsistent with his recommendations as reflected in his most recent research report his member firm published). The Firm and Brown issued research reports that did not include either price charts and price target disclosures or information required by Rule 2711(h)(6) and (7), or information directing readers in a clear manner where they could obtain applicable current disclosures in written or electronic format, and issued one firm research report that failed to include price charts and price target disclosures. The Firm failed to establish, maintain and enforce written supervisory procedures reasonably designed to achieve compliance with its trade reporting obligations and failed, in certain respects, to implement and adequately enforce its written supervisory procedures relating to NASD Rule 2711(h). 

Anderson & Strudwick, Incorporated: Censured; Fined $17,500 ($5,000 of which is jt/several with Brown) 

Bradley Allan Brown (Principal): Censured; Fined $10,000 ($5,000 of which is jt/several with Firm)

Acting through Baclet, the Firm issued research reports on companies whose stock traded below $5 per share that failed to disclose material information and contained misleading, exaggerated and false statements. The Firm and Baclet failed to disclose that the firm had received compensation for the preparation and issuance of research reports on the issuers’ behalf. Through Baclet, the Firm failed to obtain signed approval of research reports prior to their dissemination. The Firm and Baclet failed to establish, maintain and enforce adequate written supervisory procedures reasonably designed to achieve compliance with applicable securities laws and NASD rules concerning the preparation and issuance of research reports. Runyon issued research reports that contained material misstatements and omissions. 

Donner Corporation International nka National Capital Securities, Inc: Expelled

Jeffrey Lyle Baclet: Barred

Paul Alan Runyon: Fined $20,000; Suspended 6 months in all capacities; Required to requalify as General Securities Representative and Principal  

Under a typical agreement between Donner and an issuer, Donner received an initial retainer fee of $2,500, $2,000 per month for services provided, and $2 to $3 for each investor package mailed to potential investors. Some agreements also provided that Donner would receive stock if the company's share price exceeded a certain level after Donner initiated coverage of the company. Uberti testified that, for the companies Baclet gave him "to handle," Uberti received fifty percent of the amounts "generated by [Donner's] relationship with the company."

If you are unfamiliar with these "touting" cases, you might want to visit http://sec.gov/litigation/opinions/2007/34-55313.pdf and read the details of these types of arrangements.  The statement of facts is quite well crafted and offers some fascinating insight.

Acting through Bennett, the Firm 

• engaged in proprietary trades that required a higher minimum net capital and failed to file the required application, and receive NASD approval, to change the membership agreement under SEC Rule 15c3-1 before engaging in the proprietary trades. 
• failed to report statistical and summary information regarding customer complaints. 

Bennett willfully failed to timely amend his Uniform Application for Securities Industry Registration or Transfer (Form U4) to disclose material facts. 

Blacklake Securities Corporation: Expelled 

and Wesley Arthur Bennett Jr. (Principal): Barred

Valdejueza deposited cash in varying amounts to his personal bank account at an automated teller machine (ATM) and each time falsely represented the amount of the deposit by adding zeros to the deposit amount when entering it on the ATM keypad. Valdejueza intentionally entered the false deposit amounts knowing that the bank would credit them to his account and that he would have access to funds to which he was not entitled until the bank reconciled the false entries. 

Neilson Ojastro Valdejueza: Barred

Taussi converted $80,000 from her member firm for her own use and benefit by cashing checks that were issued to “Cash” and falsely recording that these checks had been paid to vendors. Taussi failed to respond to NASD requests for information and documents. 

Maria Teresa Taussi : Barred

Shupak opened several money market accounts for public customers of a bank affiliated with his member firm, accessed the bank’s electronic records system and changed a code in the records to show that the money market accounts had been opened as checking accounts, for which he entitled to receive more compensation from the bank for opening a checking rather than a money market account. 

Lonnie Richard Shupak : Barred

Shelley attempted to cheat on the Series 24 examination and failed to comply with NASD Rules of Conduct governing securities examinations. 

Kenneth Christopher Shelley: Barred

Ross failed to 

• establish, maintain and enforce written procedures reasonably designed to supervise his member firm’s wholesale trading and market making business and its registered representatives’ actions;
• establish and maintain an adequate supervisory system reasonably designed to achieve compliance with federal securities laws, regulations and NASD rules to adequately supervise the trading and market making activity the firm conducted; 
• adequately review a representative’s trading activities and ignored or failed to identify red flags associated with the representative’s manipulative trading;
• provide adequate AML training for appropriate personnel and failed to provide for independent testing for AML compliance by member personnel or a qualified outside party; and
• monitor and analyze manipulative trading, he did not further investigate suspicious activity to determine if he should file an SAR to report suspicious transactions. 

William Frederick Ross : Fined $50,000; Suspended 1 year in principal capacity; Required to complete 25 hours of AML conntinuing education within 12 months of becoming associated with any NASD member firm.

Poma improperly waived overdraft bank fees on his personal checking account at his member firm’s affiliate bank, and he not been authorized and/or was otherwise not entitled to those waivers. 

Jimmy Poma : Barrred

Offenbacher knowingly and intentionally, artificially increased the market price of a stock in an attempt to comply with the provisions of SEC Rule 10b-18 and still execute a cross transaction between the issuer and the seller at the negotiated price. 

Klaus Alois Robert Offenbacher : Fined $25,000; Suspended 90 days in all capacities (credit to be given for 60-day suspension imposed by member firm without pay).

O'Brien submitted expense reports to her member firm in which she had forged her supervisor’s name.

Kelly Irene O’Brien : Barred

Montalvo made improper use of public customers’ funds in that she notarized what was purported to be the customers’ signatures on a Letter of Authorization (LOA) requesting a $1,000 wire transfer from the customers’ account to a bank account in the name of Montalvo’s family member, without the customers’ authorization. Montalvo failed to appear for an NASD on-the-record interview. 

Penny Dorton Montalvo: Barred

Manhas had a public customer unknowingly sign documents to open a securities account at another broker-dealer, transferred $240,000 from the customer’s old account to the new account and submitted false documents to the new broker-dealer to transfer the customer’s assets to Manhas’ personal account. Manhas sold the assets and withdrew the proceeds from his account, thereby converting the customer’s funds to his own use and benefit. Manhas submitted falsified documents to a member firm in furtherance of his scheme to convert the customer’s assets. Manhas failed to respond to NASD requests for information and failed to appear for an NASD on-the-record interview. 

Vikram S. Manhas: Barred

Lenz borrowed $3,500 from a public customer in contravention of his member firm’s written procedures that prohibit borrowing money or securities from a customer. 

Randall Kevin Lenz: Fined $5,000; Suspended 10 business days in all capacities.

Lane borrowed $5,000 from a public customer in contravention of his member firm’s written procedures that prohibit employees from borrowing or otherwise obtaining any customer funds for personal use or investment. Lane failed to respond to NASD requests for information. 

Timothy John Lane : Barred

Krudop placed large on-open orders through the NASDAQ Opening Cross through SuperMontage to create a buy or sell imbalance that would exert pressure on the security’s share price, then he placed transactions through an Electronic Communications Network (ECN) on the opposite side of the imbalance he had created to obtain an advantageous price that would not have been available but for his entry of a large on-open order. Upon receiving execution of his order(s), Krudop would cancel the subject orders prior to the time after which such orders could not be canceled. 

John Christian Krudop: Fined $10,000; Suspended 6 weeks in all capacities

When all is said and done, you still have to wonder.  Why is it so easy to short circuit the market?  Clearly, there are other -- far more sophisticated maneuvers -- even supposedly legitimate ones, that permit market makers and market participants to "move" a stock one way or the other on any given day.  Bidders routinely seek to hide the size of their bids and firms seek to hide the "principal" client by breaking up orders.  Why are those gambits more savory?  Seriously, when all is said and done, Krudop entered orders that could have been "hit" and he could have suffered some market risk.  Moreover, as even NASD admits, he cancelled the orders within the legal time for such cancellation.  So his violation was that he entered at-risk orders in a manner calculated to game the system and which, in fact, permitted him to get better fills through the contra ECN orders.  Please understand, I am NOT defending the conduct and appreciate the violation --- however, there are always consequences when regulators prohibit some aspects of gaming the system but tolerate others.  Just a thought piece.

Kaweske failed to promptly return investor funds after an offering closed without meeting its sales contingency, and failed to establish an escrow account for the contingency offering. He made fraudulent misrepresentations in connection with the purchase and sale of preferred stock. Also, Kaweske willfully failed to disclose material information on his Form U4. 

John David Kaweske: Fined $140,000; Barred

Hirth willfully failed to disclose material information on his Form U4. Hirth functioned as a member firm’s associated person and engaged in a securities business even though he was statutorily disqualified. Also, he failed to respond to an NASD request for information and documents. 

Gary Evert Hirth: Barred

At the request of institutional public customers, he provided them with letters that contained false and misleading representations to the effect that each of the institutions maintained the required collateral to issue credit facilities in the amount of $130 million. Hirsch failed to verify deposit of funds prior to sending the letters, knowing that the institutions planned to use the letters to secure funds for investment in venture capital projects, and he knew that the institutions had no funds or securities in their accounts at his member firm. Hirsch neglected to obtain prior approval of the correspondence from a principal at his firm when he knew, or should have known, that prior approval of outgoing correspondence was required pursuant to firm procedures. 

Brian Stuart Hirsch: Fined $10,000; Suspended 18 months in all capacities; Ordered to requalify by exam as a general securities representative (Series 7) within 90 days of becoming re-associated with any NASD member in any capacity. If Hirsch fails to requalify within 90 days, he will be automatically suspended from association with any NASD member in any capacity until he requalifies. 

As a representative of a bank affiliated with his member firm, Gomez provided false information to a mortgage company in that he substantially overstated the amount of funds a bank customer had in his checking account and misrepresented the date on which the account was opened. Gomez submitted the falsified document to the mortgage company for processing. 

Newton Eduardo Gomez: Fined $5,000; Suspended 9 months in all capacities

Bender received $1,000 from a public customer as a reward for the gains the customer realized in his brokerage account in violation of NASD Rule 2330(f), which prohibits registered representatives from sharing directly or indirectly in the profits in any customer account. 

Mark William Bender: Fined $5,000; Suspended 10 business days in all capacities.

While employed at a bank affiliated with his member firm and in connection with a mortgage application, Basile falsified a copy of a public customer’s canceled check by changing the date and number on the check to make it appear that it was the missing check needed to prove that the customer had been making regular payments on an existing credit account, and submitted it and other check copies to the retail credit sales department in order to process the loan application. 

Alan Nicholas Basile : Fined $5,000; Suspended 6 months in all capacities

The Firm underwrote an offering of common stock on a firm commitment basis and in an effort to meet a perceived regulatory minimum deal size, it submitted a bid to purchase 200,000 shares that had not been bid for in the auction without identifying itself as the bidder. The Fiirm allocated shares for which it did not have orders to its market-making account and sold the shares the next day in the after-market at prevailing prices, thereby receiving $77,239 in profits. The preliminary prospectus did not disclose that the firm would or could submit a bid that indicated its intent to purchase shares in the auction, and the final prospectus did not disclose that the firm had sold the shares at prevailing market prices and realized a profit on the transactions. 

The Firm engaged in conduct inconsistent with just and equitable principles of trade by submitting a bid in the live-auction and purchasing shares offered in the auction in a proprietary capacity without disclosure. Further, the profit realized on the proprietary transactions constituted underwriting compensation that the firm failed to disclose. 

W.R. Hambrecht + Co., LLC : Censured; Fined $127,239 (includes $77,239 in disgorgement)

As far as this case goes (and to the extent I understand what happened), it's actually quite interesting.  The Firm underwrote on a Firm Commitment basis but apparently came up short on the placement of about 200,000 shares.  The Firm then bid for its own undistributed shares (???) but did not disclose its identity.  Lacking sufficient indications of interest for the 200,000 shares, the Firm simply dumped the shares in its market-making account and then sold them in the after-market at prevailing prices to the public.  What NASD seems to have been troubled by (and rightly so ... if only they made the point), is that this didn't exactly come off as a bona fide public offering and for all intents and purposes, the Firm interposed itself within the offering and made a profit that should have gone to a public buyer.  Under the totality of circumstances, the sanctions seem a tad light.

The Firm permitted a statutorily disqualified person to function as an associated person. The Firm failed to obtain fingerprints from that individual and submit them for identification and processing as SEC Rule 17f-2 required and failed to discover that the individual had previously been convicted of a felony. 

Geneos Wealth Management, Inc.: Censured; Fined $15,000

The Firm failed to maintain and preserve all of its electronic communications as SEC Rule 17a-4 requires. (NASD Case )

Essex Financial Services, Inc.:Censured, Fined $25,000; Required to review its procedures regarding the preservation of electronic mail communications for compliance with federal securities laws, regulations and NASD rules. 

The Firm accepted and executed unsolicited customer orders to purchase and sell options, and failed to timely submit an application for NASD approval of this material change in business. The Firm’s written supervisory procedures were not reasonably designed to achieve compliance with rules applicable to its options business. 

BTIG, LLC: Censured; Fined $15,000

The Respondents were aware, or should reasonably have been aware, of “red flags” that should have triggered the firm’s AML obligations. 

Acting through Rumyantsev and Santos,the Firm 

• failed to adequately implement and enforce AML procedures, 
• failed to adequately perform due diligence, file Suspicious Activity Reports (SARs) or cease trading in multiple accounts a public customer of the firm owned and controlled. 

Acting through Santos, the Firm 

• participated in private placement distributions of securities for which the memoranda represented that the offerings were on a best efforts “part or none” basis, and failed to properly escrow purchasers’ funds in a segregated account until the minimum contingency had been satisfied. The Firm caused the release of funds before satisfaction of the contingency to sell the minimum amount of securities through bona fide transactions to non-affiliated investors, thereby rendering there presentations in the memoranda false and misleading;
• failed to timely report written customer complaints to NASD;
• failed to timely report the existence of conditions that required disclosure within 10 business days after the firm knew, or should have known, of the existence of the conditions. 

Santos failed to ensure that the firm establish and maintain an effective supervisory system, including adequate written procedures, reasonably designed to achieve compliance with federal securities laws, regulations and NASD rules relating to contingency offerings and reporting requirements. 

Nevwest Securities Corporation: Censured: Fined $100,000 ($100,000 jt/sev with Santos; $75,000 jt/sev with Rumyanstev); Required to hire an independent consultant to review the firm’s policies, controls, systems, procedures and training relating to the firm’s ability to comply with the Bank Secrecy Act, NASD Rule 3011 and other anti-money laundering (AML) statutes and regulations, and all rules and regulations related to its participation in private offerings; Ordered not to a) participate in any private offering for 30 days following the effective settlement date, and b) accept or hold customer securities until it certifies to NASD that it has adopted and implemented recommendations the consultant made in the initial written report. 

Sergey Rumyantsev (Principal): Censured; $75,000 jt/sev with Firm; Suspended 3 months in Principal capacity; Required to complete 16 hours of AML training each year for a two-year period (16 hours within six months after the settlement’s effective date)

Antony Michel Santos (Principal): Censured; $100,000 jt/sev with Firm; Suspended 3 months in Principal capacity; Required to complete 16 hours of AML training each year for a two-year period (16 hours within six months after the settlement’s effective date)

Acting through Nummi, the Firm  

• failed to establish and maintain a supervisory system, and failed to establish, maintain and enforce written supervisory procedures reasonably designed to provide a system of supervision for registered representatives with disciplinary histories of repeated customer complaints, disciplinary actions and/or arbitrations;
• failed to establish and maintain a supervisory system, and failed to establish, maintain and enforce written supervisory procedures reasonably designed to prevent and detect unauthorized trading; 
• failed to enforce the firm’s written procedures relating to telecommunications; and 
• permitted a registered representative to solicit an individual by telephone after the individual had requested to be placed on the firm’s “do not call” list. 

Acting through Saunders, the Firm 

• permitted an individual whose registration was CE Inactive to effect customer securities transactions;
• failed to report, and failed to report timely, customer-related reportable matters as NASD Rule 3070 requires, and failed to timely update Uniform Applications for Securities Industry Registration or Transfer (Forms U4) or Uniform Termination Notices for Securities Industry Registration (Forms U5) with respect to customer complaints or arbitrations against registered representatives. 

Also, Sanders failed to reasonably supervise registered representatives in a branch office of the firm to prevent and detect unauthorized trading. 

GunnAllen Financial, Inc.: Fined $100,000 ($45,000 jt/sev with Saunders; $27,500 jt/sev with Nummi; $17,500 jt/sev with Nummi and Sanders

Richard Mark Nummi, (Principal) Fined $27,500 jt/sev with Firm; Fined $17,500 jt/sev with Firm and Nummi; Suspended 60 days in Principal capacity

Brian Edward Sanders (Principal) Fined $17,500 jt/sev with Firm and Nummi; Suspended 10 business days in Principal capacity

Stephen Irvin Saunders IV, (Principal) Fined $45,000 jt/sev with Firm; Suspended 60 days in Principal capacity

Acting through Fareri, the Firm 

• commenced a private placement offering and participated in municipal securities transactions contrary to its NASD membership agreement, and did not file an application for approval to engage in new lines of business, including private placement offerings and municipal securities transactions, even though these were material changes in the firm’s business operations; 
• failed to adopt, maintain and enforce an adequate supervisory system regarding private placement transactions and the maintenance of internal communications. 

Acting through an unnamed individual, the Firm conducted a securities business without maintaining its required minimum net capital. Finally, Amerifinancial failed to timely create and implement its business continuity plan. 

Amerifinancial: Censured; Fined $30,000 ($25,000 jt/sev with Fareri; $5,000 jt/sev with unnamed individual) 

Anthony Joseph Fareri: Fined $25,000 jt/sev with Amerifinancial; Suspended 1 year in all capacities.

1. Fidelity Distributors Corporation (FDC): Principal Underwriter for Fidelity family of mutual funds;
2. Fidelity Brokerage Services LLC (FBS): Introducing broker for Fidelity retail accounts;
3. Fidelity Investments Institutional Services Company: Markets non-retirement/retirement plan products/services, Inc., and
4. National Financial Services LLC: Clearing broker for FBS and others

No Docket Number or Date provided in NASD's April Monthly Report. The Fidelity BDs settled the action without admitting or denying the charges, but consented to the entry of NASD’s findings. See, February 5, 2007 Press Release http://www.nasd.com/PressRoom/NewsReleases/2007NewsReleases/NASDW_018479

FDC permitted certain new employees hired by the investment advisor FMR Co. to “park” NASD licenses they held prior to joining Fidelity—even though they did not perform any functions for the broker-dealer. The four Fidelity broker-dealers improperly maintained registrations for 1,100 individuals who did not perform jobs for which an NASD license is required or permitted. By parking and/or improperly maintaining those licenses, the Fidelity broker-dealers effectively gave those individuals the ability to rejoin a brokerage firm at a later time without the re-testing required of those who are unregistered for two or more years. NASD alleges that its qualification and registration requirements are intended to afford reasonable assurance to the investing public that registered individuals maintain and update their knowledge about products and services available to investors, as well as applicable rules, regulations, and policies governing the investment banking and securities business. 

In addition, the four broker-dealers failed to assign registered supervisors to 1,000 registered individuals. None of the broker-dealers had any mechanism, policy or procedure in place in place to ensure that registered individuals to whom no registered supervisor was assigned complied with NASD rules. NASD opines that these violations occurred because the Fidelity BDs permitted employees from every aspect of the Fidelity-wide enterprise to maintain registrations if they chose to do so, and they did not assess on an individual basis whether the activities of each individual fell within the “permitted” or “required” categories for NASD registration. 

From 2002 through 2004, at least nine of the FMR Co. investment advisor traders whose licenses were parked at FDC received gifts and entertainment valued at hundreds of thousands of dollars from employees of brokerage firms who sought business from FMR Co. During that time, FDC’s gift policy and Fidelity’s corporate-wide gift policy prohibited employees from giving or receiving gifts with a value of more than $100 per calendar year from a current or prospective customer. Likewise, Fidelity’s entertainment policy prohibited employees from giving or accepting transportation (other than local ground transportation), lodging or other travel-related expenses to attend an entertainment event with customers without reimbursement from or to the customer for the expense. Fidelity also maintained a general policy governing professional conduct and conflicts of interest which provided that “Fidelity expects employees to have high standards of performance, integrity, productivity and professionalism.” This general policy also required employees to be familiar with and adhere to the more particular standards set forth in Fidelity’s gift and entertainment policies. FDC failed to take any action to identify or examine the nature, frequency, extent and expense of the gifts and entertainment received by the investment advisor traders to determine if the gifts and entertainment were in compliance with Fidelity’s policies. 

Examples of gifts provided by brokerage firm employees to the investment advisor traders included: several private chartered flights, including flights provided to an NASD-registered Fidelity trader and his wife for their honeymoon, tickets and lodging at expensive hotels for Wimbledon tennis tournaments, tickets to a Justin Timberlake/Christina Aguilera concert, tickets to the US Open Tennis Tournament, and twenty bottles of expensive wine, including twelve bottles of 1993 Chateau Petrus (Pomerol). Examples of entertainment provided by brokerage firm employees to the investment advisor traders included: private chartered flights to various destinations including, but not limited to, Palm Beach and Miami Beach, FL, and Nantucket, MA, for overnight and weekend golf outings, a bachelor party for one of the registered investment advisor traders, and tickets to the 2004 Super Bowl. The golf outings included annual, multiple-day golf trips at venues such as Las Vegas, NV, Cabo San Lucas, Mexico, and Arizona. These events included extravagant private accommodations for the investment advisor traders. 

From 2001 through 2004, the Fidelity broker-dealers failed to retain email related to their business as such as required by NASD rules and federal securities laws. Pursuant to a written, corporate wide policy applicable to each broker-dealer, the Fidelity broker-dealers retained email of only certain registered individuals and failed to keep email of 1,900 other registered individuals—totaling approximately 18 percent of all registered individuals at the time. This group consisted of NASD-registered individuals whom the firms determined were not doing the work of the broker-dealer. NASD requested that the Fidelity broker-dealers produce email for the investment advisor traders. The Fidelity broker-dealers, however, could not ensure that they had produced all email that should have been retained for these individuals and that they had fully complied with NASD’s regulatory requests. In addition, prior to December 2002, the Fidelity BDs recorded over back-up tapes and, from 2001 to August 2003, failed to capture and preserve all Instant Messages and Bloomberg email. 

Fidelity Distributors Corporation (FDC); Fidelity Brokerage Services LLC (FBS); Fidelity Investments Institutional Services Company; and National Financial Services LLC: Fined $3.75 million; Ordered  to conduct comprehensive audits of the firms’ systems, policies and procedures relating to registration and electronic recordkeeping.

Varley made false entries into his member firm’s internal customer relationship system that reflected he had had several contacts with a client regarding the client’s preceding purchase of mutual funds through an external wholesaler when, in fact, those contacts had not occurred. Based on the purported contacts, Varley would have been entitled to receive compensation in connection with the purchase if the firm had not discovered that the entries were false. 

Daniel J. Varley: Barred

Meyers and Klein engaged in fraud by recklessly failing to disclose to public customers potential sales incentives for selling a particular recommended stock. The sanctions were also based on the hearing panel’s findings that Meyers and Klein made fraudulent price predictions for the stock in order to induce customers to purchase it. 

John M. Meyers: Fined $213,967; Barred

Brian Craig Klein: Fined $174,676; Barred

Acting through Lee, his member firm failed to record private placement transactions on its books and records. A company, acting through Lee, entered into a written agreement with an unregistered individual and retained him as an independent contractor to offer and sell its securities, and Lee caused the company to pay commissions to the individual, thus dealing with him on terms and conditions different from those it accorded the general public. Lee knew, or should have known, that the independent contractor effected transactions in securities without registration as a broker or dealer in violation of Section 15(a)(1) of the Securities Exchange Act of 1934. In connection with his company’s offers and sales of securities, Lee caused his company to make untrue statements of material fact and omitted to state material facts necessary in order to make the statements that it made, in light of the circumstances in which they were made, not misleading. 

Dickson Virchill Lee : Fined $65,000; Suspended 1 year in all capacities.

Acting through Huberman, his firm failed to establish and maintain a supervisory system, including but not limited to, the establishment and maintenance of written procedures reasonably designed to ensure that the firm and its associated persons complied with NASD’s Research Analyst and Research Report Rule. Huberman failed to ensure the timely filing of Forms U5. Huberman continued to act in a registered capacity even though he became inactive for failing to complete the Regulatory Element of Continuing Education. 

Isac Huberman: Fined $15,000; Suspended 6 months in Principal capacity.

Greenjack falsified an annuity liquidation form in that he took a form a public customer signed and submitted in connection with an earlier withdrawal, altered the withdrawal’s date and dollar amount and then submitted the falsified annuity liquidation form to the insurance company for processing. T

Thomas Michael Greenjack : Fined $5,000; Suspended 3 months in all capacities

Gordon and Lee allowed a statutorily disqualified individual to function as the firm’s principal without his properly being registered and failed to disclose the individual’s association with the firm on a Uniform Application for Broker-Dealer Registration (Form BD). They caused their firm to charge retail customers fraudulently excessive markups and failed to disclose the markups on customer confirmations. 

This decision has been appealed to the SEC. The SEC denied Gordon’s request for a stay of the bar. The sanctions, other than the bars, are not in effect pending consideration of the appeal. 

Dennis Todd Lloyd Gordon (Principal) and Sterling Scott Lee (Principal): Barred; Ordered to pay $20,832.40 plus interest in restitution to a customer.

Fleno aided and abetted a registered representative in his fraudulent and manipulative parking scheme by participating in the non-bona fide sale and purchase of municipal bonds. Fleno purchased bonds into his member firm’s proprietary account to hold the bonds for several days so the registered representative could purchase them back within several days.

William Daniel Fleno: Fined $5,000 (in consideration of his financial status); Suspended 4 months in all capacities

DeSaint falsified documents regarding the price of convertible bonds in an effort to hide the excess market risk created by his losses accumulated from selling 10-year Treasury Note futures. By falsifying documents, DeSaint caused his member firm to fail to preserve accurate books and records in compliance with SEC Rule 17a-4. DeSaint failed to respond to NASD requests for information.

Philippe Alfred DeSaint: Barred

Alderman failed to provide any notice to his member firm of his outside employment with another member firm. The findings stated that Alderman also failed to disclose his continuing employment with his member firm to the new firm. The findings also stated that Alderman failed to appear for an NASD on-the-record testimony. 

Richard Joseph Alderman Jr. : Barred

The Firm allowed registered individuals to maintain their registrations as general securities representatives while they were not actively involved in the firm’s investment banking or securities business, and were not functioning as the firm’s representatives. The Firm failed to establish, maintain, and enforce a system of supervisory control and policies, and procedures reasonably designed to achieve compliance with NASD rules to prevent the firm from maintaining the registration of any registered representative not actively involved in the firm’s investment banking or securities business, and not functioning as a representative of the firm. 

Thornes & Associates, Inc. Investment Securities: Censured; Fined $12,500

The Firm violated NASD Conduct Rule 2830: Investment Company Securities by maintaining programs in which participating mutual fund companies and other financial services companies paid fees and, in return, received preferential treatment from the firm, including exclusive listings on the firm’s internal Web site, the use of “blast” emails to the firm’s representatives, participation in conference calls and speaking arrangements at various firm meetings. The mutual fund companies paid for their fees by directing a minimum of $90,790 in brokerage commissions to the firm. The Firm violated NASD’s recordkeeping requirements by failing to make and keep adequate records concerning the compensation received from offerors who participated in the shelf space programs.

Hornor, Townsend & Kent, Inc. : Censured; Fined $50,000

The Firm failed to include conflict of interest disclosures in research reports as NASD Rule 2711(h) requires. 

Censured; Fined $10,000

Acting through Aaron and Randall Wilbanks, the Firm failed to specify a cycle for the inspection of non-branch locations in its written supervisory procedures and to conduct inspections of 55 non-branch locations as NASD Rule 3010 (c)(1)(C) requires. The Firm and Randall Wilbanks failed to file quarterly reports with NASD that disclosed information regarding customer complaints. The respondents failed to preserve its received and sent electronic communications, including inter-office memoranda and communications, in an easily accessible place and to establish, maintain and enforce written supervisory procedures regarding the preservation of electronic mail correspondence. 

Wilbanks Securities, Inc.: Censured, Fined $25,000

Aaron Bronelle Wilbanks: Censured, Fined $25,000 (joint/several with the Firm)

Randall Lee Wilbanks: Censured, Fined $20,000 (joint/several with the Firm)

(c) Internal Inspections 

(1) Each member shall conduct a review, at least annually, of the businesses in which it engages, which review shall be reasonably designed to assist in detecting and preventing violations of, and achieving compliance with, applicable securities laws and regulations, and with applicable NASD rules. Each member shall review the activities of each office, which shall include the periodic examination of customer accounts to detect and prevent irregularities or abuses. 

(A) Each member shall inspect at least annually every office of supervisory jurisdiction and any branch office that supervises one or more non-branch locations. 

(B) Each member shall inspect at least every three years every branch office that does not supervise one or more non-branch locations. In establishing how often to inspect each non-supervisory branch office, the firm shall consider whether the nature and complexity of the securities activities for which the location is responsible, the volume of business done, and the number of associated persons assigned to the location require the non-supervisory branch office to be inspected more frequently than every three years. If a member establishes a more frequent inspection cycle, the member must ensure that at least every three years, the inspection requirements enumerated in paragraph (c)(2) have been met. The non-supervisory branch office examination cycle, an explanation of the factors the member used in determining the frequency of the examinations in the cycle, and the manner in which a member will comply with paragraph (c)(2) if using more frequent inspections than every three years shall be set forth in the member’s written supervisory and inspection procedures. 

(C) Each member shall inspect on a regular periodic schedule every non-branch location. In establishing such schedule, the firm shall consider the nature and complexity of the securities activities for which the location is responsible and the nature and extent of contact with customers. The schedule and an explanation regarding how the member determined the frequency of the examination schedule shall be set forth in the member’s written supervisory and inspection procedures. 

Each member shall retain a written record of the dates upon which each review and inspection is conducted.

. . .

Acting through Tudisco, the firm 

• underwent material changes in its business operations (expanded into omnibus BD and options business) without first seeking and receiving NASD approval;and
• engaged in a securities business while failing to maintain sufficient net capital and that the firm failed to maintain a general ledger. 

VanthedgePoint Securities, LLC: Censured; Fined $18,000 ($17,500 jt/several with Tudisco)

Geoffrey Michael Tudisco:Censured; Fined $17,500 jt/several with Firm 

McElwee failed to timely file an application with NASD for approval of a change in ownership of her member firm. McElwee performed the duties of a Financial and Operations Principal (FINOP) on her member firm’s behalf without being registered as a FINOP.

Claudia Joanne McElwee: Censured; Fined $10,000 ($5,000 jt/several with unidentified party)

While associated with his member firm, Martins engaged in activities requiring registration while his registration status with NASD was inactive due to his failure to complete the Continuing Education Regulatory Element requirement.

Guillherme Loos Martins: Censured; Fined $10,000

Paruch 

• offered and sold shares of common stock to public customers when there was no registration statement filed or in effect with the SEC with respect to the common stocks as required by Section 5 of the Securities Act of 1933, and the transactions were not exempt from registration requirements;
• engaged in acts operating as a fraud or deceit in connection with the purchase or sale of securities; and 
• misused public customers’ funds intended to pay for their stock purchases and solicited investors to purchase securities without the benefit of a general securities representative registration.

Robert Sean Paruch Jr.: Barred

Masceri forged public customers’ signatures on insurance documents without the customers’ authorization or consent. Masceri responded untruthfully to NASD requests for information. 

Gregory Roy Masceri : Barred

Horton improperly attempted to have his member firm reimburse him for his personal expenses.

Richard Horton III : Barred

Ho signed customers’ names on account transfer forms without the customers’ knowledge or consent, and submitted them to his member firm to effect the transfer of the accounts from his previous firm to his new firm. After learning that one of the customers had complained about the unauthorized transfer, Ho contacted the customer several times to persuade her to drop the complaint without advising his firm. 

Brown Jin Ho: Fined $10,000; Suspended 4 months in all capacities

Frost engaged in outside business activities, for compensation, without providing prompt written notice to his member firm. Frost maintained a desk in a local bank, falsely told a public customer that he was a salaried bank employee, and failed to disclose that he was a registered representative with a firm and received transaction-based commissions. Frost recommended a securities transaction to a public customer without having a reasonable basis for believing the transaction was suitable for the customer based upon her age, financial objectives, situation and needs. Also, he failed to fully and timely respond to NASD requests for information. 

Robert Allen Frost : Barred

Forsythe falsely represented to his member firm, in writing, that he had taken and passed the Series 6 examination and failed the Series 63 examination when he had failed to appear for both examinations. Forsythe failed to timely respond to NASD requests for information. 

Byron D. Forsythe: Barred

Chun failed to appear for an NASD on-the-record interview. Chun sent a response letter to a public customer without making the letter available to his member firm for prior supervisory review and approval, thus preventing the firm from discharging its obligation to review outgoing correspondence. 

Hong Joon Chun: Barred

Chau shared in a public customer’s trading loss by causing $40,000 to be deposited in the customer’s account. Chau did not obtain written authorization from the customer or his member firm before making the deposit. 

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

Byrne obtained a wrongful extension of credit in violation of Section 7(f) of the Exchange Act and Regulation X promulgated thereunder. Byrne failed to post trades made in his personal margin account to the clearing firm, which caused his member firm’s books and records to be inaccurate. 

Gerard Francis Byrne: Barred

Abbondante engaged in 

• private securities transactions without providing prior written notice to, and obtaining prior written approval from, his member firm;
• an outside business activity without providing written notice to his member firm; and
• material misrepresentation and omission of material facts in connection with his recommendation of an investment to public customers. 

Also, Abbondante caused to be created, and knowingly facilitated an individual in providing, fictitious account statements purporting to show pertinent information to their investments.

Joseph Abbondante: Barred; Ordered to pay $276,265 (plus interest) in restitution to customers.

The Firm failed to 

• fully comply with the Firm Element of NASD’s Continuing Education requirements for the years 2001 and 2002 by failing to maintain records documenting the content of its continuing education programs and completion of the programs by covered registered persons;
• develop an anti-money laundering (AML) program reasonably designed to achieve and monitor its compliance with the requirements of the Bank Secrecy Act and the implementing regulations promulgated thereunder; 
• create or maintain a Business Continuity Plan; and
• maintain the minimum required net capital. 

Vision Securities, Inc. : Censured; Fined $27,500

The Firm failed to have a properly licensed and registered equity trader to supervise a representative’s equity trading activity.

The Shemano Group, Inc. : Censured; Fined $10,000

The Firm failed to establish and maintain written supervisory procedures that identified the principal responsible for reviewing customer complaints, disclosures and arbitrations. The Firm reported customer complaints late and failed to amend Forms U4 and a Form U5 in a timely manner. Acting through an individual, the Firm failed to maintain a supervisory system reasonably designed to achieve compliance with applicable rules and regulations, in that the individual responsible for the direct supervision of the firm’s equity trader was not licensed as a Series 55 trading principal. 

Summit Brokerage Services, Inc. : Censured; Fined $25,000 ($7,500 jt/se with unnamed party); Required to retain an independent consultant to conduct a complete audit of the firm’s policies, practices, and procedures regarding reporting requirements under NASD Rule 3070 and NASD By-Laws Article V. 

The Firm failed 

• within 90 seconds after execution, to transmit last sale reports of transactions in OTC equity securities through ACT;
• to designate some last sale reports as late through ACT;
• to enforce its written supervisory procedures with respect to best execution of customer orders as agent, “riskless principal” trade reporting, ACT reporting, short sale reporting and recordkeeping;
• to evidence (in documentation) that it conducted the reviews described in its written supervisory procedures;
• to provide written notification (when it acted as principal for its own account) disclosing to its customers that 
  • it was a market maker in each security, 
  • its correct capacity in transactions, or 
  • that transactions were executed at an average price. 
• failed to register a person engaged in the firm’s investment banking or securities business in the registration category appropriate to the function to be performed. 

Also, the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable securities laws, regulations and NASD rules concerning OATS and the “Three Quote Rule.” 

Natexis Bleichroeder Inc: Censured; Fined $27,500 ($7,500 jt/several with unnamed party); Required to to revise the firm’s written supervisory procedures regarding best execution, “riskless” principal trade reporting, ACT reporting, short sale reporting and recordkeeping.

The Firm failed to preserve any of the firm’s internal or external electronic mail communications, as SEC Rule 17a-4 and NASD Rule 3110 require. 

Itradedirect.Com Corp.: Censured; Fined $25,000

The Firm 

• permitted an individual to engage in activities that required registration as a General Securities Representative and General Securities Principal when he was not registered as either;
• began to clear its own transactions and, as a result, the firm’s supervisors no longer received consolidated transactional data from its clearing firm; and
• was unable to create a consolidated transaction log for supervisory review and approval as its written supervisory procedures required. 

HSBC Brokerage (USA), Inc. : Censured; Fined $50,000

The Firm permitted a representative to function in a registered capacity while his registration status was inactive due to his failure to complete the Regulatory Element of the NASD Continuing Education requirement. The Firm failed to enforce its written supervisory procedures pertaining to the Regulatory Element of Continuing Education. 

Headwaters MB, LLC: Censured: Fined $12,000

While acting through an individual, the Firm it failed to obtain written consent to conduct numerous unauthorized Web-based Central Registration Depository (CRD) searches and falsely certified that the firm had obtained written consent. The Firm failed to 

• establish and maintain written procedures to supervise the use of CRD;
• supervise the use of Web CRD to ensure that the requisite written consents were obtained prior to conducting all Web CRD searches;
• ensure that all Web CRD searches were conducted for authorized purposes. 

GunnAllen Financial, Inc. : Censured; Fined $50,000

During an internal audit, West was required to provide the file for a corporate customer and found that the Corporate Authorization to Open Account was missing a signature. In order to avoid a problem with the bank’s internal auditors, West made a copy of the missing individual’s signature from another document and placed it on the Corporate Authorization without the individual’s knowledge or consent. 

Blain Anthony West: Fined $5,000; Suspended 60 days in all capacities

Smith falsified public customers’ addresses to circumvent state securities laws because he was not licensed to sell securities in the state in which the customers resided (these inaccurate customer account records caused his member firm’s books and records to be inaccurate).  Smith used his personal email account to communicate with the customers.  Also, he sent written communications to public customers that failed to provide a sound basis for evaluating the presented information and contained numerous false, exaggerated, unwarranted or misleading statements and claims regarding investments. 

Thomas Avery Smith: Fined $35,000; Suspended 2 years in all capacities; Ordered to requalify by exam in all capacities

Rivera engaged in a fraudulent trade allocation or “cherry picking“ scheme, in that certain of his member firm’s representatives aggregated retail customers’ day trading orders and communicated an opening transaction to Rivera, who would work the order in a firm proprietary account to sometimes allocate a first profitable trade to a relative’s personal account and the resulting loss to the customers’ accounts. Rivera failed to give the affected customers best execution. 

Alexis Jose Rivera : Barred

Ralston made changes to insurance application forms a public customer signed and affixed the customer’s initials to the changes with the customer’s knowledge and consent and submitted the forms to his member firm to purchase life insurance for the customer, in contravention of his firm’s written supervisory procedures. 

Robert Duane Ralston: Fined $5,000; Suspended 60 days in all capacities

Parrelly recommended and effected transactions in Class B shares of mutual funds for a public customer without having reasonable grounds for believing the resultant transactions were suitable for the customer who would have benefited from owning Class A shares in the identical funds. Parrelly recommended the customer sell Class B shares and later recommended that she purchase additional Class B shares of the same funds so that she was subjected to contingent deferred sales charges (CDSCs) as well as a new CDSC period associated with the new purchases. Parelly engaged in short-term trading of Class B shares within one year of the initial purchase, thereby subjecting the customer to a 5 percent CDSC in connection with the sale. Parelly recommended that the customer use cash distributions from mutual fund positions to purchase additional shares of the same fund, generating new commissionable sales instead of reinvesting the shares with the fund group. 

James Anthony Parrelly: Fined $5,000; Suspended 20 days in all capacities; Ordered to pay customer the amount agreed upon pursuant to their written agreement.

Parker affixed public customers’ signatures to his member firm’s proprietary forms to replace lost original forms and placed them in the customers’ records as authentic. 

Lamont Percell Parker: Fined $15,000; Suspended 3 months in all capacities.

Mongelli induced a public customer to purchase a security by promising to place a stop loss order on the shares purchase, but failed to place the promised stop loss order and, as a result, the client suffered monetary losses. Mongelli transmitted an electronic mail message to a prospective customer that contained misleading statements that made unreasonable and baseless predictions regarding potential return on the customer’s future investments. 

Rocco Anthony Mongelli : Fined $10,000; Suspended 60 days in all capacities

"McKnight altered a Commission Override Form after signing it to reflect that he would receive 20 percent of future commissions rather than 10 percent, and he faxed the altered form to his member firm. The findings stated that McKnight failed to respond to NASD requests for information and failed to appear for an on-the-record interview." 

Toby Allen McKnight : Barred.

Now that you are beginning to understand some of my frustration, ask yourself the most basic of all questions: If McKnight's misconduct was so extreme as to warrant a Bar, then why doesn't NASD do a better job of explaining what the nature of the misconduct was and how firms might better deter and detect future iterations.  Frankly, this case sounds somewhat intriguing and I wish our regulators appreciated the import of this monthly disclosures as a teaching tool.  

Makris affixed a public customer’s signature to a disability application without noting that the application had been signed by someone other than the customer; thereby violating her member firm’s prohibition against representatives signing documents on behalf of customers, even with the customer’s consent. Also, she failed to respond to NASD requests for information.

Caliope Makris: Barred.

While associated with a member firm, Cao maintained personal brokerage accounts at other member firms without giving prompt written notice to her member firm that she had accounts with those firms, and without notifying those firms of her association with her member firm. Kao participated in private securities transactions without giving prior written notice to her member firm. 

Angela Shuhui Kao : Fined $10,000; Suspended 40 business days in all capacities

Guidicipietro engaged in a private placement offering through means of an offering memorandum that was false and misleading. The offering memorandum failed to disclose that Guidicipietro would personally receive substantial commission payouts for all effected transactions and misrepresented the investment philosophy and trading strategy to be employed in the account, as well as the attendant risks. 

Rocco Gerard Guidicipietro : Fined $113,035 (includes commission disgorgement); Suspended 1 month in all capacities.

In his capacity as operations officer at his member firm, Germain converted shareholders’ funds totaling $184,337.96 by having mutual fund holdings liquidated and having the proceeds delivered to him by check or wired to his bank account. 

Paul Norman Germain : Barred

Clarke borrowed $38,000 from public customers even though his member firm’s written supervisory procedures specifically prohibited registered representatives from borrowing money from customers except immediate family members. Clarke failed to respond to NASD requests for information. 

Richard Crawford Clarke II : Barred; Ordered to pay $38,000 plus interest in restitution to public customers

Chicola effected unauthorized trades in public customers’ accounts. He failed to reasonably supervise an individual to prevent and/or detect unauthorized trades. Chicola settled a customer complaint without his member firm’s knowledge or consent. 

Jeffrey Robert Chicola : Fined $10,000;Suspended 2 years in all capacities

Cherry sent a letter to a variable annuity issuer requesting that the issuer reallocate the subaccounts in the variable annuities of many clients without his member firm’s approval. He caused these changes to be effected based upon oral discretionary authority the clients gave him, although he had not obtained the clients’ written discretionary authority, nor had he gotten his member firm to accept the accounts as discretionary accounts. 

Charles Randall Cherry: Fined $5,000; Suspended 10 business days in all capacities

Callaghan discovered that errors had been made in calculating the required minimum distribution for public customers’ IRA accounts, and in order to rectify the errors, altered and submitted disbursement request forms to her member firm without the customers’ knowledge, authorization or consent. 

Vicki L. Callaghan : Fined $5,000; Suspended 60 days in all capacities

Brighton borrowed $14,800 from public customers without his member firm’s approval, and failed to repay the loan by the agreed upon date, and failed to fully repay the customer. In inducing and obtaining the loans, Brighton failed to disclose to the customers that he had obtained loans from other customers in the past and had not yet repaid those customers in full.

Francis Preston Mark Brighton : Barred

The Firm failed to ensure that a temporary employee was not engaging in activities requiring NASD registration. 

Waddell & Reed, Inc.:  Censured; Fined $20,000

The Firm 

• shared research reports prepared before their publication;
• published research reports that did not disclose the valuation methods used to determine price targets; 
• failed to preserve copies of all electronic mail for three years and/or maintain electronic mail for the first two years in an accessible location; 
• permitted an individual to engage in securities business without being properly registered as a principal;
• participated in municipal underwritings while not employing a qualified municipal securities principal;
• permitted an individual to take customer securities orders, cause orders to be executed and solicit transaction while not registered as general securities representatives; 
• did not comply with the Regulatory Element of the Continuing Education requirement and with the Firm Element of the Continuing Education requirement;
• provided inaccurate information to NASD staff;
• failed to make adequate inquiries and conduct sufficient due diligence. 
• (acting through FINOPS) failed to establish and maintain ledgers and other records that accurately reflected all assets, liabilities and expense
• failed to give notice and/or timely notice under SEC Rule 17a-11 of material inadequacy, failed to timely file an annual audit report, failed to establish, maintain and enforce a supervisory system reasonably designed to insure its compliance with applicable laws, regulations and NASD rules regarding electronic correspondence, research and underwriting activities, and failed to properly update its supervisory procedures. 

Utendahl Capital Partners, L.P. : Censured; Fined $240,000; Required to submit to NASD quarterly reports for calendar years 2007, 2008 and 2009 audited by an independent public accountant in accordance with generally accepted accounting principles; and revise the firm’s written supervisory procedures to ensure that the firm maintains accurate financial books and records, maintains sufficient excess net capital to meet contractual commitments related to the firm’s underwriting activities and other financial obligations, maintains minimum required net capital, and files accurate Financial and Operational Combined Uniform Single (FOCUS) reports. 

The Firm distributed research reports prepared by an entity affiliated with the firm that were deficient, and those reports failed to contain the required research analysts’ certifications attesting to the nature of the views contained in the reports and their compensation. 

Redwood Brokerage, LLC : Censured; Fined $15,000

Northland failed to deposit investor funds in an appropriate escrow account for private offerings and released investor funds before the minimum contingency was met with bona fide investments. The Firm rendered false and misleading representations in a private placement memorandum that investor funds would be released to the issuer only after the minimum contingency was met. 

Northland Securities, Inc. : Censured; Fined $10,000

The Firm engaged in a general municipal securities business through the execution of unsolicited liquidating transactions in municipal securities for a public customer on a riskless principal basis. This activity comprised a material change in the firm’s business for which it had not sought or obtained NASD’s prior approval. The Firm conducted a municipal securities business without a qualified municipal securities principal and did not retain all electronic communications relating to its business. The Firm did not establish, maintain and enforce a supervisory system and written supervisory procedures reasonably designed to achieve compliance with the requirements of the SEC and MSRB rules with respect to the retention of electronic communications. 

McKim Capital, Inc. : Censured; Fined $20,000

The Firm failed to maintain and preserve electronic communications relating to its business. The Firm utilized a vendor to maintain and preserve electronic communications, and while the vendor initially captured those communications, the vendor could not later retrieve them and the firm failed to retain those communications. The Firm’s TRACE-eligible securities transactions were reported late. 

Legend Merchant Group, Inc. : Censured; Fined $30,000;  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 enforce its written supervisory procedures regarding the review of customer addresses and customer address change requests by the firm’s legal and compliance departments. The Firm failed to prevent a registered representative from having a back office clerk change customer addresses to post office boxes and to his home address in violation of firm written supervisory procedures. 

First Montauk Securities Corporation: Censured; Fined $10,000

The Firm failed to 

• implement a system that allowed the firm to adequately retain and retrieve instant messages that registered representatives sent and received;
• apply for the research analyst designation for a registered representative and for a supervisory designation for any of the firm’s principals to supervise a registered representative’s activity in his capacity as a research analyst; and
• adopt or implement written supervisory procedures reasonably designed to ensure compliance with research analyst rules. 

The Firm permitted an associated person to act in a capacity requiring registration as a general securities representative without being properly registered in that capacity. 

Block Orders Execution, LLC : Censured; Fined $11,000

The Firm provided non-cash compensation to associated persons of other NASD member firms in connection with the sale and distribution of investment company securities. The Firm failed to have systems and procedures in place that were reasonably designed to ensure compliance with NASD Rule 2830(L)(5) concerning non-cash compensation in connection with the sale of investment company securities. 

AllianceBernstein Investments, Inc. : Censured; Fined $100,000

Acting through Marshman, the Firm permitted an associated person of the firm to function as its chief compliance officer and perform various supervisory functions without being registered as a principal with NASD. The Firm failed to conduct independent testing for compliance with its anti-money laundering (AML) program and to provide for ongoing training for appropriate personnel. 

Aladdin Capital LLC: Censured; Fined $5,000; Fined $10,000 jt/sev with Marshman

George McMurray Marshman: Fined $10,000 jt/sev with Aladdin

A branch office of the Firm failed to establish and maintain a system to supervise its registered representatives’ activities reasonably designed to achieve compliance with applicable securities laws, regulations and NASD rules. The Firm’s supervisory system 

• failed to detect the activities of a registered representative engaged in an outside business activity (Evans did not review correspondence the representative received and facsimile correspondence he sent), and
• was deficient in that it had inadequate procedures regarding review of customer account statements to detect irregular activity in the representative’s customer accounts (failed to follow up on a “red flag“ that might have uncovered the representative’s Ponzi scheme). 

Acting through Evans, the Firm failed to adequately investigate the nature of a business entity and to monitor the entity’s account that would have revealed additional “red flags.“ Evans failed to conduct any further investigation regarding the representative’s outside business activities including calling customers, reviewing statements and verifying financial arrangements, but instead relied on the representative’s statements. 

Prudential Equity Group, LLC fka Prudential Securities, Inc.: Censured; Fined $125,000 

Gary Earl Evans: Fined $7,500; Suspended 45 days in Principal capacity

Bloom and Scott affixed public customers’ signatures to forms without the customers’ knowledge or consent. The Firm failed to promptly and accurately file with NASD an amended Rule 3070 Report and failed to amend Scott’s Uniform Application for Securities Industry Registration or Transfer (Form U4) to disclose a written complaint alleging forgery. 

Horace Mann Investors, Inc.:Censured; Fined $10,000

Sherman Marc Bloom: Fined $5,000; Suspended 30 days in all capacities

Jerry Deamus Scott:Fined $5,000; Suspended 60 days in all capacities

Voelker forged a client’s signature on life insurance applications, submitted the applications to his member firm and paid the premiums for the policies, and failed to respond to NASD requests for information and documents. 

Christopher M. Voelker : Barred

Vo allowed an unregistered individual (and Vo had no reasonable basis to believe that the individual was registered with NASD) who was also subject to disqualification from association with any NASD member, to be associated with his member firm.  Vo allowed him to 

• exercise supervisory and managerial powers at the firm, 
• control the firm’s securities operations and activities, and 
• engage in and perform a range of activities and functions that were impermissible and required registration. 

Vo made no reasonable effort to prevent the individual from exercising managerial powers at the firm. Vo willfully failed to amend his Form U4 to disclose material information. 

Kiet Tuan Vo : Fined $25,000; Barred in Principal capacity; Suspended 18 months in all capacities

Varner provided an affiliate of his member firm with a copy of what he claimed to be a valid insurance license issued by a state insurance department, when, in fact, his license with the state had expired, and he had altered the document to make it appear current before submitting it to his member firm.

James Lester Varner : Barred

Rocchio possessed unauthorized materials during a Series 7 qualifications examination. 

Susan Lynne Rocchio : Fined $5,000; Suspended 7 months all capacities

Randall was given discretionary trading authority over a public customer’s account at another member firm and failed to give the firm and his member firm the required notifications. Randall engaged in excessive and unsuitable trading in the customer’s account at another member firm. 

Michael Anthony Randall: Fined $5,000; Suspended 60 days all capacities

Poultre failed to provide complete and timely information to NASD during an onsite examination, in that he deleted business-related emails prior to providing access to his email communications. 

Michael Alcide Poutre II : Fined $5,000; Suspended 10 business days all capacities

Petretta failed to disclose to his member firm a public customer’s oral complaint and his $400 payment to the customer to compensate for the surrender charges incurred in connection with cash withdrawals made against a variable annuity policy. By failing to disclose the complaint and the $400 payment, Petretta’s member firm was precluded from conducting a more timely analysis of the customer’s written complaint. 

Robert Howard Petretta: Fined $5,000; Suspended 10 business days all capacities

Pauley withdrew $95,000 from a deceased public customer’s checking and savings accounts, transferred the funds to newly created bank accounts and moved $65,000 from the new accounts to an investment account in his name, thereby improperly using the customer’s funds. 

Brian L. Pauley: Barred

Pantaleo was found in possession of unauthorized materials during an examination for Series 7 licensing. 

Deane Joseph Pantaleo: Fined $20,000; Suspended 2 years in all capacities

Molenar affixed a copy of a public customer’s signature to a corrected Explanation of Transaction Form after noticing a mistake on the original form that the customer signed, and signed the customer’s initials on the second page of the corrected form without the customer’s knowledge or consent. 

Meredith Anne Molenar: Fined $5,000; Suspended 60 days in all capacities

In connection with the sales of securities, McFadden knowingly or recklessly made misstatements and omissions of material facts, in that he falsely represented to public customers that returns that would be generated by their investments were sufficient to allow customers to retire from their jobs and replace salary payments with regular, sustainable monthly withdrawals from their securities accounts. McFadden recommended securities transactions to customers that were unsuitable in view of the customers’ financial situations and investment objectives, and he disseminated false and misleading sales literature to customers, including monthly account statements that contained material omissions and misrepresentations.  McFadden referred to himself as an experienced “CPA” despite the fact that he did not have a current, valid, active certificate. McFadden did not submit the sales literature and correspondence to his member firm for prior approval. Finally, he effected transactions in the accounts of customers without their prior authorization, knowledge or consent. 

David Lester McFadden : Barred

Malloy 

• purchased and sold securities for a public customer at a member firm without providing written notification to his member firm and the executing firm of his association with another firm;
• entered into an agreement with the customer to share in the profits without his member firm’s prior written authorization;
• engaged in a level of trading activity in public customers’ accounts that was excessive in light of the customers’ financial situation and objective;
• settled a customer complaint without his firm’s knowledge or authorization; and
• failed to respond to NASD requests for information and document 

William Andrew Malloy: Barred; Ordered to pay $278,072.59 in restitution

Labadie offered and sold unregistered shares of common stocks to public customers; and he made material misrepresentations or omitted material facts to customers in those offers and sales. He failed to disclose to customers any of the risks associated with investment in the stocks and failed to provide documentation regarding the securities. Further,  Labadie directed customers to pay for their stock purchases to the firm or another non-registered entity that Labadie led customers to believe was the firm’s clearing firm or bank. He failed to provide documentation evidencing the purchases, and the customer funds were never returned to them by Labadie. Finally, Labadie failed to register as a general securities representative while soliciting customers to purchase securities. 

Steven Matthew Labadie : Fined $15,000; Suspended 18 months in all capacities.

Klein sent a hand-written note to a mutual fund company in which he falsely represented that he was a public customer. Klein never obtained the customer’s consent or authority to send the letter on her behalf, designate himself as the representative for the account or change the customer’s mailing address to his own. 

Harold Lawrence Klein : Barred

Jacke distributed sales literature to members of the public that contained false, exaggerated, unwarranted or misleading statements and claims; failed to identify the financial product being promoted as well as its features, benefits, fees, charges, withdrawal restrictions and risks; failed to provide investors with a sound basis for evaluating the product; failed to disclose his member firm’s name; and failed to file sales literature concerning registered investment companies with NASD within 10 days of first use. 

Christopher Lee Jacke: Fined $10,000; Suspended 2 months in all capacities; Required to requalify as General Securities Representative; Subject to a "pre-use' filing requirement for all future advertisements for 2 years.

Gilliland reimbursed public customers for surrender fees based on oral complaints without notifying his member firm that the surrender fees had been incurred when moving assets to the firm, or that the customers were verbally complaining. 

Dale Lee Gilliland : Fined $5,000; Suspended 10 business days in all capacities

This Associated Person misused $218,558.00 of public customers’ funds intended to be invested on the customers’ behalf, and rather than depositing the funds into the customers’ accounts as instructed, Gallagher caused the funds to be deposited into a bank account she controlled without the customers’ knowledge, authorization or consent. She forged, or caused to be forged, a registered representative and public customers’ signatures on Investment Distribution Forms, causing funds to be wired from the customers’ accounts to accounts under her control without the customers’ knowledge or authorization to conceal her misuse of funds. Finally, Gallagher falsified books and records, and forged documents and customers’ signatures in order to conceal her misuse. 

Kathy Lynn Gallagher : Barred

The Firm failed to ensure that an individual working at the firm did not engage in any activities requiring NASD registration. 

Waddell & Reed, Inc.: Censured; Fined $20,000

The Firm's written supervisory procedures failed to specify a cycle according to which its non Office of Supervisory Jurisdiction branches would be inspected. The Firm failed to retain email messages in an accessible, reviewable format, and to review incoming and outgoing emails during a period of time. Also, the Firm failed to develop and implement a written AML program reasonably designed to achieve and monitor compliance with the requirements of the Bank Secrecy Act and the regulations promulgated there under. 

Strand, Atkinson, Williams & York, Inc. : Censured; Fined $50,000

The Firm failed to

• timely report to NASD customer complaints regarding misappropriation of funds or forgery, 
• timely report disciplinary actions of its registered representatives that resulted in terminations or suspensions and filing charges against an associated person;
• pre-file sales material from a training seminar with NASD in accordance with a previous AWC; and
• accurately report municipal securities transactions and accurately prepare municipal customer confirmations.

Northwestern Mutual Investment Services, LLC : Censured; Fined $115,000

The Firm facilitated market timing activities of two hedge fund companies by using multiple accounts that cleared through different clearing firms in order to circumvent the trading restrictions the mutual fund companies implemented. The Firm failed to preserve copies of electronic communications associated persons in its branch offices sent or received. 

Archer Alexander Securities Corporation: Censured; Fiend $108,450.10 (includes $38,450.10 disgorgement)

The Firm permitted individuals to act in a capacity that required registration while their registration status with NASD was inactive due to their failure to complete the Regulatory Element of NASD’s Continuing Education requirement. The Firm failed to report statistical and summary information regarding customer complaints as NASD Rule 3070(c) requires. The Firm prepared an inaccurate month-end net capital computation and filed an inaccurate Financial and Operational Combined Uniform Single (FOCUS) report. 

Advanced Planning Securities, Inc.: Censured; Fined $10,000

Acting through DeCastro, the Firm permitted 

• an employee to engage in activities that required registration while his general securities representative registration status with NASD was inactive due to his failure to complete the Regulatory Element of NASD’s Continuing Education Requirement, and
• its associated persons to engage in activities that require registration with NASD as Limited Representatives - Equity Traders (ET) when they were not so registered. 

Also, the Firm failed to ensure that the individual who supervises the individuals’ ET-related activities was registered as an ET, as required. 

Pactual Capital Corporation: Censured; Fined $20,000 ($10,000 joint/several with DeCastro)

Christina S.A. DeCastro: Censured; Fined $10,000 joint/several with Firm

Elliot, Shepherd and Griling knew that an individual was an associated person of another member firm, had a financial interest in an account opened at Haywood Securities and failed to inform his employer that he would exercise discretionary authority over the account. Prior to executing transactions for this customer’s account, acting through Elliott, Shepherd and Girling, the Firm did not notify the individual’s member firm, in writing or otherwise, of its intention to open the account, nor did it notify the individual of its intention to provide notice to his member firm. 

Haywood Securities (USA), Inc.: Censured; Fined $50,000 ($15,000 jt/sev with Elliott; $15,000 jt/sev with Shepherd; and $10,000 jt/sev with Girling)

John David Shepherd: Fined $15,000 jt/sev with Firm; Suspended 10 business days all capacities

David Brian Elliott: Fined $15,000 jt/sev with Firm; Suspended 10 business days all capacities

Nancylee Girling: Fined $10,000 jt/sev with Firm

The Firm and Ramson failed to enforce the firm’s supervisory system and written procedures, and Ramson failed to supervise the registered representatives assigned to the firm’s home office. 

Acting through Ramson, the Firm failed to 

• take reasonable measures to ensure that Viola, a designated principal assigned to supervise a registered representative, was diligently exercising the supervisory authority delegated to him, and
• ensure that the designated principal responsible for maintaining and enforcing the firm’s supervisory system and procedures and for supervising the representatives at the home office reasonably exercised the delegated duties assigned to him. 

Mekalainas failed to 

• take reasonable steps to verify that a branch office was being adequately supervised and that Viola was diligently exercising his delegated supervisory responsibilities over the branch, and
• reasonably supervise a registered representative’s activities and permitted him to engage in securities transactions without proper registration. 

Viola failed to 

• monitor and inspect a registered representative’s off-site office, 
• enforce effective procedures to supervise his outside business activities, and
• review his customers’ securities transactions daily and accurately identify his supervisors in the firm’s written supervisory procedures as well as the specific areas of supervision for which the supervisors were responsible. 

Great Eastern Securities, Inc.: Fined $100,000 jt/sev with Ramson; Ordered to retain an independent consultant to review the firm’s policies, systems, procedures and training relating to supervisory deficiencies, and submit a report to NASD with recommendations.

Alphonse Mekalainas Jr.: Fined $25,000; Suspended 1 year in all capacities followed by 18-month Principal capacity suspension

Ernest Richard Viola: Fined $5,000; Barred in Principal capacity; Suspended 60 days in all capacities

Jeffrey Scott Ramson: Barred in Principal capacity; suspended 6 months all capacities

The Firm permitted Kailer to actively engage in the management of its investment banking or securities business without being registered as a general securities principal. Acting through Kailer, the firm

1. permitted a representative to conduct a securities business while his registration was inactive due to his failure to timely satisfy the Regulatory Element of the Continuing Education requirement; 
2. failed to maintain all required information for new accounts; and
3. failed to maintain email correspondence sent or received by Kailer relating to the firm’s business. 

The Firm was unable to produce any written procedures relating to email or instant messaging prior to contracting for electronic storage. 

Banif Securities, Inc. : Censured; Fined $45,000 ($20,000 joint/several with Kailer)

Richard John Kailer: Censured; Fined $20,000 joint/several with Firm