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» CASES OF NOTE » CONTINUING EDUCATION » OUTSIDE BUSINESS/PRIVATE TRANSACTIONS » U4, U5 AND RE3 » RESEARCH & ADVERTISING » STATUTORY DISQUALIFICATION » UNDISCLOSED SETTLEMENTS » ONLINE BOOKSTORE » SECURITIES INDUSTRY COMMENTATOR » RULES, REGULATIONS, LAWS & DECISIONS » BULLETIN BOARD		Printer Friendly 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. 2005 NASD CASES OF NOTE    John Yasushi Hasegawa AWC/2005000435802/December 2005 Hasegawa received a prospective public customer referral from an unregistered person, then paid the unregistered person a referral fee. Hasegawa engaged in electronic communications with customers from his personal computer, but failed to provide notice to his member firm, preventing the firm from discharging its obligations to review and retain outgoing correspondence relating to its securities business. Censured; Fined $10,000 Bill Singer's Comment: I still don't understand why you can't pay finder's fees provided you disclose the conduct in writing to all parties.  Moreover, I'm not sure that the NASD has this issue exactly correct --- I thought you couldn't pay a "transaction related" fee (for example, a percentage of a commission) to an unregistered person but that under certain circumstances a flat or nominal fee (not related to any transaction) was okay.  For example, why shouldn't an RR be allowed to pay $10 per new account opened?  Frankly, I think this is yet another perfect example where the NASD needs to better explain its decision and provide some minimal detail.   Finally, here is yet another case in which we see growing regulation of online conduct.  Folks, ask yourself before you use your computer to send any message or post any comments whether your conduct could be deemed "relating to the securities business."  It's not as clear-cut a question as you may think. Melissa Jean Williams C8A20050022/December 2005 Williams submitted a falsified Series 7 examination score report to her member firm and failed to respond to NASD requests for information and documents.  Barred Bill Singer's Comment: And as 2005 comes to a close, we find yet another case in which someone thought they had found a new and improved way to pass a registration exam.  See Levardsen, Raymond, and Tedeeva for additonal examples of this not-so-clever approach. Terry Shane Taylor  AWC/2005000771001/December 2005 Taylor caused public customers’ accounts to be charged fees for investment advisory services that they had not authorized and did not receive, by forging, or causing to be forged, customers’ signatures on various documents to authorize the fees to be charged. He failed to respond to NASD requests for information. Barred Palit Paul Suranakapan AWC/E022004064901/December 2005 Surankapan falsified and forged customer signatures on authorization letters and converted $24,000 of customers’ funds without the customers’ knowledge, authorization or consent. In an attempt to conceal his misconduct, changed the address of one of the customer’s accounts and, when the customer became aware of the unauthorized change of address and a wire transfer from the customer’s account, he created and sent the customer a letter on his member firm’s letterhead, without the firm’s knowledge, authorization or consent, falsely representing that the wire transfer was due to a firm system error which was then corrected.  Barred Raymond James Morrison, Jr. AWC/E9B2004040001/December 2005 Morrison received $750 from public customers to pay the premium on a homeowner policy; instead, he deposited the funds to his personal checking account without the customers’ knowledge or consent. Barred; Required to pay $750 in restitution Bill Singer's Comment: It's not that this is a noteworthy case; to the contrary, it's far too typical of the rather mundane frauds perpetrated upon the public.  I simply note it here because its banality is such that it serves a valuable lesson.  Even something as mundane as a premium payment can be stolen or converted.  Thankfully, the overwhelming majority of Wall Street employees are decent, hardworking, and honest folks.  Still, when it comes to money, you just never know. Brian Robert Mitchell  OS/CLI20050009/2005001017102/December 2005 Mitchell, an associated person, prepared and issued, or caused to be prepared and issued to the trustees of the customer account, false account statements, confirmation statements and Forms 1099 of the Internal Revenue Service that purported to represent the performance of the customer account to conceal his misconduct, and that overstated the value of the customer’s account by several million dollars.  Barred Bill Singer's Comment: Not to be a nitpicker, but this is getting annoying. Why would an associated person --- presumably one not getting commissions --- engage in this subterfuge? Terrence Edward Maryniw AWC/E8A2003082802/December 2005  Maryniw purchased securities in the securities account of a stockbroker, who was registered at a different NASD firm than Maryniw --- and he did so without notifying  the other NASD firm that he was associated with an NASD firm, and  his own firm that he had a beneficial interest in the other broker’s securities account.  Maryniw participated in a private securities transaction in that he failed and neglected to give written notice to his employing NASD firm, and failed to receive written approval from his firm, prior to engaging in such activity.  Fined $5,000; Suspended 10 business days in all capacities Michael Louis Lieb AWC/E8A2004063701/December 2005 Lieb attempted to compensate a public customer for penalties incurred when withdrawals from the customer’s IRA account were not returned to the account in a timely manner. Lieb wrote a personal check payable to the customer without informing his member firm that he had attempted to compensate the customer, and without obtaining authority from his firm to settle the loss in this manner.  Fined $5,000; Suspended 10 days in all capacities. Bill Singer's Comment:  Grrrr!!!!  Why can't the NASD just provide a few facts to explain what happened.  What do you mean "attempted to compensate" --- like, what --- Lieb wrote the check, gave it to the client, and for some reason it wasn't deposited?  And why weren't the withdrawals timely returned.  And were these withdrawals made by the client?  As they used to say on the television show Dragnet:  Just the facts Patricia Anne Kwan AWC/E9B2003045001/December 2005 Kwan obtained CDSC waivers for customers by misrepresenting that they were disabled. The waivers deprived mutual fund companies of fees that they were otherwise entitled to, and that caused her company’s books and records relating to the redemptions to contain false information regarding the customers’ disability statuses. Also, Kwan exercised discretion in public customers’ accounts of without written authorization. Barred Bill Singer's Comment:  The first one of these cases I recalled seeing was in April, and now we have a second.  My guess is that this is an area that has fallen under regulatory scrutiny. See the Levy case for similar facts. Donald Jordan Haskell  AWC/E0220040658-01/December 2005  Haskell participated in private securities transactions without providing written or oral notification to, or receiving prior written approval from, his member firm. He settled a customer complaint and did not inform his member firm of the customer’s complaints, or of his agreement to personally help repay the notes to the customer.  Fined $5,000; Suspended 6 months in all capacities; Requalify as General Securities Representative Craig Tyson Feltz OS/E102004085603/December 2005 On behalf of his member firm, Feltz obtained a subordinated loan agreement for $5 million, but then entered into a side agreement with the lender that contradicted the terms of the secured demand note. The side agreement states that Feltz, on behalf of the firm, would not attempt to pledge, hypothecate or encumber the collateral for the note and that, in furtherance of the side agreement, a limited power of attorney was signed giving the lender control of a bank account containing the funds used for collateral. Feltz, on behalf of the firm, filed the required documents with NASD to get approval of the $5 million subordinated loan for net capital purposes without disclosing the side agreement and power of attorney to NASD. If the filing had not been misleading, NASD would not have approved the demand note. As a result, the firm was allowed to conduct business for over a year until NASD learned of the side agreement and power of attorney. When NASD’s approval was rescinded, the firm was forced to cease doing business for lack of adequate net capital.  Fined $10,000; Suspended 3 months in all capacities Bill Singer's Comment:  We just don't see many sub loan cases from NASD, and any decision involving one is normally noteworthy.  If lenders are given assets of a broker-dealer either directly or indirectly to collateralize subordinated loans, the loans do not qualify as satisfactory subordination agreements pursuant to Appendix D of SEC Rule 15c3-1 and cannot be considered part of a firm’s capital.  Once again, I'm sorry to keep harping, but NASD must really do a much better job explaining its decisions.  There is simply no mention in the official report as to why the above scheme is a violation --- not a single cite to any rule or regulation . . . I shouldn't be doing the SRO's homework. Dean Anthony Esposito OS/CLI20050015/ELI2003017305/December 2005 Esposito signed new account forms with the purported signature of another registered representative without his authorization. Esposito provided inaccurate, incomplete testimony during an NASD on-the-record interview.  Barred Hurson Belizaire, Jr.  C10050026/December 2005 Belizaire published an unbalanced electronic bulletin board message on the Internet which failed to disclose material facts and to have sent a misleading, false, exaggerated and unwarranted e-mail to a public customer without his member firm’s prior approval. Also, he failed to respond to NASD requests for information.   Barred Bill Singer's Comment:  What exactley did Belizaire post on the BB?  Which BB did he use and did he identify himself as affiliated with a BD?  Was the message pertaining to a security?  What was in the email to the client?   I wish the good folks  at NASD would take a page from the NYSE's book and begin to give us just a tad more meaningful information.  Again, don't take my word for it --- compare for yourself. For example, see the recent NYSE Romano case [Mitchell Allan Romano SFC/HPD 05-106/September 19, 2005]. Compare the NYSE's Romano decision with the NASD's Belizaire case, and you will see the chasm in reported information.  No, I'm not suggesting the NASD needs to issue as detailed a decision as the NYSE -- and I fully understand that the NASD's caseload is far more extensive than that of the NYSE; nonetheless, the devil is always in the details. Sentra Securities Corporation AWC/E3A2004007001/December 2005 The Firm filed late, or did not file, amendments to the previously filed Forms U4 of persons registered with the firm and Forms U5 pertaining to persons formerly registered with the firm; failed to report, or reported late, matters that required disclosure within 10 days as required by NASD; reported late, did not report or inaccurately reported matters required to be included on quarterly statistical reports; and paid transaction-related compensation to a person previously, but no longer, registered with the firm.  Individuals of the firm who were required to participate in an annual compliance interview did not. Written supervisory procedures documenting the supervisory system did not assign a principal with the responsibilities for the review of the firm’s supervisory system and procedures and for making recommendations to the firm’s management for changes to them; and the firm did not consistently and systematically enforce some of its written supervisory procedures. In addition, the firm’s supervisory system and procedures for its municipal securities business did not include provisions for record retention, new municipal securities accounts, transaction reporting, suitability reviews and mark-up reviews.  The firm’s supervisory system and procedures were not reasonably designed to  achieve compliance with applicable rules; oversee the activities of the firm’s geographically dispersed sales force; assure that proper steps were taken to review the conduct of persons whose histories in the securities business indicated the propriety of heightened supervision; assure that proper steps were taken to recover firm records and property from persons whose registrations were terminated; and  timely report information required by NASD.  Censured; Fined $122,500 Bill Singer's Comment:  Geez . . . all that for only a measly $122,500 in fines?  Either the NASD has engaged in a bit of overkill in describing the facts (not that they would ever do that) or Sentra was ably represented by a defense lawyer with backbone.  Nonetheless,  an interesting year-end case that truly ties up many of 2005's regulatory themes.  Again we see an emphasis on timely filing of U4s/U5s.  We also see the enhanced focus on WSPs and supervisory systems.  Noteworthy is the implicit warning about what I call scalability issues --- is your firm so "geographically dispersed" that you may not be adequately supervising?  Harkens back to one of the earliest cases of the year: Olsen   I was also struck by what was a fairly new charge; namely, that the firm had failed to "recover firm records and property" from terminated registered reps.  Frankly, I wish NASD had explained this one in a bit more detail.  What exactly was the issue here --- that "confidential" records involving customer information had been taken?   Pruco Securities, LLC. AWC/E9B2003004301/December 2005 Pruco failed to file certain amendments to Forms U4 and U5 in a timely manner, and filed Forms U5 for terminated registered representatives late. The firm’s supervisory system and procedures were not reasonably designed to achieve compliance with its reporting obligations.  Censured; Fined $550,000; Required to conduct internal audits to evaluate the effectiveness of its system for ensuring compliance with the reporting obligations of the Uniform Applications for Securities Industry Registration or Transfer (Form U4) and the Uniform Termination Notice For Securities Industry Registration (Form U5); and an officer of the firm must certify that such audits have occurred, that recommendations from the audits have been implemented, and that the firm has established systems and procedures reasonably designed to achieve compliance with NASD reporting requirements. Bill Singer's Comment:  Interesting case at year end --- sort of underscores NASD's ongoing message this year about the need to timely amend/file U4s and U5s.  Note the sanction imposed an internal audit obligation upon the firm to ensure that it is evaluating the "effectiveness" of its system.  Moreover, note that an officer of the firm must certify the occurrence of such audits and the implementation of recommendations.   Susanne Smith Pruitt (Principal) AWC/E3B2003029701/November 2005 Pruitt failed to preserve memoranda brokerage orders and any other instruction given or received for the purchase or sale of securities, whether executed or unexecuted.  Acting on behalf of her member firm, Pruitt also failed to preserve any of the firm’s internal or external email communications; print and review the firm’s email as required by the firm’s written supervisory procedures; and implement her firm’s written supervisory procedures for review of email correspondence. Censured; Fined $20,000 ($5,000 joint/several with Firm) Bill Singer's Comment:  As part of the NASD's apparent shift towards holding Principals responsible for an increasing range of lapses, we see yet another example of this trend in action.  Here, Pruitt was fined for for failure to preserve orders and emails.  Note that the email violations cover the full range: failure to preserve internal AND external email; failure to print/review the emails as required by the WSPs; and failure to implement the WSP's provisions concerning email review. Pardon me for a bit of sarcasm here, but, geez, you can't pile on in football but on Wall Street the regulators always seem to get in a couple of extra, late shots. Look, charge her with failing to preserve the orders. That's okay. Charge her with failing to follow the WSPs as pertaining to printing and reviewing emails.  But, come on folks, isn't it just a bit gilding the lily to also charge for failing to "implement" WSP procedures for failing to review emails when you already charged here with failing to review those same emails in accordance with the WSPs?   Ryan Christopher Stewart  AWC/2005001807801/November 2005 Stewart accepted a $5,000 loan from a public customer without obtaining prior written approval from his member firm to borrow the funds. Also, Stewart failed to respond to NASD requests for information.  Barred George Margossian AWC/20050007348-01/November 2005 While acting as treasurer of a business networking organization, Margossian forged the signature of the organization’s president on a company check, cashed the check and misappropriated $700 of the organization’s funds. Barred Richard Leaf Levardsen AWC/E102004117601/November 2005 Levardsen took the NASD Series 7 examination, received a failing score of 45 percent, then altered the proctor’s report to reflect that he received a failing score of 65 percent. He then presented the altered proctor’s report to his firm’s managers, thereby misrepresenting that he had received a higher score than the one he actually received. Fined $5,000; Suspended 6 weeks in all capacities Bill Singer's Comment:  You know, I was going to say something.  It's really hard to resist in the face of such stupidity.  But sometimes you laugh so hard that you just have to stand up and applaud the boundless limits of human ingenuity and imagination.  Also, take a look at Raymond and Tedeeva. Thomas Garcia Lara, Jr. OS/#E3A20040328-03/November 2005 Lara prepared and submitted requests for reimbursement to his member firm for business travel expenses totaling $26,268 that he did not incur, and accepted the reimbursement payment knowing that he had not incurred the expenses for which he was being reimbursed.  Barred Mark Augustine Kollar (Principal)  AWC/E072004033901/November 2005 Kollar accepted $54,449 in compensation from an insurance company unaffiliated with his member firm for the sale of an annuity and an insurance policy to a public customer without providing notice to his member firm. Fined $5,000; Suspended 30 days in all capacities Joseph Eugene Hamlet AWC/2005000738701/November 2005 Hamlet settled verbal customer complaints without informing or obtaining authorization from his member firm.  Fined $5,000; Suspended 3 months in all capacities Robert Glenn Bard (Principal) AWC/E9A2004043301/November 2005 Bard  signed public customers’ names on client agreements/new account forms, discretionary power forms, variable annuity purchase applications and related documents, and third-party management agreements without the authority to sign the names; obtained signature guarantees for some of the signatures, notwithstanding that some of the signatures were fake; effected transactions in customers’ accounts based on oral or written discretionary power the customers had granted him but failed to obtain his member firm’s acceptance of the discretionary power; and effected a purchase of a variable annuity on behalf of a customer and guaranteed a minimum investment return, both orally and in writing.  Barred Bill Singer's Comment:  I'm just plum tuckered out and tired of writing up yet another annuity case involving forged signatures.  Trust me, there are far more NASD annuity/forgery cases reported this year than you'll find on this 2005 page.  Fact is, if it's mere repetition I don't see any point in simply posting yet another iteration of the same violation with the same sanction.  Nonetheless, this case should serve to remind you of the mess that's out there in the annuity sector.  Don't blame the NASD for doing its job. Meyers Associates, L.P. OS/CE2050003/November 2005 The Firm failed to comply with  its discovery obligations by failing to produce, in a timely manner, documents in its possession or control that were requested by the claimant; and orders issued by an arbitration panel requiring the firm to produce documents in its possession or control, or to submit an affidavit from its CEO providing specific information related to the production of documents.  Censured; Fined $25,000; Required to revise its written supervisory procedures to notify all counsel representing the firm in arbitration proceedings of the firm’s policy to comply with discovery requirements as set out in the Code of Arbitration, and to comply with all orders of arbitration panels relating to discovery obligations Bill Singer's Comment:  Even as jaded an industry pundit as I am sits up every once in a while when an odd case comes across my desk.  You rarely see NASD (regulation) get involved in allegations of discovery abuses in an NASD arbitration. Avalon Research Group, Inc.  AWC/E072004009801/November 2005 The Firm issued research reports that failed to  adequately disclose the valuation method used to determine price targets; adequately disclose the risks that may have impeded achievement of the price targets; contain disclosures on the front page of each report; and  prominently display the reference to the pages on which the disclosures were located. In consideration of the above lapses, the Firm failed to present the required disclosures in a clear, comprehensive and prominent manner.  Censure; Fined $10,000 Bill Singer's Comment:  One of the big pains for supervisors dealing with research analysts, is that the analyst tend to whine about why they have to do "this" and have to do "that."  Well, here, in fairly terse language, the NASD provides a checklist for the use of price targets.  Next time an analyst complains about your editing of his/her report --- show 'em what the NASD says has to be in there. Northwestern Mutual Investment Services, LLC and Diane Barbara Horn (Principal) C8A030071/November 2005 Respondents violated Rule 3070 by failing to timely report customer complaints to NASD as statistical and summary information.  The Firm failed to  properly train its registered representatives and other personnel with respect to the handling of customer complaints; adequately maintain and enforce supervisory procedures;  timely report customer settlements; and failed to timely amend a former registered representative’s Uniform Termination Notice for Securities Industry Registration (Form U5).  Northwestern Mutual Investment Services, LLC: Censured; Fined $110,000 Diane Barbara Horn: Censured; Fined $15,000 Bill Singer's Comment:  Without question the NASD has clamped down on 3070 reporting lapses this year.  Moreover, there is a clear focus on a firm's intake of customer complaints and timely processing of same. Kuhns Brothers Securities Corporation and John Douglas Kuhns (Principal) AWC/E112004010401/November 2005 Acting through Kuhns, the Firm  violated the membership rules by initiating a 50 percent transfer of its ownership to another person without giving prior notice, and without NASD approval;  failed to comply with their claimed exemption under Section 15(c) of the Exchange Act in that during various periods of time, the firm acted as the placement agent for a private offering and held customer funds in a firm bank account;  used the instrumentalities of interstate commerce to conduct a securities business while failing to maintain its minimum required net capital; and failed to make, maintain and preserve required customer information records and/or subscription agreement documents for offering investors.  Kuhns Bros and Kuhns: Censured; Fined $15,000 joint/several Bill Singer's Comment:  I'm noticing a bit more of this Membership Agreement cases involving transfers of assets/ownership issues.  As the findings state, you need to give prior notice AND obtain NASD approval of changes of control. David Lerner Associates (DLA), SSH Securities, Inc (DLA Affiliate), David Lerner(Principal), and John Dempsey (Principal) October 2005 Without admitting or denying the allegations, the firms and individuals consented to NASD's findings of advertising and supervisory failures and agreed to the imposed sanctions. In a September 2004 complaint, NASD charged DLA and David Lerner with using 11 radio advertisements and other communications between May 2001 and May 2003 that contained numerous statements and claims that were misleading, exaggerated or unwarranted. The firm advertised heavily on New York metropolitan area radio stations with 60-second spots that ran several days a week, frequently throughout the day. DLA spent $2.3 million during the review period on radio ads, which represented 71 percent of its total marketing expenditures. As the spokesman for the firm, David Lerner narrated all of the ads. A recurring theme of the radio advertisements was the concept of “providing returns of 10 percent and more” to “tens of thousands” of customers.  “For 25 years, we at David Lerner Associates have provided tens of thousands of people with investments that, even in these turbulent times, continue to pay over 10%.”  “We are currently providing returns of 10 percent and more in investments that have nothing to do with the stock market.”  The firm’s advertisements also suggested that individuals who invested with DLA would retain the value of their assets regardless of market conditions, or would regain prior losses sustained in the stock market downturn in 2000.  “While past performance can never be a guarantee of future results, we at David Lerner Associates are proud and pleased that for 26 years, tens of thousands of our investors have been receiving high income and solid returns regardless of whether interest rates or the stock market went up or down.”  “By counseling them to select value-oriented investments, our clients have not only weathered the financial storm, they have actually seen their income grow and their assets more than hold their value.”  Like radio advertising, investment seminars were also important to the firm’s marketing efforts. During the relevant period, the firm conducted approximately 70 to 80 seminars for the public, with Lerner appearing as the principal speaker at each seminar. As with the radio ads, the firm did not have factual support for many of the claims and also failed to disclose material information.  SSH Securities, Inc. prepared inaccurate fact sheets distributed by DLA to promote its Spirit of America proprietary family of mutual funds.  Dempsey, the principal of DLA responsible for approving advertisements, failed to discharge his supervisory responsibilities.  David Lerner Associates: Fined $115,000; Ordered not to conduct any public seminar for 30 days; Ordered to pre-file all sales literature and advertisements with NASD's Advertising Regulation Department for at least 10 days prior to their first use for a period of 6 months SSH Securities, Inc.: Fined $10,000 David Lerner: Fined $25,000 John Dempsey: Fined $25,000; Suspended for 30 days in principal/supervisory capacity Bill Singer's Comment:  I dunno --- maybe I'm just too demanding, but the timeframes for the NASD's actions seem a bit excessive.  I mean, come on, the "misleading, exaggerated or unwarranted" advertisements (what...they couldn't find any more adjectives???) first ran in May 2001.  In case you don't have a calendar handy, that's about four and a half years before the date the NASD announced the settlement of this case. And of course that's also about 13 months from the date of the issuance of the Complaint.  Frankly, these are somewhat iconic radio spots in the NYC market.  I've been listening to Lerner's radio ads for years.  I never thought they were over the top and if NASD objected to "pay over 10%," I'm wondering why they couldn't have contacted the firm, raised that pointed concern, and "jawboned" a change rather than filing charges.  Additionally, it would be nice if the NASD press release made just a bit more of an effort to note that Lerner's radio ads promoted investments in bonds --- hence, the repeated references to the poorly performing "stock" market and stock market's conditions.   Alas, there's so much we don't know from those fairly circumspect NASD press releases.  Hey guys, maybe spend a bit less time looking up synonyms and a bit more time on improving your response times.   Matthew Gary Winslow (Principal)  AWC/E062001028601/October 2005 Winslow engaged in trading activities that resulted in negative equity balances in his accounts totaling $750,000. His financial inability to eliminate the negative equity balances in his accounts caused his member firm and the clearing firm to incur substantial losses.  Suspended 30 business days; Ordered to comply with the terms and conditions of the General Release and Settlement Agreement with the clearing firm. Bill Singer's Comment:  If I'm reading this decision correctly, after Winslow trashed his own accounts to the tune of $750,000, he was unable to pay the debit --- but that this was as clear from the NASD's baffling turn of the phrase "financial inability to eliminate the negative equity balances in his accounts . . ." Hey guys and gals, ever heard of plain English?  Most interesting is the Order to comply with the terms of an apparent settlement Winslow entered into with the clearing firm.  Might have been nice if NASD gave us some details as to what he failed to comply with.  I simply can't figure out if he was suspended for incurring the $750,000 debt and not paying it; or if he was suspended for failing to honor a settlement agreement.   Brad David Wilson (Principal) C0720040086/October 2005 Wilson affixed a notary public’s signature and seal without the knowledge or authorization of the notary public.  Fined $5,000; Suspended 60 days in all capacities. Bill Singer's Comment:  Using a notary's signature/seal without authorization is among the more idiotic things you can do.  The ramifications can be explosive.  See these other cases: Kelsey, Harper, and Mizenko David James Swiat AWC/E8A2004068801/October 2005 Swiat received $300 in cash from a public customer for investment purposes and failed to promptly use the customers funds as instructed. Swiat created and gave to the customer a fictitious order ticket and a fictitious receipt on which he signed his member firm’s branch office manager’s name without his knowledge or consent. He misused customer funds by failing to follow instructions, in that he used the funds for some purpose other than the benefit of the customer.  Barred Glen Joseph Santangelo AWC/E1020031690-01/October 2005 Santangelo disseminated, by email, material confidential and non-public information to different institutional customers concerning stock preferences and trading for other large institutional customers. Santangelo improperly disseminated, by email, draft research reports to institutional customers without the prior approval of a registered principal of his member firm.  Fined $50,000; Suspended 60 business days in all capacities Kendra Ann Reed AWC/E9A2004025401/October 2005 Reed did not disclose to her member firm that the data on the applications for public customers’ variable life insurance had been altered by her and was not the product of the paramedical examiner. Fined $5,000; Suspended 6 months in all capacities Gary Allen Randa AWC/E8A2004082401/October 2005 Randa fraudulently obtained a public customer’s checkbook without the consent or knowledge of the customer, forged the customer’s signature on deposit slips and checks totaling $60,500, made them payable to himself, and deposited the funds in his bank account, thereby converting the customer’s funds to his own use and benefit.  Barred Michael Jay Margolis AWC/ELI20040383-01/October 2005 Margolis commingled a public customer’s funds with his own in that he deposited $10,000 in cash from a customer into his personal bank account and simultaneously had the bank issue a $9,990 check, and used the check to pay the semi-annual premium for a variable life insurance policy owned by customer’s wife.  Fined $2,500; Suspended 15 business days in all capacities Bill Singer's Comment:  My, my, my --- how clever.  Did he stay up all night coming up with this scheme to avoid the need to declare a $10,000 cash deposit?  I'm just surprised that he didn't just make it $9,999. David Benjamin Lazarus (Principal) AWC/2004200001804/October 2005 Lazarus knowingly and intentionally  entered priced limit orders to buy or sell shares of NASDAQ securities into an Electronic Communications Network (ECN) at prices that he knew would improve, and were intended to improve, the National Best Bid or Offer (NBBO) in such securities; and  bought and sold shares of these securities at prices that were lower than he would otherwise have been able to buy, thereby obtaining a financial benefit.  Lazarus caused to be published or circulated  limit orders at prices that affected the NBBO and became quotations for the securities, without believing that those quotations represented bona fide bids or offers for the securities; and purchases and sales of securities that he did not believe were bona fide purchases and sales.  Fined $30,000; Suspended 42 days in all capacities; Ordered to disgorge $1,413.35 (plus interest) David Ray Kelsey AWC/20050006024-02/October 2005  Kelsey asked a colleague to notarize 401(k) rollover forms, knowing that the signatures for the participants’ spouses were not genuine. Fined $5,000; Suspended 6 months in all capacities; Required to requalify in all capacities Bill Singer's Comment: See Mizenko, Harper and Wilson cases.   Richard Francis Huston AWC/E9B2004018301/October 2005  Huston photocopied a public customer’s signature onto nine trading authorization forms used in connection with penny stock transactions without the customer’s knowledge or consent.  Fined $5,000; Suspended 60 days in all capacities Roger Dean Harper, Jr.  AWC/20050006024-01/October 2005 Harper knowingly notarized 401(k) rollover forms that contained non-genuine signatures.  Fined $10,000; Suspended 18 months in all capacities; Required to requalify Bill Singer's Comment: See Kelsey, Mizenko  and Wilson cases.   Douglas William Daniels AWC/E9B2004050101/October 2005 Daniels invested $5,000 in a variable annuity that required a minimum investment of $10,000 for a public customer with the notation that it was an initial deposit and additional funds would follow. When the insurance company failed to receive the additional $5,000, it issued a check canceling the customer’s application and returned the initial deposit. Without the knowledge or consent of the customer, Daniels negotiated the $5,000 check and misappropriated the proceeds to his own use and benefit.  Daniels failed to respond to NASD requests for information. Barred Bill Singer's Comment: I wish the NASD would not have left the recitation of the facts at such a pregnant point.  I can't figure out whether Daniels scammed the client by getting the $5,000 with the intent to NOT deposit the necessary additional $5,000, and to then misappropriate the first $5,000 by improperly negotiating the returned investment. Thomas Michael Aretz AWC/2005001180902/October 2005 Aretz borrowed $25,000 from a public customer in contravention of the firm’s written procedures, and although he repaid the loan with interest, he did so only after the customer complained to NASD and his firm.  Fined $5,000; Suspended 60 days in all capacities. Bill Singer's Comment: Ummm . . . lemme see if I can explain this.  One, it ain't a good idea to borrow money from a client.  Two, if you have to borrow money from a client make sure it's in full accordance with your firm's written policy.  Three, you really want to repay the principal borrowed from the client on a timely basis.  Four, you really want to pay all the interest due to the client on a timely basis.  Five, you really don't want the client to complain the your firm that you haven't complied with steps #3 and #4 above (thereby notifying your firm that you didn't comply with Step #2.  Six, you really don't want the client to complain to the NASD that you haven't complied with steps #3 and #4, and then have the NASD find out that you didn't comply with Step #2.  If you would like a written chart explaining the detailed steps noted below, please send an email request to bsinger@rrbdlaw.com, together with $24.95 to cover shipping and handling. John Joseph Amore  OS/E102004102402/October 2005 Amore engaged in securities transactions at his member firm that required him to be registered with NASD; and he failed to appear for an NASD on-the-record interview.  Barred 1717 Capital Management Company  AWC/E112002095801/October 2005 The Firm failed to enforce written supervisory procedures for special supervision of registered representatives who had a history of customer complaints. Censured; Fined $25,000 Bill Singer's Comment: You see it's like this --- it's sort of understandable that a firm might not enforce some policies when it comes to an isolated customer complaint against a clean RR.  Hey, it happens.  However, when you've got an RR under "special supervision" and he/she has a "history of customer complaints" ... hmm... let's all think about this.  Okay, enough thought.  Yo!!!  The regulators will come down on you like a ton of bricks for inadequate WSPs under these circumstances. Duh. Legacy Financial Services, Inc.  AWC/E012004004501/October 2005 Firm failed to  timely  file disclosures for reportable events to NASD within 10 business days after learning of such events; report complaints to NASD by the 15th day of the month following the calendar quarter in which the complaints were received; and  promptly update Forms U4 and U5 for events that required regulatory disclosure.  The Firm had inadequate written supervisory procedures relating to prompt reporting of events requiring regulatory disclosure filings.  Fined $54,250 The Jeffrey Matthews Financial Group, L.L.C.  AWC/E9B2004025501/October 2005 The Firm's supervisory system and procedures were not reasonably designed to ensure that the required written consent was obtained before pre-registration searches on WebCRD, and that the firm retained the required documentation.  Censured; Fined $75,000 Bill Singer's Comment:See Millenium Brokerage case.  This looks like an area of increased NASD scrutiny.  Word to the wise. Eastlake Securities, Inc. AWC/E1020040133-01)/October 2005 The Firm developed and implemented an AML program that was not reasonably designed to achieve and monitor compliance with the requirements of the Bank Secrecy Act and the implementing regulations thereunder. Also, the firm allowed a representative 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 business or otherwise functioning as a representative of the firm.  Censured; Fined $10,000 Clayton, Dunning & Company, Inc. AWC/E1020040891-01/October 2005 The Firm failed to develop and implement an AML program reasonably designed to achieve and monitor its compliance with the requirements by failing to implement an adequate customer identification program in that the firm did not adequately verify the identity of new customers.  Censured; Fined $10,000 American Funds & Trust, Inc. AWC/E3A2004003401/October 2005 Firm's anti-money laundering (AML) compliance program failed to implement procedures required by the firm’s customer identification program by failing to establish and maintain records of information obtained and reviewed to verify the identity of 49 customers of 50 new accounts opened. The Firm’s independent test of its AML program was limited to certain aspects of the firm’s AML program as opposed to the entire program.  Censured: fined $10,000 Viewtrade Securities, Inc. and James Joseph St. Clair, Jr., (Principal AWC/E072003014001/October 2005 Acting through St. Clair, the Firm  failed to establish, maintain and enforce taping procedures for supervising the telemarketing activities of all of its registered persons; sent a signed “certification regarding special written supervisory procedures for compliance with NASD 3010(b)(2)” to NASD that contained material misrepresentations;  failed to establish and implement policies and procedures that were reasonably designed to achieve compliance with the Bank Secrecy Act and regulations thereunder, by failing to have procedures to monitor accounts for described red flags, and failing to identify and adequately investigate suspicious activity in customer accounts despite the existence of red flags; failed to establish, develop and implement an adequate supervisory system or procedures allowing the firm to monitor, achieve and retrieve instant messages sent and received by its registered persons, and the use by its registered representatives of email; and failed to establish and maintain a system of supervision reasonably designed to ensure compliance with the rules of NASD and the applicable laws and regulations. The firm also failed to obtain foreign bank certifications, and failed to have supervisory procedures designed to prohibit insider trading in accounts maintained for public customers. Viewtrade Securities, Inc.: Censured; Fined $185,000 ($30,000 jt/sev with St. Clair); Required to retain an independent consultant to conduct a complete audit of the firm’s policies, practices and procedures James St. Clair, Jr.: Fined $30,000 jt/sev with Firm; Suspended 18 months in principal capacity Presidential Brokerage, Inc., Anthony Joseph Campen (Principal) and Eric Joel Lempe (Principal) AWC/E3A2002001601/October 2005 Acting through Campen, the Firm  reported customer complaints with inaccurate information and failed to report, or reported late, matters that required disclosure within 10 days pursuant to NASD Rule 3070; reported late amendments to Forms U4 and U5 and did not disclose information required to be disclosed on a Form U5; failed to establish a supervisory system; and  failed to establish, maintain and enforce written supervisory procedures reasonably designed to achieve compliance with applicable NASD rules pertaining to Rule 3070, reporting the timely and accurate filing of Forms U4 and U5, and the suitability of mutual funds share class recommendations.  Acting through Lempe, the Firm recommended the purchase of mutual fund “Class B” shares to customers for whom a recommendation of “Class A” shares would have been economically more beneficial.  Acting through an employee, the Firm failed to supervise the activities of registered representatives who were employing trading strategies with customers located abroad in a manner reasonably designed to achieve compliance with NASD rules.  Presidential Brokerage, Inc. Censured; Fined $70,000 jt/sev with Campen (includes $65,083 restitution); required to attest in writing that it complied with the requirements of NASD Rule 3070 Anthony Joseph Campen (Principal) Fined $70,000 jt/sev with Firm (includes $65,083 restitution); Suspended 15 business days in principal capacity Eric Joel Lempe (Principal) Fined $224,618; Suspended 6 months in all capacities Samuel John Trigillo 8A040082/September 2005 Trigillo affixed a customer’s signature to securities related documents without the customer’s knowledge or consent; and transferred a customer’s funds from a fixed annuity to a variable annuity without the customer’s knowledge or consent. Trigillo affixed another registered representative’s signature on customer forms without the registered representative’s knowledge or consent. In addition, Trigillo engaged in outside business activity without providing prompt written notice to his member firm.  Barred Victor Thomas Travaglianti AWC/ELI20040403-03/September 2005 Travaglianti signed or affixed customer signatures on firm account documentation for public customers as an accommodation to the customers in question and failed to disclose this fact to his member firm.  Fined $5,000; Suspended 9 months in all capacities Bill Singer's Comment: Yet another example of where more information is needed in order to better understand the case.  It appears that Travaglianti had the customer's permission to sign account documents ("as an accommodation""-- otherwise, I assume the NASD would have charged him with the more serious "forgery." As best I can understand the facts here, Travaglianti didn't inform hi firm that he was signing for the client.  Okay, not the best course of conduct but if the client corroborates the signing was authorized, why is there a 9 month suspension?   Before you're so quick to put me in my place, look at the Hetzer case below where the NASD imposed only a 60 day suspension for someone who acted as an imposter--- pretended to be a client in connection with false complaints filed on both the SEC's and the NASD's websites. I'm not defending Travaglianti's conduct but the sanction seems awful severe. David Bruce Medansky  AWC/E3A2004024201/September 2005 Medansky obtained a credit card in the name of an individual by submitting an application and representing himself to be the individual. He then used the credit card to obtain goods, services or funds for his own benefit. He made payments on the card’s balance due, accepted an offer of a second credit card, and cashed a $500 promotional check drawn on the account of the credit card company payable to the individual.  Barred Bill Singer's Comment:  And this is an NASD regulatory matter because...what?  You better be careful if you jaywalk or spit on the street. Kristin Stockmar Hetzer  OS/C02040049/September 2005 Hetzer filed an anonymous complaint on the SEC’s and NASD’s Web sites, posing as a public customer, without the customer’s knowledge or consent. In addition to falsely identifying herself as the customer, the material allegations in the NASD and SEC Web site postings were false.  Fined $5,000; Suspended 60 days in all capacities. Bill Singer's Comment:  Geez, this is a really bizarre case.  On the one hand, I thought the whole point of encouraging "anonymous" complaints was to ensure that efforts aren't made to investigate a poster's identity.  I'm not sure that the public disclosure of this case is necessarily a positive thing---it may discourage future tippers.  On the other hand, what the hell did she actually post that got everyone so upset?  This is one of those matters where a bit more information would be helpful. Gordon Trevor Gibson (Principal)  AWC/E102003022304/September 2005 Gibson failed to ensure that his member firm accurately computed its net capital and complied with its minimum net capital requirement.  Fined $2,500; Suspended 2 months in FINOP capacity Bill Singer's Comment:  As I noted in August, I sense that NASD has decided to begin to suspend FINOPs with greater frequency than in the past.  Lo and behold, we now have the second such sanction in the past two months!  See the prior Stoever case. Michael Charles Caska (Principal)  AWC/#E102004102902/September 2005 Caska actively engaged in the management of a former member firm’s investment banking or securities business without being registered as a general securities principal. Acting on behalf of his member firm, he failed to file an application with NASD prior to transferring 25 percent or more of the firm’s assets or brokerage business to another NASD member firm.  Fined $10,000; Suspended 15 business days in all capacities Millennium Brokerage, LLC AWC/E9B2003041708/September 2005 The Firm allowed  allowed a representative to perform duties as a registered person while his registration with NASD was inactive due to his failure to complete the regulatory element of the continuing education program;  permitted employees to function in a capacity that required fingerprinting under SEC Rule 171-2, but failed to submit fingerprint cards to NASD;  failed to file Forms U5 for representatives in a timely manner, in contravention of Article V of NASD’s By-Laws; failed to establish, implement and enforce policies, procedures and internal controls that were reasonably designed to achieve compliance with all requirements imposed by the Bank Secrecy Act and books and records retention requirements.  Also, the firm’s supervisory system and procedures were not reasonably designed to ensure that the required written consent was obtained before pre-registration searches on Web CRD and that the firm retained the required documentation. The firm did not maintain and preserve all electronic instant messaging as required and failed to report trades within 90 seconds of execution. Censured; Fined $125,000 Bill Singer's Comment:  See later Jeffrey Matthews Financial Group Case Lincoln Financial Advisors  AWC/C8A050067/September 2005 The firm received notice of events that were subject to the reporting requirements of NASD Rule 3070(a), but failed to  report to NASD within 10 business days after it knew or should have known of the existence of the reportable events; report customer grievances to NASD as statistical and summary information by the required deadline; and prepare and maintain adequate written supervisory procedures to ensure compliance with NASD Rule 3070(a) Censured; Fined $75,000 Ridgeway & Conger, Inc.  AWC/E9B2004013201/September 2005 Acting through a representative, the firm permitted an individual to maintain his securities license with the firm although he was not actively involved in its investment banking or securities business, and permitted an individual to act as the firm’s FINOP, although she possessed an inactive registration status with NASD. Also, the firm reported Trade Reporting and Compliance Engine (TRACE)- eligible securities and municipal securities transactions late or with the wrong MPID.  Censured; Fined $10,000 (includes $5,000 jointly/severally with an unnamed individual) Interactive Planning Corp. and Lawrence St. John York (Principal)  AWC/E052003037401/September 2005 Acting through York, the Firm  entered into an account purchase contract with a public customer that contained restrictive language prohibiting the customer from disclosing any information regarding the contract to securities regulators; and failed to maintain a record of the complaints filed by a customer, failed to file the customer’s complaint with NASD within 10 business days, and failed to amend York’s Form U4 as a securities representative to disclose a customer’s complaint.  Interactive Planning Corp. and Lawrence St. John York: Censured; Fined $10,000 joint/several Bill Singer's Comment:  Compliance 101--you cannot prohibit a customer from cooperating with the regulators.  If you use such language in an agreement, you're going to get in trouble.  Please visit this page for citations to the applicable NASD Notices to Members on improper restraints on customer cooperation. September 2005 appears to be a watershed month for the NASD to focus on failures to properly intake and file customer complaints.  Gryphon Financial Securities Corp. and Younis Zubchevich (Principal) AWC/E072004006003/September 2005 Acting through Zubchevich, the Firm failed to  prepare a written needs analysis and training plans for the firm element of the continuing education program;  show that the training was executed and that all covered persons attended; and  establish a bank escrow account to safeguard customer funds for contingent private placement offerings and failed to maintain records reflecting the receipt and disbursement of customer funds.  Also, the firm failed to develop and implement an anti-money laundering (AML) program that was reasonably designed to achieve and monitor compliance with the requirements of the Bank Secrecy Act and the regulations promulgated thereunder. Gryphon Finanical Securities Corp.: Censured and Fined $17,500 (includes $12,500 joint/several with Zubchevich Younis Zubchevich: Fined $12,500 joint/several with Gryphon Great Eastern Securities, Inc. and Alphonse Mekalainas, Jr. (Principal) AWC/ELI2002004801/September 2005 Acting through Mekalainas, Great Eastern Securities failed to timely report on registered representatives Forms U4 (Uniform Applications for Securities Industry Registration or Transfer) : customer complaints that alleged one or more sales practice violations and contained a claim for compensatory damages of $5,000 or more; and settlement of a customer complaint that alleged one or more sales practice violations and was settled for an amount of $10,000 or more.  Also, the firm permitted excessive commissions to be charged in agency transactions. Additionally, the firm permitted its president to conduct a securities business while his securities registration was inactive due to his failure to satisfy the continuing education regulatory element in a timely manner.  Great Eastern Securities, Inc.: Censured; Fined $15,000 (includes $5,000 joint and several with an unnamed individual and $5,000 joint/several with Mekalainas, Jr.) Alphonse Mekalainas, Jr.: Fined $5,000 joint and several with Great Eastern Securities, Inc.; Suspended 5 days in Principal/Supervisory capacities Bill Singer's Comment:  These types of violations drive me crazy.  I mean, it's one thing for a BD and its ownership to do a cost-benefits analysis and decide to engage in a massive fraud because they think you can make millions and if they get caught it's only a fine and suspension.  That's wrong, but at least you can sort of understand the mind-set involved.  However, when a firm and its principals get whacked for minor compliance failures, you simply have to wonder.  There are often a whole host of explanations and reasons for such miscues --- staffing problems, communication failures, etc.  Nonetheless, as I previously noted, the regulators are making a point of checking up on your timely reporting of customer complaints.    Hennion & Walsh, Inc., William Walter Walsh (Principal) and Richard Hennion (Principal) AWC/E9B02004201/September 2005 Hennion & Walsh, Inc.  failed to report written grievances from public customers on quarterly reports and reported written grievances from customers in an untimely manner.  solicited and received payment from public customers for the purchase of shares prior to the effective date in the underwritings of closed-end mutual funds in violation of Section 5(a) of the Securities Act of 1933; and acting through Walsh and Hennion,  failed to establish and maintain a supervisory system and written supervisory procedures reasonably designed to achieve compliance with applicable securities laws, regulations and NASD rules.  Hennion & Walsh, Inc.: Fined $35,000 ($15,000 joint/several with Walsh and also with Hennion); Suspended as an underwriter or selling group member for any offering of closed-end mutual funds for 30 days; Required to retain an independent consultant to review and make recommendations concerning the adequacy of the firm’s current policies and procedures relating to past deficiencies, as well as the firm’s 3070 reporting, underwriting activities, and suitability of recommendations.  William Walter Walsh: Fined $15,000 joint/several with Hennion & Walsh, Inc.; Suspended 10 business days in Principal capacity Richard Hennion: Fined $15,000 joint/several with Hennion & Walsh, Inc.; Suspended 10 business days in Principal capacity Bill Singer's Comment:  See April 2005 Hennion & Walsh case. One of the more dramatic regulatory initiatives the NASD and NYSE appear to have undertaken in 2005 is a focus on the timely reporting of customer complaints --- frankly, an area where they seemed to have been a bit lax in years past.  Nonetheless, the regulators appear intent to make up for lost time.  Similarly, as if mutual funds haven't come under enough of an attack in recent years, now we see that some folks are gun-jumping sales of closed-end funds by seeking and obtaining payment prior to the effective date.  Clearly, NASD is sending a message with this case--the firm has been suspended as a closed-end mutual fund underwriter/selling group member for 30 days.  Looks like there's some bite in the once toothless tiger. Cardinal Capital Management, Inc., Hershel Francis Smith, Jr. (Principal), and Christopher Alan Sweeney (Principal) AWC/E072003004201/September 2005 Respondents engaged in a course of conduct involving the unregistered offer and sale of common stock and promissory notes, in that Smith and Sweeney failed to establish and maintain a supervisory system reasonably designed to achieve compliance by Cardinal Capital Management, Inc., and its registered representatives with applicable sales practice rules (thus failing to reasonably supervise its registered representatives); failed to ensure full disclosure of all material facts, including the risks associated with the purchase of the notes, to the note purchasers;  sent sales communication to shareholders that contained exaggerated statements and price predictions concerning the stock; personally guaranteed the repayment of the notes when they had no reasonable basis for believing that they could fulfill their obligation;  failed to prepare and preserve records for each transaction as required by Securities Exchange Act Rules 17a-3 and 17a-4; failed to reflect said transactions on the firm’s books and records, and issued promissory notes to public customers without their knowledge or authorization; held customer subscription funds in a firm bank account before forwarding the funds onto the issuer; and failed to respond to NASD requests for information.  Cardinal Capital Management, Inc.: Expelled Hershel Francis Smith, Jr.and Christopher Alan Sweeney: Barred in all capacities Bill Singer's Comment:  This case is noteworthy on a number of levels.  First, we have the fairly rare event of an NASD member firm agreeing to its expulsion by way of a settlement (AWC).  Then, we have two of the firm's principals being barred.  Finally, we have the odd allegation that promissory notes were issued to public customers "without their knowledge." Sort of like if a tree falls in the forest but no one hears it... Edwin Rodriguez, Jr. AWC/C10050020/August 2005 Rodriguez sent a letter to a public customer concerning a transaction in the customer’s account that was not on firm letterhead, was not made available for supervisory review, and was sent without his member firm’s knowledge or consent.  Fined $10,000; Suspended 10 business days in all capacities Kyle Timothy Holland (Principal) AWC/C06050016/August 2005 Holland failed to ensure that his member firm included a $500,000 settlement agreement as a liability of the firm. He filed inaccurate FOCUS Reports with NASD that significantly overstated the firm’s net capital position and Holland failed to give NASD notice of the firm’s net capital deficiencies.  Holland participated in private securities transactions and failed to give his member firm prior notice of his transactions involving a stock, his role therein, and whether he might receive compensation in connection with the transactions. Fined $25,000; Suspended 1 month in all capacities; Suspended 3 months in principal capacity Kerry John Grinkmeyer (Principal)  OS/C05050022/August 2005 Grinkmeyer failed to perform certain supervisory duties, including delegating certain compliance responsibilities to his unregistered assistant, failed to show evidence of review of and follow-up on certain exception reports, and failed to provide copies to his firm of certain executed forms. In addition, registered representatives assigned to Grinkmeyer’s Office of Supervisory Jurisdiction (OSJ) effected all transactions under his advisor number and, as a result, neither Grinkmeyer nor his firm could monitor the activity of individual registered representatives.  Fined $10,000; Suspended 1 month in general securities principal capacity Bill Singer's Comment: 2005 is shaping up to be the Year of the Principal.  We're certainly seeing more principals being sanctioned more frequently than before.  Here is a clear-cut warning from the NASD.  The once winked-at practice of delegating compliance functions to unregistered assistants isn't going to be tolerated.  Come on, now --- you all do it; don't deny it.  Nonetheless, word to the wise.  Clean up your acts.  Todd Grafenauer National Adjudicatory Council/C8A030068/August 2005 Grafenauer falsified internal documentation so that he would be able to utilize uncompensated interns to promote his securities business and that of his partner.  Barred Scott West Jones  AWC/C02050050/August 2005 Jones impersonated another registered representative of his member firm who was scheduled to complete a firm element continuing education training module, and completed the training module in his place. Subsequently, Jones submitted a completion certificate to the firm, falsely indicating that the other representative had completed the training module, causing the firm’s books and records to be inaccurate.  Fined $5,000; Suspended 18 months in all capacities Bill Singer's Comment: See the Fernandez case immediately below.  Joe Manuel Fernandez (Principal)  AWAC/C02050051/August 2005) Fernandez learned that another registered representative of his member firm had  impersonated him and had completed the firm element continuing education training module in his place; and submitted a completion certificate to the firm falsely indicating that Fernandez had completed the training module, causing the firm’s books and records to be inaccurate. However, Fernandez failed to take any action to correct the firm’s books and records or to report the other representative’s misconduct.  Fined $5,000; Suspended 18 months in all capacities Bill Singer's Comment: Oh, please.  How thoughtful of the "other" RR to complete the Firm Element on behalf of Fernandez.  I simply can't imagine why Fernandez failed to take any action.  If that's the version the NASD wishes us to accept, fine --- maybe there are other facts at work here that the regulator hasn't set forth and I'm being just a bit too cynical.  See the Jones case immediately above. Vincent Anthony Buchanan (Principal) AWC/C10050050/August 2005 Buchanan consented to the described sanctions and to the entry of findings that member firms, acting through Buchanan, engaged in the securities business while failing to have and maintain sufficient net capital.  Fined $15,000; Suspended 20 business days in all capacities. Bill Singer's Comment: This strikes me as an odd report.  What does the NASD mean by the plural "firms"?  How many?  Is the regulator alleging that numerous firms were under Net Capital and that Buchanan was responsible for all of those violations?  Seems like a fairly light sanction if that's the case.  How come no requalification? Charles Gabriel Bourdreaux, IV  OS/C05050014/August 2005 Bourdreaux engaged in a scheme to evade federal cash reporting requirements by advising the purchase of multiple money orders in amounts less than $3,000 and causing money orders totaling $11,650 to be deposited into a brokerage account maintained at his member firm. Also, Bourdreaux failed to respond to NASD requests for information. Barred Bill Singer's Comment: One of the great myths:  No one will detect under-$10,000 cash deposits.  Oh yeah?  Gee. . . didn't I just write this same comment for the case immediately below?  Hmmm . . . like, maybe, just maybe, the NASD is making this an enforcement priority?  This must be a very, very difficult violation to detect.  Let's see, an examiner would have to investigate whether multiple deposits under $10,000 are being made to the credit of the same account and likely being deposited within a fairly short period of time.  Wow!  That must take all of about five minutes, even with a cup of coffee in one hand and a donut in the other.  Folks, wise up!  This is a stupid violation that is going to be quickly detected by even a rookie examiner. Juan Carlos Alb AWC/C9A050026/August 2005 Alb agreed to deposit $18,200 in cash received from another person into a bank account that Alb maintained at a bank where he worked, made two separate deposits of less than $10,000 on separate days to his account at the bank, and then gave the person from whom he had received the cash a check for $18,500. Alb intended to prevent the bank from filing a currency transaction report as required by federal law for any cash deposit exceeding $10,000.  Barred Bill Singer's Comment: One of the great myths:  No one will detect under-$10,000 cash deposits.  Oh yeah? Zions Investment Securities, Inc.  AWC/C3A050027/August 2005 The Firm failed to report in a timely manner customer grievances required to be reported with quarterly statistical information or no more than 10 days following the firm’s discovery; failed to amend Forms U4/U5;  failed to ensure that registered representatives of the firm participated in a required annual compliance interview; failed to ensure that registered representatives of the firm completed one or both of two components of the required firm element continuing education program; settled a customer complaint by means of a settlement agreement that contained language implying that the customer could not voluntarily assist NASD or any self-regulatory organization with respect to the subject matter of the settlement; utilized two forms of written supervisory procedures that evidenced two forms of supervisory systems, both of which were not reasonably designed to achieve compliance with the reporting obligations of NASD Rule 3070, requirements to amend Forms U4 and U5, requirements to monitor for compliance with variable annuity and mutual fund compensation rules, rules pertaining to retail transaction in fixed income securities and corporate bond trading, continuing education provisions, SEC Rule 15c2-12, and the requirements for office inspections in NASD Conduct Rule 3010; and did not enforce its supervisory system and procedures relating to annual compliance interviews, firm element continuing education, office inspections, and advertising and sales literature reviews. Censured; Fined $35,000 Equity Trading Online, LLC AWC/C10050057/August 2005 Firm permitted an individual to park his registration with the firm by maintaining 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 representative of the firm. Acting through an individual, the firm failed to designate properly a branch office as an Office of Supervisory Jurisdiction (OSJ). The firm inaccurately reported to the MSRB the capacity for transactions by publishing an extraneous transaction report, failing to timely report transactions, and inaccurately reporting inter-dealer transactions as customer transactions. The firm failed to report accurately the capacity on certain customer confirmations.  Censured; Fined $13,500 ($6,000 jointly/severally with an unnamed individual) CJS Securities, Inc.  AWC/C3A050031/August 2005 CJS Securities, Inc. permitted its analysts to sell securities issued by companies for which the analysts were primarily responsible for research coverage at times when the firm’s recommendation was to buy or hold the security. The firm’s analysts bought or sold securities issued by companies for which the analysts were primarily responsible for research coverage during a period of time prior to or after the issuance of research reports concerning those companies. Also the firm issued research reports covering companies from which the firm had received, or expected to receive, compensation for investment banking services in connection with participation in public offerings of the companies’ securities. The firm did not have written supervisory procedures reasonably designed to achieve compliance with NASD Rule 2711.  Censured; Fined $40,000 Chicago Investment Group, L.L.C.  AWC/C8A050052/August 2005 The Firm used the mails or other means or instrumentalities of interstate commerce to effect transactions in securities when it failed to maintain the minimum required net capital; prepared inaccurate trial balances, general ledgers, and net capital computations; filed FOCUS IIA reports that overstated the member’s net capital; failed to prepare and maintain adequate written supervisory procedures to ensure that employees whose registrations were subject to numerous strict supervisory guidelines and restrictions by several state securities regulators remained in compliance with those restrictions; and failed to obtain NASD approval prior to effecting a material change in business operations in that the firm increased the number of associated persons involved in sales activities beyond the limits delineated in IM-1011-1: IM-1011-1. Safe Harbors for Business Expansions Censured; Fined $22,000 Strasbourger Pearson Tulcin Wolff Inc. and Michael J. Schumacher (Principal)  AWC/C07050040/August 2005 Acting through Schumacher, the firm  failed to establish and maintain a supervisory system, including adequate written supervisory procedures, reasonably designed to achieve compliance by the firm and its representatives with numerous NASD rules; and permitted a registered representative to conduct a securities business while his registration was inactive.  In addition, the firm failed to conduct independent testing of its antimoney laundering (AML) compliance programs, collect all required information for wire order/transfers, review wire orders, and verify the identities of customers who open accounts in violation of NASD Rules 2110 and 3011.  Strasbourger Pearson Tulcin Wolff Inc.: Censured; fined $30,000 ($12,500 joint/several with Schumacher) Michael J. Schumacher: Fined $12,500 joint and several with firm; Suspended 15 business days in principal capacities. Stoever, Glass & Company Inc., and Michael Francis Carrigg ( Principal)  AWC/C10050045/August 2005  The firm  commingled customer securities with non-customer securities to collateralize bank loans; neglected to report to the Trade Reporting and Compliance Engine (TRACE) the underlying yield to inter-dealer corporate debt security transactions; and failed to make a timely transaction report to TRACE.  Acting through Carrigg, the firm collateralized the loan set up for firm trades with a customer security position that was not fully paid and permitted a customer’s fully paid securities to remain in a non-control location for an extended period of time.  Stoever, Glass & Company Inc.: Censured; Fined $7,000 joint and several with Carrigg; Fined an additional $5,000 Michael Francis Carrigg: Censured; Fined $7,500 joint and several with firm; Suspended 10 business days in FINOP capacity Bill Singer's Comment: We just don't see FINOP suspensions that frequently --- so take note of this case.  Perhaps the beginning of a tougher trend? Jersey Shore Trading Group, Inc. and John F. Helbock (Principal)  AWC/C9B050038/August 2005 Acting through Helbock, the Firm permitted a statutorily disqualified person to be associated with and conduct activities on behalf of the firm. The firm executed order tickets for equity and municipal transactions that were deficient, and was late in reporting municipal securities transactions executed by the firm.  Jersey Shore Trading Group,Inc.: Censured; Fined $25,000 ($15,000 of which joint/several with Helbock) John F. Helbock: Fined $15,000 (Joint/several with firm); Suspended 30 business days in principal/supervisory capacity David A. Noyes & Company and Anthony Michael Quirini (Principal)  AWC/C8A050058/August 2005 Quirini created and distributed sales literature in the manner of form letters to the public, which the firm failed to file with NASD’s Advertising Regulation Department. These form letters contained statements that  exaggerated the safety of the products failed to reflect the risks of fluctuating prices and the uncertainty of rates of return and the yield of investments; failed to provide balanced presentations of the risks and rewards of the products offered failed to disclose material information regarding the risks of each proposed investment, and  failed to provide a sound basis for evaluating the recommendations contained in the letters.  The firm failed to adequately and properly supervise the use of these form letters and failed to establish, maintain, and enforce adequate written supervisory procedures designed to achieve compliance with applicable securities laws and regulations.  David A. Noyes & Company: Censured; Fined $10,000 (jointly and severally with Quirini) and fined an additional $30,000; Must obtain a “no objection” letter from the NASD Advertising Regulation Department on any proposed sales literature or advertising prior to its use for one year. Anthony Michael Quirini: Fined $10,000 (jointly and severally with firm); suspended 10 business days all capacities Bill Singer's Comment: The interesting aspect of this case is the imposition of a 1 year requirement to obtain a "no objection" letter from NASD Advertising.   Paul Zdzieblowski  NAC Hearing/C8A030062/July 2005  Zdzieblowski willfully failed to disclose material information on his Form U4.  Fined $5,000; Suspended 1 year in all capacities  Bill Singer's Comment: An interesting case on appeal. The Hearing Officer Barred Zdzieblowski, but on appeal the NAC reduced the sanction to a $5,000 fine and a 1 year suspension. Respondent had been found in default for not timely responding to NASD charges that he willfully failed to disclose a prior conviction. The NAC sustained the Hearing panel's finding that Respondent was in default and failed to show good cause for same.  On or about March 28, 1998, Michigan law enforcement charged Zdzieblowski with retail fraud, a misdemeanor. On July 29, 1998, Zdzieblowski pleaded guilty to the charge. The court placed him on probation for 12 months and ordered that he pay a fine and court costs. On or about December 30, 2001, Zdzieblowski submitted a Form U4 in connection with his registration as an investment company/variable contracts representative for USAllianz. On the Form U4, the Hearing Panel found that Zdzieblowski willfully failed to disclose that he had been charged with and convicted of a misdemeanor involving theft or wrongful taking of property.  The NAC did not believe the record supported a finding that he had been convicted because the Court may not have "legally" accepted a guilty plea (but merely took the plea under advisement for one year and then closed the case). Nonetheless, the NAC was satisfied that the Respondent willfully failed to disclose the "charge" --- and that renders him statuorily disqualified in its own right. Ricardo Alfonso Sibaja AWC/C02050041/July 2005 Upon the request of public customers, Sibaja completed forms on their behalf to change the names of ownership on two of their accounts. After submitting the forms, Sibaja was notified that the forms were outdated and that the customers needed to submit an original, executed form for each account. However, in an attempt to accommodate the customers, he cut the customers’ signatures from the outdated forms and pasted them onto the new forms without the customers’ knowledge or consent.  Fined $5,000; Suspended 45 days in all capacities Bill Singer's Comment: What harm would a little cut and paste cause?  After all, it's what the customer wanted and it will save time.  Well, in this case it doesn't really save the RR any time --- in fact, it costs 45 days. Steven Charles Kirsch (Principal) CAF040025/July 2005 Kirsch provided false testimony about his activities at an NASD on-the-record interview. Also, he performed supervisory duties while subject to a 30-day suspension and failed to reasonably supervise his research department prior to his 30-day suspension to ensure that a research report issued by his member firm was accurate.  Barred Bill Singer's Comment: Yet another bit of Street wisdom --- if you're suspended , the regulators will never know if you're back in the office.  Oh yeah?  So, here, instead of a 30 day supervisory suspension, the Principal is Barred in all capacities.  Barred --- as in a lot more time than 30 days in supervisory capacities only. John Basil Inferrera AWC/C9B050032/July 2005 While not licensed to sell securities in the states of New Jersey and Indiana and in order to circumvent securities licensing requirements, Inferrera entered into an arrangement with registered representatives who were properly registered. As a part of this arrangement, he created inaccurate records related to public customer accounts so that other representatives appeared as the registered representatives of the record when he was actually handling the customers’ accounts (the other registered representatives entered securities transactions for New Jersey and Indiana public customers on Inferrera’s behalf). Fined $10,000; Suspended 6 months in all capacity. Hampton Forrest Hook  AWC/C05050028/July 2005 Hook loaned $6,100 to public customers to be deposited into their account at his member firm for the purchase of shares of stock. Hook guaranteed public customers against loss in connection with the purchase of shares in a company. He opened a brokerage account for a public customer by completing and signing “New Account Approval” and “Client Option Agreement and Approval” forms (the information on the forms was inaccurate).  Hook shared in the account of a public customer of his member firm by funding all transactions with his own funds and keeping all but $1,000 of the account proceeds for himself without obtaining prior written authorization from his member firm.  Hook executed unauthorized purchase and sale transactions in the account of a public customer; and exercised discretion in the accounts of public customers without having obtained prior written authorization from the customers and without prior written acceptance of the accounts as discretionary by his member firm. Hook recommended