NEW YORK STOCK EXCHANGE, INC. 

SOURCE CITE

A Stipulation of Facts and Consent to Penalty is submitted by the Respondent without admitting or deny guilt, but merely consenting to findings by the Hearing Panel.

NYSE Rule 342

Firm failed to reasonably supervise and control its activities by permitting producing BOM to recommend unsuitable junk bonds (at unacceptable levels of concentration). Issue of producing BOM supervising own sales practices. Censure, $25,000 fine, independent compliance consultant

Prentice Securities, Inc. submitted a Stipulation of Facts and Consent to Penalty to the NYSE, which was accepted by the Hearing Panel as set forth below.

During 1997-1999, PSI's Milwaukee branch solicited so-called junk bonds for 30 customers .  All the accounts at issue were handled by producing Branch Office Manager AB and by one of two registered representatives CD or DF.  The junk bonds were not priced on account statements and made up a substantial portion of or the total assets in the accounts.  Based upon the customers' objectives, experience, and resources such concentrations in highly speculative securities were deemed unsuitable by NYSE.

25 customers filed complaints against PSI seeking damages ranging from $20,000 to $75,000 each.  To date PSI has settled 11 complaints for approximately $460,000.  At least five of the junk bonds defaulted.  

NYSE determined that PSI failed to 

1. reasonably supervise and control its business activities to detect and/or prevent the unsuitable transactions at issue;

2. implement and maintain adequate supervisory procedures for the branch office and its producing manager; and

3. review the suitability of corporate bonds recommended by the manager and two RRs (particular criticism noted for permitting BOM to supervise his own sales activities).

Hearing Panel imposed a Censure, $25,000 fine, undertaking to retain outside consultant 

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