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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.

The Pitfalls of Research and Advertising

by Bill Singer bsinger@rrbdlaw.com

Earl Morton Slosberg (AWC/CAF030054/November 2003)
Slosberg created and used advertisements and a piece of sales literature that misleadingly suggested that individuals purchasing variable annuities would pay no fees when they do have to pay such.  He used sales literature that failed to present a balanced discussions and omitted material information about dollar-cost-averaging.  Also used a slide presentation at seminars that did not present a balanced discussion and omitted material information about guaranteed minimum death benefits and failed to describe the conditions and costs associated with said benefit.

  • Earl Morton Slosberg
    Censured; Fined $25,000

 

Joseph Lawrence Peggs (AWC/CAF030054/November 2003)
Peggs created and used violative sales literature sent to customers and prospects that emphasized the benefits of a variable annuity without a balanced discussion and with the omission of material information concerning costs, risks, and restrictions.  Newsletters failed to disclose certain benefits were avalable only if customer paid an extra cost and the existence of surrender charges and reductions in benefits for certain withdrawals.

  • Joseph Lawrence Peggs
    Censured; Fined $10,000

Tejas Securities Group, Inc. and Arnold Reed Durant (AWC/CAF030051/November 2003)
Firm's website contained research coverage that contained exaggerated, unwarranted, or misleading statements and claims.  Selectively posted successful recommendations but not all recommendations as to same type, kind, grade or classification of securities made within prior year.  Posted press releases and summaries of research reports for issuers that failed to present a complete discussion of risks and contained high price target without fully disclosing basis or speculative nature of the security.  Firm failed to adequately keep and maintain records relating to preparation and approval of press release and summaries of research reports, and the dates when they were posted on website.  Durant failed to adequately supervise the postings of same and failed to review or adequately review other materials.

  • Tejas Securities Group, Inc.: Censured; Fined $35,000 ($10,000 jt/several with Durant); must file with NASD Advertising Regulation Dept. the firm's current Web site and all revisions including sales literature and advertisements posted thereon at least 10 days prior to their first use for six months.
  • Arnold Reed Durant: Censured; Fined $10,000 jt/several with Tejas; Suspended for 5 business days in all capacities.

Axiom Capital Management, Inc. Mark David Martino, David Leon Jordon, and Jeffrey Stuart Goldberg (AWC/CAF030047/November 2003)
Registered Representatives Jordon and Goldberg published to the investing public research reports with material misrepresentations, omissions, and exaggerated, unwarranted, and misleading statements.  Axiom failed to disclose its ownership of warrants of issuers covered in said reports.  Firm and Registered Pricipal Martino failed to approve sales literature by a GSP's signature or initials, notwithstanding that Martino approved each report (albeit without signature or initial).  Firm and Goldberg failed to disclose in a report that Axiom had received fees for writing research reposrts (although there was disclosure of the receipt of unspecified fees).  Finally, NASD found a failure to establish, maintain, and efforce adequate research report supervisory procedures and system.

  • Axiom Capital Management: Censured, Fined $50,000
  • Mark David Martino: Fined $15,000; Suspended all capacities for 60 days
  • David Leo Jordon: Fined $10,000; Suspended in all capacities 20 days
  • Jeffrey Stuart Goldberg: Fined $10,000; Suspended all capacities 45 days.

Christopher Cosme Tavares and Alfred George Marchetti (OS/CMS030047/November 2003)

Registered Principal Tavares issued a negative research report and Registered Principal Marchetti traded ahead by engaging in short sales for a profit of $28,000.  In anticipation of issuing his report, Tavares shorted in his personal accounts for a profit of $9,165.  Marchetti failed to make an annotate affirmative determinations for the shorts sales and he knew, or should have known, that Tavares had prepared a report against which he was trading ahead.  Marchetti was also found to have failed to supervise Tavares to ensure that he did not trade ahead.  Also, Tavares maintained accounts at another member firm without inform the firm in writing of his association with an NASD member.  Finally, respondents were found to have failed to establish and maintain adequate supervisory procedures.  

  • Christopher Cosme Tavares: Fined $25,000 (includes $9.165 disgorgement); Suspended 4 months in all capacities; Suspended 2 years in Principal or Supervisory capacities; May not issue or contribute to the preparation of any research report with any member in any capacity for 3 years; 
  • Alfred George Marchetti: Fined $15,000; Barred in a principal or supervisory capacity.  






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