Statutory Disqualification Index
NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.

In the Matter of the Continued Association of X as a General Securities Principal with the Sponsoring Firm 

MC-400: July 2001 

Redacted Decision
SD Decision No. 02003

APPROVED without hearing upon the recommendation of the Department of Member Regulation in accordance with NASD Procedural Rule 9523

Filed Under: Felony, Controlled Substance, Approval after hearing
SD Event

1992 guilty plea to charges of criminal sale of a controlled substance(one-half ounce of cocaine). The conviction was a second-degree felony. X was sentenced to lifetime probation; however, in 1997, he was granted an early discharge from probation. He also was issued a Certificate of Relief from Civil Disabilities in 1996. We note that X's statutory disqualification expires on March 27, 2002

Sentence Expiration

1997 discharge

Prior Industry Activity

Prior SD applications approved on three occasions as of 1997.  NASD subsequently approved X as an equity trader with Firm.  Passed Series 24 in 2001.


1997-1998 served as an apprentice trader without Firm having sought SD approval. In 1999, NASD issued AWC against Firm and LOC to X. 

Sponsoring Firm

NASD member since 1936. Full-service investment bank engaged in retail brokerage. and has been in the industry for 125 years. 4 OSJs and 6 branches.  Employs 40 registered principals and 251 RRs.  AWCs: statutory disqualification procedures, Censure/$50,000 fine; written supervisory procedures Censure/$8,000 fine; ACT, limit order quotes,short sale reports, Censure/$2,000 fine; free-riding interpretation Censure/$7,500 fine, LOC: OTCBB quotes, $250 fine;CBOE Censure/$125,000 fine for supervision; SEC Cease and Desist for unregistered sales; settlements with six different states. Presently a defendant in several class actions alleging public offering conduct.  Firm does not employ any other SDs.

Proposed Activity

X to be employed in main office as assistant head trader on OTC desk with ability to recruit personnel, act in liaison capacities, and rainmaking. Compensated per base salary, override, and bonus.

Proposed Supervisor

Head Trader on OTC desk. GSR 1993. GSP 1998.  No regulatory history.

Member Regulation Recommendation



X was 23 years old at time of offense and out of college one year.  Proposed supervisor has 9 years of industry experience and no record.  Noted the AWC for failure to register as assistant trader but ascribed violation to confusion as to “clerical capacity”. Firm’s history “not out of the ordinary for a large firm.” Only two incidents at Firm within past four years and none bear directly on ability to effectively supervise.  


1.         X will sit in close physical proximity to the Proposed Supervisor, on the same OTC desk, in the same location.           

2.         X will act as a principal on the Firm's OTC desk, carrying out the specified duties as expressed in above in the section entitled "X's Proposed Business Activities."           

3.         X will have no dealings with public customers of the Sponsoring Firm, nor shall he be authorized to commit any of the Sponsoring Firm's capital.

4.         X will not be responsible for servicing accounts or providing investment advice to the Sponsoring Firm's customers.           

5.         All of X's outgoing correspondence will be approved by the Proposed Supervisor prior to being sent.  The Proposed Supervisor will review all incoming correspondence.  The Proposed Supervisor will maintain copies of all outgoing and incoming correspondence with his initials, thereby evidencing his review and approval.

6.         The Proposed Supervisor will meet with X on a quarterly basis to review his transactions.  A log shall be kept by the Firm of these meetings.           

7.         All complaints pertaining to X, whether verbal or written, will be immediately referred to the Proposed Supervisor for review, and then to the director of compliance.  The Proposed Supervisor will prepare a memorandum to the file as to what measures he took to investigate the merits of the complaint and the resolution of the matter. Documents pertaining to these complaints will be kept segregated for ease of review.           

8.         For the duration of X's statutory disqualification, the Sponsoring Firm must obtain prior approval from Member Regulation if it wishes to change X'sresponsible supervisor from the Proposed Supervisor to another person.

Enforcement Actions