RR Dixon provided a false response on a Form U-4, in violation of Rule 2110 and IM-1000-1 and failed to respond in a timely manner to requests for information issued pursuant to Rule 8210, in violation of Rules 2110 and 8210. However, leniency was shown in the sanctions because she had first consulted a veteran "mentor" who mistakenly told her she did not need to disclose her criminal history.  Interesting discussion of what constitutes "wilful" nondisclosure.

• For failing to respond timely to information requests, Dixon was fined $2,500 and suspended in any and all capacities for six months.  
• For filing the false U-4, Dixon was fined $2,500 fine and if she re-enters the securities industry, she must complete the Regulatory Element of her continuing education requirement within one year following her registration.  She was also assessed a total of $1,733.08 in costs.  

• Barred in all capacities

At no time during the account's existence did Klein receive the required written authorization from his firm to share in profits with his customer; nor did he obtain the necessary prior written approval of the customer to exercise discretion (nor similar approval from his BD). Similarly, he never notified the other BD of his registered status with his employing BD. Further, he failed to properly notify and obtain authorization from his employing BD to maintain such an account at another member firm.

• Barred in all capacities

Registered Principal Hearne paid commissions to an RR (upon that RR's registration with Hearne's firm) for transactions that occurred prior to the RR becoming so registered.  Hearne also agreed to process the paperwork to open accounts and to effect said transactions. Hearne also failed to take appropriate action to supervise a registered representative who recommended unsuitable transactions in customer accounts.

• Fined $15,000; and
• Suspended in all capacities for 1 month.

See registration cases matrix

RR Delgado Delgado solicited public customers to purchase securities, downplayed the attendant investment risks, and made unwarranted price predictions, causing the customers to authorize and pay for the transactions. He also effected transactions in the account of a public customer without the customer’s prior knowledge, authorization, or consent.  Finally, he effected the sale of securities in at least three states in which he was not yet registered, and attempted to conceal it by placing the trades under another broker’s name.   

• fined $10,000;

• suspended in all capacities for 18 months;

• required  to requalify by examination as a general securities representative before associating with any NASD member in any capacity.

Ronald James Blekicki
NASD CASE #CMS020170
AWC
NOVEMBER 2002

RR Blekicki  failed  to disclose fully the amounts of compensation he received in exchange for publishing favorable information about stocks on his Internet Web site. He further failed to have a registered principal of his member firm review and pre-approve his Internet publications. Finally, Blekicki maintained a securities account at another broker/dealer without notifying his member firm, and without notifying the other firm where the account was opened when he become associated with a member.

• Fined $15,000; and
• Suspended in all capacities for 1 year.

CyberTrader

• Censured;
• Fined $15,000 

Stryker

• Censured;
• Fined $15,000 

BD and Registered Principal Dowell failed to failed to prevent an RR from publishing information about stocks on his Web site without fully disclosing the amounts of compensation he received for doing so.  NASD deemed BD's supervisory system and written supervisory procedures inadequate to  achieve compliance with Section 17(b) of the Securities Act of 1933 and NASD Conduct Rule 2210(b). 

• Censured;
• Fined $10,000 

DOWELL

• Censured;
• Fined $2,500; and
• Suspended in all capacities for 5 business days.

National Adjudicatory Council (NAC) affirmed an NASD Hearing Panel's decision that John Fiero and Fiero Brothers, Inc. of New York, NY, violated NASD and federal securities antifraud laws when they colluded to manipulate the market for several small cap securities through a massive short-selling campaign. The NAC also found that Mr. Fiero and Fiero Brothers violated NASD affirmative determination requirements by executing numerous short sales without having determined that they could borrow the securities or otherwise provide for delivery.  The NAC determined that John Fiero and Fiero Brothers participated in a "bear raid," a coordinated, manipulative action in which short selling is used to drive down the price of a security by creating a false imbalance of sell-side interest. Fiero and Fiero Brothers engaged in a manipulation and deception that "violated public trust and jeopardized market integrity," according to the decision. Specifically, John Fiero and the firm intentionally drove down the prices of several small cap securities by amassing sizeable short positions in those securities with the aim of demonstrating a large demand to sell the securities. The underwriter of the manipulated securities, who held large proprietary positions in the securities, was coerced to sell Fiero Brothers blocks of the manipulated securities at deeply discounted prices. Mr. Fiero used the discounted securities to cover the firm's short positions at a sizeable profit and sold the remaining securities to other short sellers to cover their short positions, thereby generating significant profits for them and additional profits for Fiero Brothers. The NAC also found that Fiero Brothers, after covering its short positions, commenced a second wave of illegal short selling in the same securities that eventually drove Hanover Sterling & Co., Inc., the underwriter of the securities, out of business and led to the bankruptcy of its clearing firm, Adler Coleman Clearing Corp. A key aspect of Mr. Fiero and Fiero Brothers' manipulative conduct was its violation of NASD's affirmative determination rule. The affirmative determination rule requires a securities firm to determine, prior to selling a stock short, that it can borrow securities or provide for delivery by settlement date before effecting a short sale of the securities. The rule prevents short selling by those who do not have, and have no intention of delivering, the stock that they are selling. The NAC found that, over the course of two months and in connection with Fiero Brothers' short sales of the manipulated securities, Mr. Fiero and the firm violated NASD's affirmative determination rule in a number of instances. The NAC concluded that, as a result of John Fiero and Fiero Brothers' manipulative conduct, they intentionally injected into the marketplace inaccurate information regarding the level of interest in the manipulated securities because it was the concerted efforts of Mr. Fiero and Fiero Brothers and not the free forces of supply and demand that created the appearance in the marketplace of a massive selling effort. 

John Fiero:

• Fined $1,00,000 (joint and several); 
• Barred in all capacities 

• Fined $1,00,000 (joint and several); 
• Expelled from membership

• Censured;
• Fined $10,000 (financial status cited in mitigation); 
• Suspended as a FINOP for 9 months;and 
• Requalify as FINOP

LOUIS MICHAEL MONTAINO
and
MICHAEL ROBERT MARCUS 
NASD CASE #CAF010025
AWC
OCTOBER 2002

RR Marcus arranged for his girlfriend to purchase shares of stock for her account at a steep discount to the prevailing market price, and he began placing day limit purchase orders (increasing bids) for shares of stock (thinly traded) with a market maker (that frequently was the inside bid) to create the appearance of interest and activity in the stock, and placed all stock purchased into the firm's proprietary account. 

RR Montaino and another broker with whom he shared a registered representative number solicited public customers to purchase the stock, failed to disclose material risks, and fraudulently misled investors in connection with their decision to purchase and sell the common stock. Furthermore,  Montaino solicited and obtained customer orders for purchases of the stock and held the orders for execution without authorization from the customers until 

Marcus filled the orders with shares held in inventory by their member firm, thereby realizing approximately $1,900,000 in illicit profits for the firm, and approximately $29,000 in illicit profits for his girlfriend's account. 

RR Marcus:

• Fined $20,000; and 
• Suspended in all capacities for 8 months

RR Montaino

• Suspended in all capacities for 6 months

• Barred in any capacity

• Censure;
• fined $65,000; and 
• an Undertaking to:

1. provide to NASD within 60 days a copy of the firm's written procedures regarding the accurate and prompt submission of all Form U-5 filings;
2. One year review of its U-5 reporting policies and procedures with semi-annual reports to NASD;
3. Semi-annual summary reports for one-year outlining the details of every late Form U-5 filing made within the prior six months,

• Censure;
• fined $5,000 (financial status cited in mitigation); and 
• Barred in any principal or managerial capacity

Panel seemed particularly troubled by RR's telephoning one of the panelists one day after the hearing.  Despite the Panelist telling RR that it was totally inappropriate for him to be calling, RR asked whether the Panelist thought anyone in the securities industry would hire a broker with a sanction on his record. The Panelist responded that he knew of working brokers with sanctions, but that he should not be talking to RR. Although RR was represented by counsel at the hearing, counsel was unaware of his client's intention to make the call to a Panelist.  In determining sanctions the Panel noted that the "post-hearing ex parte communication confirms its conclusion that a lengthy suspension is an appropriate sanction in this case. As noted above, Conduct Rule 9143 prohibits ex parte communications with an Adjudicator."

• fined $5,000 plus costs
• suspended in all capacities for 2 years

Hearing Panel decided that the investors had the power to exercise control over their investments and did not deem the transaction to constitute a "security." Interesting analysis of LLCs and their unique impact on the liability and management (control).  Excellent discussion and analysis of the definition of a security as per SEC v. W.J. Howey Co., 328 U.S. 293 (1946) and Great Lakes Chemical Corp. v. Monsanto Co., 96 F.Supp. 2d 376 (D.Del. 2000)

Panel found that Moran did not timely disclose his outside business activity with the franchise on Merrill Lynch's Outside Interest Questionnaire (OIQ), in violation of Rules 3040 and 2110.

Specific reference was made in determining sanctions to the fact that "Moran's conduct was not venal.  He was open about his involvement . . . did not engage in his outside activities in the face of any disapproval [by Merrill Lynch] . . . nor did he attempt to create the impression that Merrill Lynch sanctioned those activities . . .At the hearing, Moran was contrite.  He credibly testified that he accepted responsiblitiy . . .In December 1999, Merrill Lynch terminated his employment and his once promising career at that firm.  Since that time, he has been living on his retirement savings and, at the present time, is practically broke."

• fined $5,000
• suspended in all capacities for 10 business days

• fined $17,500
• requalify in any capacity 
• suspended in all capacities for 6 months

In light of the financial status of Clifford, a fine of $17,500 has been imposed. The fine must be paid before Clifford reassociates or requests relief from any statutory disqualification.

• fined $15,000
• pay $4,662.50 in restitution to member firms
• suspended in all capacities for 3 months

1. the risks inherent in technology/sciences sector; 
2. fund was a non-diversified fund; and 
3. fund had an undue concentration in a limited number of securities.

Miola acted as a General Securities Principal and Representative without proper registration, and failed to obtain approval from a registered principal of the firm prior to submitting the ads to NASD.  

• fined $25,000 (with $4,565.43 disgorgement)
• requalify as GSP
• pay $82, 301.92 plus interest restitution to public customers, joint and several
• suspended in all capacities for 30 days

Member Firm:

• Censure
• fined $10,000
• Not permitted to underwrite any IPOs for Developmental Stage Company
• Not permitted to make a market in any publicly traded security
• Not permitted to offer for sale to public customers any securities of William Scott & Co., LLC or its holding company for 3 years
• Will hire independent consultant

Glodek, Sr.:

• fined $10,000 
• requalify as GSP
• pay $82, 301.92 plus interest restitution to public customers, joint and several
• suspended in all capacities for 6 months

Glodek, Jr.:

• fined $10,000 
• requalify as GSP
• pay $82, 301.92 plus interest restitution to public customers, joint and several
• suspended in all capacities for 45 days
• suspended in principal capacities for 1 year

NOTE: Glodek Sr. was permitted to begin his suspension the day after Glodek Jr.'s "all capacities" suspension was concluded.

Member Firm:

• Censure
• fined $35,000 joint and several

Registered Principal:

• Censure
• fined $35,000 joint and several 
• suspended in principal capacities for 2 months

Member Firm:

• Censure
• fined $10,000

Registered Principal:

• fined $5,000 (must be repaid before reassociation)
• suspended in principal capacities for 10 Business Days

• fined $40,000;

• suspended in all capacities for 1 year;

• required  to requalify by examination before functioning in any principal capacity;

• restitution to the estate of JRB in the amount of $55,567.03, plus interest;

• costs and fees

• Firm expelled and Principal barred in principal capacity.

• Firm and principal fined $35,000 joint and several (addtl $5,000 upon firm alone).  Principal required to Series 24 requalify within 90 days.

• Barred from industry.

• $15,000 fine, 30 day suspension, GSP and GSR requalification.

NASD delayed the filing of Complaint too long in violation of fundamental notions of fair-play. SEC standard in Hayden is that length of delay may be sufficient basis --- in and of itself --- for summary judgment or denial of findings.  SEC pointedly declined to require a demonstration of harm to respondents, as might be required per laches defense. NASD NAC disregards SEC's Hayden standard and establishes two-part test:

1. whether respondent had unreasonably caused a portion of the delay, or 

2. whether the proponent was harmed by the alleged delay.

RR failed to answer "yes" to felony charges (no felony convictions).  Panel refused to find misconduct willful and crafted lesser sanctions than typically imposed.  Interesting discussion of the aspect of the mitigating value of an honest mistake.  

• $7,500 fine plus costs and 2 months suspension.

RR, who was also a GSP/Equity Trader/FINOP, sustained significant personal trading losses and failed to make timely payment by settlement date in violation of Reg.T/X.  

• 3 month suspension all capacities, 2 years as principal, FINOP/GSP requalification, personal trading restrictions, and $30,000 fine.

Respondent denied having been granted immunity by US Attorney.  DMR produced a Cooperation Agreement and sought sanctions for the allegedly false testimony.  Because of DMR's imprecise questioning and the possibility of ambiguity inherent in a layperson's understanding of the legal definition of "immunity," the Panel dismissed case.

RR borrowed money from customers to cover personal trading losses, but failed to affirmatively disclose to member firm when asked on annual form.  Discussion of legality of customer-RR loans, but with need for disclosure. 

• Nine month suspension, $10,000 fine payable on terms, and prohibited from certain personal trading during repayment.