NOTE: Stipulation of Facts and Consent to Penalty (SFC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions and to the entry of findings.

2006
NYSE CASES OF NOTE 

James Byongmin Yim was a former registered representative with Morgan Stanley D.W. Inc. (the Firm) at its Reno, Nevada branch from 1998 through May 2004, when he was terminated.

In or about July 2001, Yim’s customer, VH, asked Yim for recommendations for investments outside of the Firm. Without the Firm's knowledge or approval, Yim recommended that VH invest money with Yim’s uncle, who had a private family business in Korea. In or about July 2001, VH gave Yim $13,000, which was purportedly for VH’s investment in Yim’s uncle’s business. Yim executed and issued a promissory note to VH which stated that the $13,000 was to be repaid with interest within one year. Yim issued the promissory note to VH without first subjecting such correspondence to review by the Firm. Although Yim repaid the full $13,000 to VH before the year’s end, the Firm reminded Yim of its policies prohibiting loans to or from customers and warned Yim that any future repeat offenses of similar conduct could result in the termination of his employment. 

In or about early 2003 TG (a friend of Yim's aunt AY) loaned approximately $55,000 to AY. When AY could not repay the loan, withouth informing the Firm, Yim agreed to accept the responsibility of repaying the loan to TG, notwithstanding the Firm’s previous warning relating to loans from customers. In or about February 2003,Yim gave TG a personal check in the amount of $56,283.32 representing the return of funds loaned to his aunt with interest. The check was drawn on Yim’s personal checking account held at Bank A. Yim’s personal check was returned to TG by Yim’s bank for insufficient funds. At the time Yim gave the check to TG, Yim knew that he did not have sufficient funds on deposit in his checking account to cover the check. 

KP and his wife, DP, maintained IRAs at the Firm’s Sacramento, California office. Yim was named as a Financial Advisor on the accounts. On or about April 15, 2004, Yim deposited two personal checks drawn on his checking account held at Bank A in the amount of $6,000 each, into the accounts of KP and DP. 20. Yim deposited his personal checks into the accounts of KP and DP so that the Ps could meet the April 15, 2004 deadline for their 2003 Roth IRA contributions of $3,000 each, and also for their 2004 Roth IRA contributions of $3,000 each. On or about April 29, 2004, Bank A returned Yim’s personal checks to the Firm for insufficient funds. On April 15, 2004, Yim knew that he did not have sufficient funds on deposit in his joint checking account to cover the two $6,000 checks. When questioned about these checks by the Firm, Yim claimed that he had deposited a $14,000 check into his bank account which had failed to clear by the time the two personal checks were presented to Bank A for payment. Yim repeated that statement during his sworn testimony to NYSE Regulation on January 12, 2006. Nevertheless, Yim’s bank account statements do not reflect a $14,000 deposit at any time prior or close to April 15, 2004. 

The NYSE Hearing Panel found that Yim violated:

• NYSE Rule 476(a)(6) by 
  • depositing personal checks into accounts of customers when he knew that his funds were insufficient to cover such checks, 
  • by issuing personal check to customer of his member organization employer when he knew that his funds were insufficient to cover such check, 
  • by recommending a customer invest in an unapproved outside business, and 
  • by making misstatement to his member organization employer concerning alleged deposit into his personal bank account; 
    
• NYSE Rule 476(a)(4) by making material misstatement to NYSE concerning alleged deposit into his personal bank account; and
  
• NYSE Rule 342.16 by issuing promissory note to customer without first subjecting such correspondence to review by his member organization employer 

James Byongmin Yim: Censure; 9 month Bar

In October 2003,  Edward D. Jones & Company (the “Firm”) received a verbal complaint from client Customer C (whose account was serviced by Registered Representataive Turner at the Firm's Mukilteo, Washington branch office) regarding the liquidation of certain funds he held at XYZ. Customer C had agreed to transfer these funds from XYZ to the Firm, but he did not want to liquidate his positions.  However, Customer C’s funds at XYZ were liquidated when Turner called XYZ and falsely represented that he was Customer C and made the request.

A Firm compliance officer, questioned Turner about Customer C’s complaint. In response, Turner explained that he did call XYZ regarding the transfer of the customer account but Turner claimed that he identified himself as “Lee Turner with Edward Jones, calling on behalf of my client Customer C.” That statement was false and the Firm terminated Turner pursuant to a  Uniform Termination Notice for Securities Industry Registration (“Form U-5”) dated February 9, 2004. 

The NYSE notified Turner of its formal investigation by letter dated July 14, 2004, which Turner received.  On August 10, 2004 Turner sent a responsive email stating that he was traveling in India and stated, “I pledge you my assistance once I return, I retained copious notes just for this forum.” Additionally, Turner stated “I’ll be there (Zanskar) for nearly 12 days so I wont be in touch until at least then.” Turner never contacted NYSE as required and promised.  The NYSE subsequently informed Turner that he was required to appear for an on-the-record interview (OTR) on February 22, 2005.  An individual representing herself to be Turner's mother sent the NYSE an email dated January 30, 2005, in which it was stated that Turner could not appear at the OTR because he would still be out of the country.  The NYSE again noticed Turner for an OTR on June 27, 2005; and the purported mother sent another email dated June 11th advising that her son would not be returning to the US until mid-August/September 2005, and would then comply.  In response to another NYSE letter, Turner sent an email dated June 24, 2005, stating that he has written substantive “briefs” to the Firm about the allegations against him and wishes to have this record stand as his response. Turner also states “I do not envision ever working in the financial field again, a self-imposed exile if you will.”
To date, Turner has failed to respond to the NYSE’s requests for written explanation and testimony.

The NYSE Hearing Panel found that Turner:

1. Failed to comply with Exchange requests for information and testimony; and
   
2. Engaged in conduct inconsistent with just and equitable principles of trade by:
   (A) impersonating a customer of a member firm for the purpose of transferring his account; and
   (B) making material misstatements to a member firm compliance officer during the course of an internal investigation.
   

Lee Mackay Turner: Censure: Permanent Bar in all capacities

In April 1999, Daniel Thomas Lemaitre joined Merrill Lynch, Pierce, Fenner and Smith Incorporated (the “Firm”) as a First Vice President and Senior Analyst, and also as the head of the firm’s Medical Technology Research Group.  On or about September 15, 2003, two of the companies followed by the Firm’s Medical Technology Research Group were XYZ and ABC. At such time, both companies were developers, manufacturers and marketers of medical devices, including cardiovascular drug-eluting stents.  ABC had  just published data from the clinical program for its cardiovascular stent reporting, among other things, an 8.9% in-segment restenosis rate. Prior to this disclosure, Lemaitre had published research reports that opined that the Clinical Trial Results to be reported by XYZ on September 15 would be at least equal to the data that had been published by ABC and that there was a high likelihood that XYZ’s results would be better than such data.

Confidential 11AM Press-only Conference

On or about September 15, Lemaitre attended a medical conference in Washington, D.c. where XYZ publicly presented clinical trial results (the “Clinical Trial Results”) concerning a drug-eluting stent that it was developing.  At an 11:00 a.m. briefing held at the conference, XYZ confidentially released the Clinical Trial Results to the press (who were prohibited from disclosing such results to any third party prior to the public release of such information later that afternoon).  

The Crowd Outside the Press-only Conference Room

During the press briefing, a number of analysts, including Lemaitre, assembled in a crowd outside of the conference’s press room, and certain rumors concerning the results were discussed among the crowd.  While in the crowd, Lemaitre heard reports and/or rumors concerning at least a portion of the Clinical Trial Results prior to the public release of such information by XYZ. At such time, he also received a telephone call from a reporter who was not present at the conference, and she advised Lemaitre that she had heard that the Clinical Trial Results compared favorably to ABC’s published data.   At approximately 11:30 a.m., Lemaitre observed that the XYZ officials who were leaving the press room appeared, both from their facial expressions and their physical conduct, to be very happy.

11:35 Squawk Box

At approximately 11:35 a.m., Lemaitre, who was still at the conference, conducted a telephonic “squawk box” broadcast, which was approved in advance by a Firm compliance officer. During this broadcast, Lemaitre stated:

We do not have the ability to give you the specifics yet, but we can tell you that that in fact the data is better than [ABC’s] data . . . . . The in-segment restenosis rate actually was below [ABC’s] 8.9%. Also, the target mean revascularization . was better. The diabetic numbers were dramatically better . . .. But at this point what I think you should just understand that in fact the data on a number of scores was in fact better than [ABC’s] numbers. (Emphasis added.)

E-Mail Exchanges

At approximately 11:44 p.m., an institutional salesperson at the Firm sent an e-mail to Lemaitre, stating 

“how do you get confirmation that the data is better (in-segment, etc.) if the actual data is not out yet?”

At approximately 12:13 p.m., Lemaitre responded to the aforementioned e-mail, stating 

“My job.”

At approximately 12:18 p.m., the salesperson again e-mailed Le Maitre. In this e-mail, the salesperson stated 

“[you] are good at it. Heard in-stent restenosis rate is 7.9% v. 26% control arm. . . in-segment should be better?”

At approximately 12:26 p.m., Lemaitre sent an e-mail to the salesperson stating 

“7.9 is the in-segment. In-stent was [a] tad north of 5 but below 6.”

Flash Note Research Report

At approximately 12.32 p.m., Lemaitre caused a research report (the “Flash Note”) to be issued to certain of the Firm’s customers concerning the Clinical Trial Results. The Flash Note, which was approved in advance by a Firm compliance officer, began by stating that the “[f]inal results from [XYZ’s] . . . pivotal U.S. study were presented to the press this morning.” It thereafter went on to state, among other things:

a. “The details of the study results will not be available until later today, but our checks at [the conference] indicate that the data compare favorably to [ABC’s] pivotal U.S. study . . ..”

b. “Although it looks like in-stent restenosis rates . . . were higher in [XYZP] versus [ABC’s] product, the in-segment rates . . .
were lower.”

c. “Additionally, the [XYZP] data were superior with respect to total lesion revascularization rates….”

Trading Halt

Trading in XYZ stock was halted by the NYSE from the opening of trading on September 15 until approximately 2:27 p.m. on that day.  The NYSE did not halt trading in ABC stock on September 15. Between 11:30 a.m. and 2:00 p.m. on that day, ABC shares fell approximately 2.5%.
At 2:00 p.m. on September 15, the Clinical Trial Results were released by XYZ to the public via the issuance of a press release. The release reported, among other things, a 7.9% in-segment restenosis rate, which compared favorably to the trial results published by ABC for its competing product.  

Lemaitre’s employment with the Firm terminated in January of 2005. He is not currently employed in the securities industry.

The Hearing Panel found that Lemaitre:

I. Engaged in conduct inconsistent with just and equitable principles of trade in that he obtained material information concerning a NYSE listed security and publicly disseminated such information prior to its official public release in internal communications at his member firm employer and in a written research note that was provided to certain customers of such firm; and

II. Violated NYSE Rule 435(5) in that, on one or more occasions, he circulated rumors of a sensational character concerning an Exchange listed security which were sensational in character and might reasonably be expected to affect market conditions.

Daniel Thomas Lemaitre: Censure; Fined $50,000; Barred 2 months in all capacities

Is it sensible to have press-only disclosures that require a good-faith embargo by third parties for hours?  Should third-parties even be permitted on premises during the press conference and prior to the public release?  Are analysts supposed to be warned against inferring anything from the smiling faces of company execs who have just departed a press conference?  If a reporter calls an analysts and essentially asks what he or she thinks about the positive comments that were purportedly just made at a press-only conference, is that the analysts fault"

Ultimately this is flawed rulemaking and questionable enforcement.  My professional experience has taught me that regulators need to speed up the public disclosure of virtually all announcements and comments, and that efforts to buffer or delay the "public" release create a devil's playground.  To a large degree, Lemaitre seems to have done his job.  But that NYSE and the issuer community were as diligent!

John Graydon Coghlan specialized in the area of retirement planning, essentially conducting seminars for employees of various corporations. He also solicited business from corporate employees by mail and phone. Coghlan was the head of the Coghlan Group, a group of registered representatives and sales assistants that worked together at Merrill Lynch, Pierce, Fenner & Smith Incorporated (“the Firm”) at its downtown San Diego, California office (the "SD Office") in developing this business. However, the employees affiliated with the Coghlan Group were firm employees over whom Coghlan did not have supervisory authority. 

In January 2002, during the course of an internal audit of the SD Office by the Firm's compliance department, the auditor reviewed a group of marketing materials which Coghlan used in his mail solicitations and seminars (“Self-Authored Materials”). The Self-Authored Materials had been approved locally by Coghlan's Branch Office management and submitted to Merrill Lynch’s New York office for approval. Coghlan had been permitted by the local management to distribute his Self-Authored Materials to the public pending approval by Merrill Lynch's New York office. 

A meeting was held at the Firm’s New York offices on February 8, 2002, to discuss, among other things, the Self-Authored Materials. In addition to Coghlan, a number of Firm employees who were affiliated with the SD Office, the Firm’s Compliance Department and Office of General Counsel were present. Another Firm employee, Vice President, Retirement Services, participated by telephone. During the meeting, Coghlan’s Self-Authored Materials were reviewed and a number of changes were discussed, including changes to a document entitled “Questions and Answers on Your ‘Company’ Lump Sum Distribution” (the “Q&A”), as well as changes to other Self-Authored Materials that related to style and Firm protocol. Coghlan was advised that he would need to make the requested changes in the Self-Authored Materials and that, although he could continue to conduct seminars, he could not use any of the Self-Authored Materials in his seminars, to solicit potential clients, or otherwise until the changes had been made and approved by the Firm’s Marketing and Legal Departments. 

Thereafter, both the Branch Administrator of the Involved Office and the District Administrative Manager reiterated to Coghlan that only Firm-approved marketing materials could be used in Coghlan’s seminars and other marketing activities. Following the New York meeting, a Firm registered representative and member of Coghlan’s working group made changes to the Self-Authored Materials based on the New York meeting and reviewed them with the Branch Administrator. Thereafter, Coghlan distributed or made available the revised Self-Authored Materials at a single seminar on March 14, 2002, which was attended by approximately 15 members of the public. The Q&A was not used at that seminar or otherwise following the New York meeting. The revised Self-Authored Materials had not been approved by Merrill Lynch’s Marketing and Legal Departments prior to their distribution at the March 14, 2002 seminar. 

The Hearing Panel found that Coghlan violated NYSE Rule 472(a) in that he caused his then-member organization employer to distribute marketing letters and sales literature to the public which had not been approved in advance by a member, allied member, supervisory analyst or person designated under the provisions of NYSE Rule 342(b)(1).  Apparently, in submitting his settlement offer per the SFC, Coghlan had agreed to a Censure and a $50,000 fine.  In a rare and laudable action, the Panel reduced the fine to $25,000.The Hearing Panel found that the consented-to penalty was not supported by the precedents cited or by the facts of this case. 

The precedents cited were: 

• In re Eddie Shu Fung, Decision 99-147 (NYSE Hearing Panel Oct. 28, 1999) (consent to censure and $25,000 fine)

The conduct in Fung included a registered representative’s agreeing in writing to share in a customer’s loss to the extent of $10,000, preparing inaccurate memoranda of brokerage orders, placing securities purchased for customers in his personal account, changing account designation of an order without authorization, placing a disputed transaction in his personal account and delivering documentation to a customer without his firm’s approval. 

• In re Harvey P. Cook, Decision 02-47 (NYSE Hearing Panel Mar. 8, 2002) (consent to censure and $25,000 fine); 

The conduct in Cook involved the acceptance of approximately 78 orders for approximately 19 customers accounts from a spouse or relative of the customer involved, without that customer’s prior written authorization. The conduct extended over a period of four years.  

• In re William Paul Van Oosterhout, Decision 02-231, (NYSE Hearing Panel Nov. 20, 2002) (consent to censure and $25,000)

The conduct in Oosterhout involved the exercise of discretionary power in customer accounts with oral, but not written, authorization. A minimum of 73 of these trades occurred in four customer accounts. 

The Hearing Panel noted that Coghlan's violation involved one meeting at which he distributed revised material to 15 members of the public. The original version of the material distributed had issues relating only to style and firm protocol. Changes were made locally to the material based on the discussions at a meeting in New York with Legal, Compliance and others; although, admittedly, said changes had not yet been approved by the Firm’s marketing and legal departments. Finally, the Panel found the conduct in the precedent cases to be significantly more serious than Coghlan’s. 

John Graydon Coghlan: Censure; Fined $25,000

Nonetheless, Coghlan raises the ever provocative question.  Must every wrong result in a fine?  What additional benefit was gained in this case by imposing a $25,000 fine --- and let's not forget that the Staff was seeking a $50,000 fine, which the Panel reduced.

Relatives of those interred at a certain cemetery established a trust (the "Trust") for the purpose of paying the costs of maintenance and upkeep of the cemetery. In January 2002, Eades, who was a non-registered employee with Edward Jones (the "Firm"),  was elected secretary/treasurer of the Trust and she reported her appointment as an officer of the Trust to the Firm. At that time, the Trust did not have an account with the Firm. After the Firm learned from Eades that she did not have any authority to handle monies or write checks on behalf of the Trust, it approved her affiliation with the Trust. 

In August 2003, Eades re-applied to the Firm for approval of her position as secretary/treasurer for the Trust. In September 2003, the Firm gave Eades permission to continue her position with the Trust. In November 2003, Eades sought approval to open an account at the Firm on behalf of the Trust. The Firm permitted Eades to open the account but required her to resign her position as secretary/treasurer for the Trust because Firm policies prohibit its employees from holding treasurer positions in organizations that have accounts with Edward Jones.

On or about July 2003, Eades entered into a loan agreement with KG, whereby Eades agreed to become a partial owner of KG’s business and share in the company’s future profits. KG was not a customer of the Firm. Over the next several months, Eades loaned KG over $100,000 and thereby acquired an ownership interest in the business. Both Exchange Rule 346(b) and the Firm’s written policy required Eades to obtain the Firm’s written approval before engaging in any outside business activity. Eades never informed the Firm about her business association with KG’s business. 

Between November and December 2003, Eades borrowed over $80,000 from three customers without the Firm’s prior approval. Eades never notified the Firm that she obtained personal loans from clients. On December 12, 2003, Eades made an unsuccessful bid to borrow money from two elderly customers. A family member of one of the customers contacted Eades’ branch manager and complained about Eades’s attempt to procure a personal loan. The second customer contacted the branch to complain about Eades’ loan solicitation. The Branch Manager, in turn confronted Eades, inquiring whether she solicited loans from two elderly customers. Eades denied asking customers for money. Eades’ denial was a misstatement.  The Firm terminated her on December 13, 2003.

Shortly after Eades’s termination, the Firm discovered that two checks from the Trust, totaling nearly $8,000, were deposited in Eades’s personal account at the Firm, rather than the Trust’s account. The Firm contacted a trustee for the Trust, who confirmed that the checks deposited in the Eades account were intended for the Trust’s account. Eades’s family fully reimbursed the Trust. 

The Hearing Panel found that Eades violated:

1. NYSE Rule 476(a)(6), by engaging in conduct inconsistent with just and equitable principles of trade in that she:
   (A) misappropriated customer funds;
   (B) borrowed funds from customers without disclosing the loans to her member firm employer; and
   (C) made misstatements to her member firm employer; and
   
2. Violated NYSE Rule 346(b) in that she engaged in an outside business without prior approval from her member firm employer.
   

Regina Eades: Censure; Permanent Bar 

For a similar case, see Gregory Thomas Boston #E8A2004107701/May 2006

From 2000 to 2003, Wiklund, a registered representative with T.D. Waterhouse Investor Services, Inc. (the "Firm") posted at least 128 messages on the Internet without Firm approval.  The posting were made under his screen name "Floridian ggg" and through his office or home computer.

Shortly after he began his employment with the Firm, Wiklund observed that BOM, his branch office manager, was posting messages on Internet bulletin boards relating to securities which BOM owned.  Wiklund’s Internet postings were made on the Raging Bull and InvestorsHub bulletin board regarding securities he owned at the time: XYZ and ABC.  Some of the postings made by Wiklund on the InvestorsHub XYZ bulletin board are noted below.

The NYSE concluded that the above statements, as well as other statements contained in the postings made by Wiklund, were speculative and could reasonably be expected to affect investor interest.

The NYSE found that Wiklund:

1. Violated NYSE Rule 472(a) by posting, on one or more occasions, communications concerning securities on Internet message boards without the knowledge and approval of his member firm employer: and
   
2. Engaged in conduct inconsistent with just and equitable principles of trade in violation of NYSE Rule 476(a)(6) by posting, on one or more occasions, on Internet message boards, without the knowledge and approval of his member firm employer, communications containing speculative statements concerning securities, which could reasonably be expected to affect investor interest at a time when he held an interest in such securities.
   

Erik William Wiklund:  Censure; Barred 3 months in all capacities