NOTE: 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.
James Byongmin Yim
SFC/NYSE Hearing Board Decision: 06-163/October 11,2006
James Byongmin Yim was a former registered representative with Morgan Stanley D.W. Inc. (the Firm) at its Reno, Nevada branch from 1998 through May 2004, when he was terminated.
In or about July 2001, Yim’s customer, VH, asked Yim for recommendations for investments outside of the Firm. Without the Firm's knowledge or approval, Yim recommended that VH invest money with Yim’s uncle, who had a private family business in Korea. In or about July 2001, VH gave Yim $13,000, which was purportedly for VH’s investment in Yim’s uncle’s business. Yim executed and issued a promissory note to VH which stated that the $13,000 was to be repaid with interest within one year. Yim issued the promissory note to VH without first subjecting such correspondence to review by the Firm. Although Yim repaid the full $13,000 to VH before the year’s end, the Firm reminded Yim of its policies prohibiting loans to or from customers and warned Yim that any future repeat offenses of similar conduct could result in the termination of his employment.
In or about early 2003 TG (a friend of Yim's aunt AY) loaned approximately $55,000 to AY. When AY could not repay the loan, withouth informing the Firm, Yim agreed to accept the responsibility of repaying the loan to TG, notwithstanding the Firm’s previous warning relating to loans from customers. In or about February 2003,Yim gave TG a personal check in the amount of $56,283.32 representing the return of funds loaned to his aunt with interest. The check was drawn on Yim’s personal checking account held at Bank A. Yim’s personal check was returned to TG by Yim’s bank for insufficient funds. At the time Yim gave the check to TG, Yim knew that he did not have sufficient funds on deposit in his checking account to cover the check.
KP and his wife, DP, maintained IRAs at the Firm’s Sacramento, California office. Yim was named as a Financial Advisor on the accounts. On or about April 15, 2004, Yim deposited two personal checks drawn on his checking account held at Bank A in the amount of $6,000 each, into the accounts of KP and DP. 20. Yim deposited his personal checks into the accounts of KP and DP so that the Ps could meet the April 15, 2004 deadline for their 2003 Roth IRA contributions of $3,000 each, and also for their 2004 Roth IRA contributions of $3,000 each. On or about April 29, 2004, Bank A returned Yim’s personal checks to the Firm for insufficient funds. On April 15, 2004, Yim knew that he did not have sufficient funds on deposit in his joint checking account to cover the two $6,000 checks. When questioned about these checks by the Firm, Yim claimed that he had deposited a $14,000 check into his bank account which had failed to clear by the time the two personal checks were presented to Bank A for payment. Yim repeated that statement during his sworn testimony to NYSE Regulation on January 12, 2006. Nevertheless, Yim’s bank account statements do not reflect a $14,000 deposit at any time prior or close to April 15, 2004.
The NYSE Hearing Panel found that Yim violated:
James Byongmin Yim: Censure; 9 month Bar
|Bill Singer's Comment: At both the NASD and the NYSE we are seeing an increase in "borrowing/lending" cases. Moreover, such cases are not always outright loans --- but, as in Yim, they often arise within the context of private securities transactions/outside business. Notably, such cases tend to involve close friends or relatives, and I suspect that many registered persons simply fail to process the facts as a violation. However, in Yim it appears that he was warned against such lending practices by the Firm, and was on notice. Further, Yim also exacerbated his problem by first lying to the Firm about the non-deposit of the $14,000 check and then seriously compounding his predicament by lying under oath to the NYSE.
Lee Mackay Turner
SFC/ NYSE Hearing Panel 05-177/February 8, 2006
In October 2003, Edward D. Jones & Company (the “Firm”) received a verbal complaint from client Customer C (whose account was serviced by Registered Representataive Turner at the Firm's Mukilteo, Washington branch office) regarding the liquidation of certain funds he held at XYZ. Customer C had agreed to transfer these funds from XYZ to the Firm, but he did not want to liquidate his positions. However, Customer C’s funds at XYZ were liquidated when Turner called XYZ and falsely represented that he was Customer C and made the request.
A Firm compliance officer, questioned Turner about Customer C’s complaint. In response, Turner explained that he did call XYZ regarding the transfer of the customer account but Turner claimed that he identified himself as “Lee Turner with Edward Jones, calling on behalf of my client Customer C.” That statement was false and the Firm terminated Turner pursuant to a Uniform Termination Notice for Securities Industry Registration (“Form U-5”) dated February 9, 2004.
The NYSE notified Turner of its formal investigation by letter dated
July 14, 2004, which Turner received. On August 10, 2004 Turner sent
a responsive email stating that he was
traveling in India and stated, “I pledge you my assistance once I
return, I retained copious notes just for this forum.” Additionally,
Turner stated “I’ll be there (Zanskar) for nearly 12 days so I wont be
in touch until at least then.” Turner never contacted NYSE as required
and promised. The NYSE subsequently informed Turner that he was
required to appear for an on-the-record interview (OTR) on February 22,
2005. An individual representing herself to be Turner's
mother sent the NYSE an email dated January 30, 2005, in which it
was stated that Turner could not appear at the OTR because he would still
be out of the country. The NYSE again noticed Turner for an OTR on
June 27, 2005; and the purported mother sent another email dated June 11th
advising that her son would not be returning to the US until
mid-August/September 2005, and would then comply. In response to
another NYSE letter, Turner sent an email dated June 24, 2005, stating
that he has written substantive “briefs” to the Firm about the
allegations against him and wishes to have this record stand as his
response. Turner also states “I do not envision ever working in the
financial field again, a self-imposed
exile if you will.”
The NYSE Hearing Panel found that Turner:
Lee Mackay Turner: Censure: Permanent Bar in all capacities
Daniel Thomas Lemaitre
SFC/Hearing Panel Decision 05-179/February 8, 2006
In April 1999, Daniel Thomas Lemaitre joined Merrill Lynch, Pierce, Fenner and Smith Incorporated (the “Firm”) as a First Vice President and Senior Analyst, and also as the head of the firm’s Medical Technology Research Group. On or about September 15, 2003, two of the companies followed by the Firm’s Medical Technology Research Group were XYZ and ABC. At such time, both companies were developers, manufacturers and marketers of medical devices, including cardiovascular drug-eluting stents. ABC had just published data from the clinical program for its cardiovascular stent reporting, among other things, an 8.9% in-segment restenosis rate. Prior to this disclosure, Lemaitre had published research reports that opined that the Clinical Trial Results to be reported by XYZ on September 15 would be at least equal to the data that had been published by ABC and that there was a high likelihood that XYZ’s results would be better than such data.
Confidential 11AM Press-only Conference
On or about September 15, Lemaitre attended a medical conference in Washington, D.c. where XYZ publicly presented clinical trial results (the “Clinical Trial Results”) concerning a drug-eluting stent that it was developing. At an 11:00 a.m. briefing held at the conference, XYZ confidentially released the Clinical Trial Results to the press (who were prohibited from disclosing such results to any third party prior to the public release of such information later that afternoon).
The Crowd Outside the Press-only Conference Room
During the press briefing, a number of analysts, including Lemaitre, assembled in a crowd outside of the conference’s press room, and certain rumors concerning the results were discussed among the crowd. While in the crowd, Lemaitre heard reports and/or rumors concerning at least a portion of the Clinical Trial Results prior to the public release of such information by XYZ. At such time, he also received a telephone call from a reporter who was not present at the conference, and she advised Lemaitre that she had heard that the Clinical Trial Results compared favorably to ABC’s published data. At approximately 11:30 a.m., Lemaitre observed that the XYZ officials who were leaving the press room appeared, both from their facial expressions and their physical conduct, to be very happy.
11:35 Squawk Box
At approximately 11:35 a.m., Lemaitre, who was still at the conference, conducted a telephonic “squawk box” broadcast, which was approved in advance by a Firm compliance officer. During this broadcast, Lemaitre stated:
At approximately 11:44 p.m., an institutional salesperson at the Firm sent an e-mail to Lemaitre, stating
At approximately 12:13 p.m., Lemaitre responded to the aforementioned e-mail, stating
At approximately 12:18 p.m., the salesperson again e-mailed Le Maitre. In this e-mail, the salesperson stated
At approximately 12:26 p.m., Lemaitre sent an e-mail to the salesperson stating
Flash Note Research Report
At approximately 12.32 p.m., Lemaitre caused a research report (the “Flash Note”) to be issued to certain of the Firm’s customers concerning the Clinical Trial Results. The Flash Note, which was approved in advance by a Firm compliance officer, began by stating that the “[f]inal results from [XYZ’s] . . . pivotal U.S. study were presented to the press this morning.” It thereafter went on to state, among other things:
Trading in XYZ stock was halted by the NYSE from the opening of
trading on September 15 until approximately 2:27 p.m. on that day. The
NYSE did not halt trading in ABC stock on September 15.
Between 11:30 a.m. and 2:00 p.m. on that day, ABC shares fell
Lemaitre’s employment with the Firm terminated in January of 2005. He is not currently employed in the securities industry.
The Hearing Panel found that Lemaitre:
II. Violated NYSE Rule 435(5) in that, on one or more occasions, he
circulated rumors of a sensational character concerning an Exchange listed
security which were sensational in character and might reasonably be
expected to affect market conditions.
Daniel Thomas Lemaitre: Censure; Fined $50,000; Barred 2 months in all capacities
Bill Singer's Comment: I just don't know with this case. First
off, I absolutely abhor such rubbery rules --- I mean, come on, what the
hell is the difference between a "rumor" and a rumor "of a
sensational character"? Worse, you have to contrast the
prohibition against "sensational" rumors with the obligation to disclose
"any" rumor or unsubstantiated information that you think was
originated or circulated to influence prices. Frankly, this just
strikes me as a terribly drafted rule that relies upon far too many
opinions and circumstances to be of much use. Moreover, the problem
here wasn't simply with Lemaitre --- I think a strong case could be made
that he was doing his job as an analyst . . . putting together bits and
pieces of information and drawing inferences. In my opinion XYZ
handled the disclosure in a manner calculated to cause problems.
Perhaps the NYSE needs to better examine the realities of these
Is it sensible to have press-only disclosures that require a good-faith embargo by third parties for hours? Should third-parties even be permitted on premises during the press conference and prior to the public release? Are analysts supposed to be warned against inferring anything from the smiling faces of company execs who have just departed a press conference? If a reporter calls an analysts and essentially asks what he or she thinks about the positive comments that were purportedly just made at a press-only conference, is that the analysts fault"
Ultimately this is flawed rulemaking and questionable enforcement. My professional experience has taught me that regulators need to speed up the public disclosure of virtually all announcements and comments, and that efforts to buffer or delay the "public" release create a devil's playground. To a large degree, Lemaitre seems to have done his job. But that NYSE and the issuer community were as diligent!
John Graydon Coghlan
SFC/NYSE Hearing Panel 05-129/January 31, 2006
John Graydon Coghlan specialized in the area of retirement planning, essentially conducting seminars for employees of various corporations. He also solicited business from corporate employees by mail and phone. Coghlan was the head of the Coghlan Group, a group of registered representatives and sales assistants that worked together at Merrill Lynch, Pierce, Fenner & Smith Incorporated (“the Firm”) at its downtown San Diego, California office (the "SD Office") in developing this business. However, the employees affiliated with the Coghlan Group were firm employees over whom Coghlan did not have supervisory authority.
In January 2002, during the course of an internal audit of the SD Office by the Firm's compliance department, the auditor reviewed a group of marketing materials which Coghlan used in his mail solicitations and seminars (“Self-Authored Materials”). The Self-Authored Materials had been approved locally by Coghlan's Branch Office management and submitted to Merrill Lynch’s New York office for approval. Coghlan had been permitted by the local management to distribute his Self-Authored Materials to the public pending approval by Merrill Lynch's New York office.
A meeting was held at the Firm’s New York offices on February 8, 2002, to discuss, among other things, the Self-Authored Materials. In addition to Coghlan, a number of Firm employees who were affiliated with the SD Office, the Firm’s Compliance Department and Office of General Counsel were present. Another Firm employee, Vice President, Retirement Services, participated by telephone. During the meeting, Coghlan’s Self-Authored Materials were reviewed and a number of changes were discussed, including changes to a document entitled “Questions and Answers on Your ‘Company’ Lump Sum Distribution” (the “Q&A”), as well as changes to other Self-Authored Materials that related to style and Firm protocol. Coghlan was advised that he would need to make the requested changes in the Self-Authored Materials and that, although he could continue to conduct seminars, he could not use any of the Self-Authored Materials in his seminars, to solicit potential clients, or otherwise until the changes had been made and approved by the Firm’s Marketing and Legal Departments.
Thereafter, both the Branch Administrator of the Involved Office and the District Administrative Manager reiterated to Coghlan that only Firm-approved marketing materials could be used in Coghlan’s seminars and other marketing activities. Following the New York meeting, a Firm registered representative and member of Coghlan’s working group made changes to the Self-Authored Materials based on the New York meeting and reviewed them with the Branch Administrator. Thereafter, Coghlan distributed or made available the revised Self-Authored Materials at a single seminar on March 14, 2002, which was attended by approximately 15 members of the public. The Q&A was not used at that seminar or otherwise following the New York meeting. The revised Self-Authored Materials had not been approved by Merrill Lynch’s Marketing and Legal Departments prior to their distribution at the March 14, 2002 seminar.
The Hearing Panel found that Coghlan violated NYSE Rule 472(a) in that he caused his then-member organization employer to distribute marketing letters and sales literature to the public which had not been approved in advance by a member, allied member, supervisory analyst or person designated under the provisions of NYSE Rule 342(b)(1). Apparently, in submitting his settlement offer per the SFC, Coghlan had agreed to a Censure and a $50,000 fine. In a rare and laudable action, the Panel reduced the fine to $25,000.The Hearing Panel found that the consented-to penalty was not supported by the precedents cited or by the facts of this case.
The precedents cited were:
The Hearing Panel noted that Coghlan's violation involved one meeting at which he distributed revised material to 15 members of the public. The original version of the material distributed had issues relating only to style and firm protocol. Changes were made locally to the material based on the discussions at a meeting in New York with Legal, Compliance and others; although, admittedly, said changes had not yet been approved by the Firm’s marketing and legal departments. Finally, the Panel found the conduct in the precedent cases to be significantly more serious than Coghlan’s.
John Graydon Coghlan: Censure; Fined $25,000
Bill Singer's Comment: As I noted in some NYSE cases reported in 2005,
the NYSE Panels seem to wrestle with the "fairness" of sanctions
to a far greater degree than NASD. Last year we saw a rare
dissenting opinion filed by one panelist against imposing a
non-retroactive sanction upon a young man charged with inappropriate
online postings. (Mitchell Allan Romano SFC/HPD 05-106/September 19,
2005--- NYSE 2005 Cases of Note) We've also
seen a number of well-reasoned Panel decisions that pointedly note where
requested sanctions were excessive in reference to prior decisions.
Here we see a similar exercise in jurisprudence.
Nonetheless, Coghlan raises the ever provocative question. Must every wrong result in a fine? What additional benefit was gained in this case by imposing a $25,000 fine --- and let's not forget that the Staff was seeking a $50,000 fine, which the Panel reduced.
SFC/NYSE Hearing Panel 06-2/January 17, 2006
Relatives of those interred at a certain cemetery established a trust (the "Trust") for the purpose of paying the costs of maintenance and upkeep of the cemetery. In January 2002, Eades, who was a non-registered employee with Edward Jones (the "Firm"), was elected secretary/treasurer of the Trust and she reported her appointment as an officer of the Trust to the Firm. At that time, the Trust did not have an account with the Firm. After the Firm learned from Eades that she did not have any authority to handle monies or write checks on behalf of the Trust, it approved her affiliation with the Trust.
In August 2003, Eades re-applied to the Firm for approval of her position as secretary/treasurer for the Trust. In September 2003, the Firm gave Eades permission to continue her position with the Trust. In November 2003, Eades sought approval to open an account at the Firm on behalf of the Trust. The Firm permitted Eades to open the account but required her to resign her position as secretary/treasurer for the Trust because Firm policies prohibit its employees from holding treasurer positions in organizations that have accounts with Edward Jones.
On or about July 2003, Eades entered into a loan agreement with KG, whereby Eades agreed to become a partial owner of KG’s business and share in the company’s future profits. KG was not a customer of the Firm. Over the next several months, Eades loaned KG over $100,000 and thereby acquired an ownership interest in the business. Both Exchange Rule 346(b) and the Firm’s written policy required Eades to obtain the Firm’s written approval before engaging in any outside business activity. Eades never informed the Firm about her business association with KG’s business.
Between November and December 2003, Eades borrowed over $80,000 from three customers without the Firm’s prior approval. Eades never notified the Firm that she obtained personal loans from clients. On December 12, 2003, Eades made an unsuccessful bid to borrow money from two elderly customers. A family member of one of the customers contacted Eades’ branch manager and complained about Eades’s attempt to procure a personal loan. The second customer contacted the branch to complain about Eades’ loan solicitation. The Branch Manager, in turn confronted Eades, inquiring whether she solicited loans from two elderly customers. Eades denied asking customers for money. Eades’ denial was a misstatement. The Firm terminated her on December 13, 2003.
Shortly after Eades’s termination, the Firm discovered that two checks from the Trust, totaling nearly $8,000, were deposited in Eades’s personal account at the Firm, rather than the Trust’s account. The Firm contacted a trustee for the Trust, who confirmed that the checks deposited in the Eades account were intended for the Trust’s account. Eades’s family fully reimbursed the Trust.
The Hearing Panel found that Eades violated:
Regina Eades: Censure; Permanent Bar
Bill Singer's Comment: A truly breath-taking case involving a
prodigious number of serious violations. The only question I have is
whether a non-registered employee is given adequate training about
industry rules to know that what many non -Wall Streeters take for
granted --- that you can freely engage in outside business activity and
freely borrow money --- is prohibited in our industry. I'm not
suggesting that she needed to be trained as to the wrongfulness of
stealing money. That's a given. However, since we see so many
of these outside business and borrowing cases, one has to wonder if
newbies are getting adequate training.
For a similar case, see Gregory Thomas Boston #E8A2004107701/May 2006
Erik William Wiklund
SFC/NYSE Hearing Panel 05-124/January 13, 2006
From 2000 to 2003, Wiklund, a registered representative with T.D. Waterhouse Investor Services, Inc. (the "Firm") posted at least 128 messages on the Internet without Firm approval. The posting were made under his screen name "Floridian ggg" and through his office or home computer.
Shortly after he began his employment with the Firm, Wiklund observed that BOM, his branch office manager, was posting messages on Internet bulletin boards relating to securities which BOM owned. Wiklund’s Internet postings were made on the Raging Bull and InvestorsHub bulletin board regarding securities he owned at the time: XYZ and ABC. Some of the postings made by Wiklund on the InvestorsHub XYZ bulletin board are noted below.
The NYSE concluded that the above statements, as well as other statements contained in the postings made by Wiklund, were speculative and could reasonably be expected to affect investor interest.
The NYSE found that Wiklund:
Erik William Wiklund: Censure; Barred 3 months in all capacities
|Bill Singer's Comment: I know that this is a growing area for enforcement action, but I still remain troubled by the SROs' sometimes questionable regulation of this behavior. Where an individual discloses that he is a broker/trader/analyst with a specific broker-dealer, I may often appreciate the propriety of an SRO sanctioning such conduct. However, here, there is no clear statement that Wiklund claimed to be a registered person or even affiliated with a broker-dealer. If he made such representations, then that fact should be spelled out in the decision. I saw nothing indicating that status and, as such, the civil libertarian in me cringes at this erosion of First Amendment rights. I see no statement cited by the NYSE that indicates anything other than the expression of an opinion. Similarly, I see no clear-cut comment relating to TD's business --- unless a mere comment about any stock is deemed to be so related, and that too seems a bit out there for my tastes.