NOTE: New York Stock Exchange Hearing Panel Decisions (HPD) denoting 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.

In the beginning there was prosperity

X and the Floor Broker maintained a friendly social relationship.

In August 1996, X became employed s a registered representative at the Firm, where he attained the title of Head Trader. X’s titles at the Firm were Managing Director of Equity and Sales Trading and global co-head of Equity Risk. X supervised a staff of approximately ten and had significant influence over which independent Floor Brokers received work from the Firm.  Floor Broker was an independent Floor Broker whose company executed trades for the Firm. The Floor Broker and his company maintained a direct “wire” to the Firm’s Trading Desk from his Floor booth. At all relevant times, the Floor Broker devoted a significant amount of his time on the Floor executing trades for the Firm until the Firm became his largest and nearly sole customer. Prior to the events in question, the Floor Broker and his firm were the independent Floor brokers that executed the largest number of transactions for the Firm on the Floor of the Exchange. In the year 2001, the Floor Broker’s firm received approximately 80% of the commissions paid by the Firm to independent Floor brokers that year. The Floor Broker’s business was almost entirely devoted to executing the Firm’s orders; about 95% of its business came from the Firm

The Road to Hell 

In the summer of 2001, X asked the Floor Broker for a recommendation of a contractor to renovate his bathroom at home. The Floor Broker convinced X to hire a contractor with whom the Floor Broker maintained a close friendship. The Floor Broker had lent the contractor $20,000 to get the contractor out of financial difficulties. The Floor Broker was aware that the contractor had personal problems, and could be unreliable, but he did not convey the extent of potential problems to X. Rather, he personally introduced the contractor to X and vouched for the quality of the contractor’s work.

The contractor’s work for X was a total mess. Soon, the contractor stopped showing up altogether. X informed the Floor Broker about the situation, and the Floor Broker sought to intervene. He lent the contractor an additional $8,500, $4,000 of which was to pay for the purchase of supplies for the job, and the remainder for additional problems that the contractor had run into. When the contractor failed to show up for work, the Floor Broker sought to find substitutes. 

The Floor Broker hoped that X’s problems with the contractor were a dead issue by the end of 2001. But they were not, as more work was done by others to repair the contractor’s failings into 2002. During this period, X’s wife, who bore the brunt of the problems of dealing with the contractor, was furious, and asked her husband to do something about the situation. The couple also learned that the Floor Broker had maintained a friendship with the contractor, had lent money to the contractor, and had been able to employ the contractor in some work for his own family even after he had abandoned his work for the couple. In July 2002, when invited to a Fourth of July party by the Floor Broker, the couple declined. X’s wife questioned X’s continuing friendship and business relationship with the Floor Broker. 

X mulled over possible resolutions of his relationship with the Floor Broker, including a request that the Floor Broker pay for the damaged work, but did not overtly act on it. 

Pay Back? 

For the first half of 2002, the Firm’s business continued to flow to the Floor Broker. Business was somewhat reduced however, as it was in the market generally. At one point, the Floor Broker discovered that a large order had gone to another Floor Broker for execution, and complained to X. X was reassuring. But in these months, X’s friendly relationship with the Floor Broker cooled significantly.

In July 2002, the Floor Broker’s head clerk, concerned that business seemed to be dropping, although unaware of any disputes, arranged to have lunch with X to determine what problems existed between them. At the lunch, X expressed a general loss of confidence in the Floor Broker, indicating that the Floor Broker “wasn’t a stand-up guy,” and that he’d lost faith in the Floor Broker. X mentioned problems he had with the bathroom contractor. X made no request for money. But the clerk asked if X would consider a payment of damages, volunteering a $40,000 figure. X was hesitant, asking “What am I gonna do? What am I gonna do with that?” Nevertheless, the clerk reported back to the Floor Broker, advising him that “I don’t think it’s gonna happen unless we take care of the bathroom.” 



18 U.S.C. §1951
Interference with commerce by threats or violence

(a) Whoever in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by robbery or extortion or attempts or conspires so to do, or commits or threatens physical violence to any person or property in furtherance of a plan or purpose to do anything in violation of this section shall be fined under this title or imprisoned not more than twenty years, or both.

(b) As used in this section -

(1) The term ''robbery'' means the unlawful taking or obtaining of personal property from the person or in the presence of another, against his will, by means of actual or threatened force, or violence, or fear of injury, immediate or future, to his person or property, or property in his custody or possession, or the person or property of a relative or member of his family or of anyone in his company at the time of the taking or obtaining.

(2) The term ''extortion'' means the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.

(3) The term ''commerce'' means commerce within the District of Columbia, or any Territory or Possession of the United States; all commerce between any point in a State, Territory, Possession, or the District of Columbia and any point outside thereof; all commerce between points within the same State through any place outside such State; and all other commerce over which the United States has jurisdiction.

(c) This section shall not be construed to repeal, modify or affect section 17 of Title 15, sections 52, 101-115, 151-166 of Title 29 or sections 151-188 of Title 45


The Floor Broker assumed that X had made a demand for money. He reported the matter to Exchange officials, who reported the matter to the FBI. The FBI arranged for taped conversations between the Floor Broker and X.

The following weekend, the Floor Broker, wearing a hidden transmitter, visited X at his home. X had been concerned about his friendship and continuing business relationship with the Floor Broker. X was festering with the problem, but had thought of no resolution to it. Now, he was willing to accept an offer of monetary payment. He told the Floor Broker to “make me right for 25 g’s.” 


“If you showed up with a bag full of cash, you know, it wouldn’t be about the bag full of cash … but I’d feel better about how you acted after … I want you to make me whole on the bathroom … and send me a case of wine for my wine cellar. that says, you know what? Yeah, I love you.” 

Still later, X commented, “[a]t some point you just got to feel good about things or else the business is going to suffer.” 

Concluding, X stated “I can’t sit there and tell you that I think my way was the right way. I can’t tell you that with a straight face … Because I’m very uncomfortable with all of it …. That’s not my style. That’s not the way I do business …But it was all about, you know, the character … I don’t think its right. But it’s about the character.”


At a later meeting, the Floor Broker expressed qualms about payment. There had been a request that the Floor Broker furnish wine for a party X was having. The meeting concluded with X saying that he would think more before making a decision on continuing to do business with the Floor Broker.


“I told you I don’t know if it’s right. But we have to find some resolution, and then what is it? That’s the point.” 

“You know I just, in the last few weeks, … I mean this wine thing, it’s over three thousand dollars.” 
X replied, “It is really? I don’t even know. I’ll talk to [unintelligible].” 

X consulted his supervisor, explaining that the Floor Broker had recommended a contractor who had fouled up the job, and that the Floor Broker had offered to make good on the work. The supervisor advised X that he should not accept the money, in order to avoid any conflict of interest. X assured the supervisor that he was not taking any money. X informed traders at the Firm, working under him, of his bad feelings about the Floor Broker. But, thereafter, he had second thoughts about requesting other traders at the Firm not to trade through the Floor Broker. 

X informed the Floor Broker that he had realized the matter hadn't really been finally resolved. He noted that he had told the traders to use the Floor Broker if they wanted.  Nonetheless, the Floor Broker believed that X was still holding the situation over his head.


“There’s definitely a conflict there. So I thought the best way for me to resolve it was for me to just step away from it; and that’s what I told the boys. I said you want to use [the Floor Broker] go right ahead and use him. I don’t want to control the situation. They’re grown men. They should be able to use you if they want to you know? That’s fine. …. I made a mistake in judgment there. They’re not going to be told who to use by me. …I’ve been very candid with them. I said … this is personal and I made the mistake of letting it cross into business.” 
When the Floor Broker said, “You’re holding this thing over my head, and all my work,” 
X replied, “I haven’t taken a dime from anybody and I’m not going to.”  

Seeking a final admission of misconduct from X, the Floor Broker recapitulated X’s willingness to accept money and wine, coupled with X’s plans to cut off business with the Floor Broker. To this X reiterated his continued emotions about the bathroom and his mistakes in letting personal cross into business. X informed the Floor Broker that, while X would no longer do business with him, he would try again to make it clear that the other traders could do business with the Floor Broker. In telephone conversations with the Floor Broker’s clerk, in the days following their lunch together, X discussed pulling the Firm’s business. 


 “I just lost confidence, you know. And it ain’t about anything else you know. “

At another point,X stated, “[I]t ain’t about the money now. It’s about, you know, now it’s just a confidence thing.” 

Subsequently, as the situation reached its climax, X told the clerk,“You know, money changing hands is not the right way to do things …That’s the way6 I feel about it … It just became a confidence problem . . . There’s no money situation to be done with …I don’t want to deal with money at all …”

Things Get Very Messy

In August 2002, most of the Firm’s business was placed with other Floor Brokers. By the end of 2002, the Floor Broker had suffered a significant drop in business from the Firm; by February 2003, the Firm’s business with the Floor Broker was negligible. Later that year, the Floor Broker went out of business.

By letter dated August 7, 2003, NYSE Enforcement notified X of its investigation into allegations that X threatened to withdraw Firm business from a Floor Broker unless he paid X the sum of $25,000. Following an investigation by the FBI, X was arrested in August 2002 and charged via a sealed federal complaint in the United States District Court in the Southern District of New York with violating 18 U.S.C. § 1951 [attempted extortion]. X was suspended by the Firm on August 23, 2002, and was subsequently permitted to resign on August 24, 2003.  In December 2002, X entered into a deferred prosecution agreement for a period of eighteen months with the U.S. Attorney’s Office of the Southern District of New York. One of the terms of the agreement states that X is not permitted to associate with a broker/dealer or investment advisory firm during the entire eighteen months.  

The federal complaint was premised on the Floor Broker's clerk’s report that X had demanded payment to cover costs of fixing the bathroom, and that there be no paper trail on the payment. The NYSE Division of Enforcement’s Charge Memorandum alleged the same version of the facts. But, at the hearing, the clerk’s testimony was clear – X made no demand for payment; the suggestion of a $40,000 payment came from the clerk. In September 2003, the Firm filed a Form U-5, indicating that X had been permitted to resign from the Firm, due to the conditions set forth in the deferred prosecution agreement. 

The NYSE charged X with: 

I. Violated Exchange Rule 476(a)(7) in that he engaged in acts detrimental to the interest or welfare of the Exchange in that, during July and August 2002, while in the course of his employment with his member firm employer, he attempted to extort funds from an Exchange Floor Broker in exchange for directing his firm’s business to the Floor Broker;

II. Violated Exchange Rule 476(a)(7) in that he engaged in acts detrimental to the interest or welfare of the Exchange in that, during the course of conducting business for his member organization employer, he engaged in conduct that resulted in his being arrested and charged with attempted extortion, among other charges, stemming from his employment with a member organization; 

III. Violated Exchange Rule 476(a)(7) in that he engaged in acts detrimental to the interest or welfare of the Exchange in that, during the course of conducting business for his member organization employer, he demanded that an independent Floor Broker pay him compensation in exchange for his employer’s continued Exchange order flow without the knowledge or consent of his employer;

IV. Engaged in conduct inconsistent with just and equitable principles of trade in that he demanded that an Exchange Floor Broker pay him money in order for that Floor Broker to continue to receive business from his member organization employer; and

V. Attempted to cause a violation of Exchange Rule 353(a) in that he demanded that an Exchange member pay him compensation as consideration for business procured for that Exchange member organization. 

 Barely Disguised Disdain

Cueing us in for the denouement of this play, the NYSE Panel renders its decision by characterizing this matter as an "overwrought dispute about a contractor's awful work in renovating a bathroom . . ." No more apt words have ever be written by a deliberative body.  Moreover, leaving no room for any doubt, the Panel notes in the opening words of its conclusion that ""X could justifiably believe, as he learned more of the relationship between the Floor Broker and the contractor, that the Floor Broker bore responsibility for the situation."  While noting that X "festered with his bad feelings for many months," the Panel seems to place some blame for the ultimate spiraling-out-of-control aspect of this dispute on the Floor Broker --- whom they said had become "unsettled by the cooling relationship, was very worried that X might take his business elsewhere."

Ultimately the Panel believes that X was considering whether to terminate his personal and professional relationship with the Floor Broker, but that such musings were interrupted by the lunch meeting with the clerk --- at which time the clerk suggested some reparation by the Floor Broker might mend things. Although the  Panel acknowledges that by the time the Floor Broker personally approached X with the idea, X was ready to accept some payment; nonetheless, X made it clear that it was "not about the money" but about a demonstration of responsibility.  Accordingly, the idea of a gift of wine was in keeping with this view of atonement --- not extortion.  Interestingly, the Panel admonishes that had X accepted the money and the wine "while not extortion, constitutes a most serious violation of his professional duties. Had X’s discussions with the Floor Broker been stopped at this point, X would have been guilty of the rule violations with which he was charged."

The important factor here is that the offers were not accepted, discussions continued, and, in short order, X plainly abandoned all intent to accept money or gifts from the Floor Broker. In concert with that change of heart, X discussed the matter with his supervisor and clearly indicated that he would not accept any money. Nonetheless, all did not resolve into a warm and fuzzy happy ending because X then broke his business relations with the Floor Broker and so informed his staff of traders. At the end, X still evidenced remorse and told his staff that he was wrong to involve them and told them to work with the Floor Broker if they desired.  Unfortunately, the wheels had been set in motion by this time and X was arrested and the Floor Broker's business was destroyed.  

Demonstrating great wisdom and commonsense, the Panel concludes

The Hearing Panel’s essential conclusion is that X’s break-off of his business relationship with the Floor Broker was uncoupled from any demand for gifts or money. It was based solely on the irreparable dissolution of their friendship. The charges against X all center on a demand for money in order to do business. This, at the end, as at the beginning, was not X’s intention. The Hearing Panel concludes that X sincerely withdrew from an effort to accept money from the Floor Broker. Nevertheless, as a consequence of his arrest, he lost his job, and he agreed to stay out of the securities industry for eighteen months. We believe that is justice enough, and no further penalty is mandated.


The Hearing Panel, by unanimous vote, found X not guilty of the charges against him. Pointedly, there was no finding of guilt of attempted extortion, either by a criminal court or by the Hearing Panel.

Bill Singer's Comment

On many levels an amazing decision.  First, the Panel showed keen insight into the issues presented.  Second, the Panel saw through the Staff's smoke and mirrors for what it was --- this was not a case of extortion but one involving a festering, personal dispute.  Third, the decision is well-crafted and sounds the perfect note of dismissal . . . if not a tinge of contempt.

Virtually everything I find wrong with self regulation is exemplified by this case.  I noted that there were three NYSE Staff attorneys cited in the decision as representing the Exchange.  Three lawyers for this silly case?  And, still, they couldn't win!  Further, that huge Staff for some reason found it necessary to charge X with five separate counts of violation --- the allegations involved one basic set of facts but the Staff needed to pile up on this poor guy.  The compensation for that overkill was a stunning dismissal of all counts.

Finally, what is left of our personal lives on Wall Street?  We can no longer send e-mails --- they are all subject to regulatory scrutiny.  Many of our phone calls are tape recorded.  Our incoming and outgoing correspondence is supposed to be reviewed.  And now . . . well . . . what are we to make of this?  You can't have a dispute with someone you do business with and take your business elsewhere?  And god forbid the other party offers a token to make things better.  Well, my friends, be careful, very careful, because the FBI is now closely scrutinizing the renovations of your bathrooms --- perhaps a terrorist is hiding under your toilet?  What the hell possesses people in power?  Was there no one willing to apply the brakes to bring this runaway mess to a gentle halt?  Did X really need to be indicted?  Did the NYSE really need to prosecute this case to verdict?

My venom having been spent, let me also note that this case exemplifies the very best of self regulation.  It shows that men and women of commonsense with expertise on Wall Street can sit on Hearing Panels and refuse to rubber stamp some of the rank garbage presented to them under the guise of regulation.  I applaud the members of this NYSE Panel.  Job well done!




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