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.

Douglas Christopher Green (Principal)
2008012444201/February 2011

Green affected trades in collateralized mortgage obligation (CMO) bonds in his member firm’s proprietary trading account to conceal inventory positions and create the false appearance of profitability through the use of fictitious and pre-arranged trades. In some cases, no contra-party had agreed to the transaction at the time Green submitted an order, and in other cases, Green had agreed to repurchase the security from the contra-party at an agreed-upon price that guaranteed a profit to the contra-party, causing the beneficial ownership to remain with Green.

Green devised a strategy that not only hedged and concealed the positions, but circumvented trading capital and inventory limits his firm set, and created the impression of profitable trading by extending the settlement dates for certain bonds and coordinating fictitious transactions with other broker-dealers.

Green received compensation based upon the overall profitability of the firm’s proprietary account, and because Green’s scheme created the appearance of profitability, he received compensation based upon the apparent profits; Green received $7,353,000, which resulted in an overstatement of the firm’s net capital and caused the firm to cease business. Green caused the firm’s books and records to be inaccurate. In addition, he failed to respond to FINRA requests for documents and information, and to appear for on-the-record testimony.

Douglas Christopher Green (Principal): Barred

Tags:  Proprietary Traders    CMO    Trading Limits    Trading Volume     |    In: Cases of Note : FINRA