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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 Short Stick:  Short-Selling Violations

Written Supervisory Procedures:  WSP

Bid Test Rule:  Must effect a short-sale in NASDAQ NNM stock above the current inside bid when that bid is below the preceding inside bid.

by Bill Singer bsinger@rrbdlaw.com

 

The Seidler Companies Incorporated (AWC/CMS030227/December 2003)
Effected short sales in violation of Bid Test Rule.  Failed to maintain records of affirmative determinations.Did not use appropriate ACT symbol for type of transaction and principal/agency.  Inadequate supervisory system per above.

  • The Seidler Companies Incorporated
    Censured; Fined $19,000

 

Pulse Trading, Inc. (AWC/CMS030236/December 2003)
Effected short sales in violation of Bid Test Rule. Inadequate supervisory system per above.

  • Pulse Trading, Inc
    Censured; Fined $15,000; Required to revise WSPs per Bid Test Rule

 

A.B. Watley, Inc. (AWC/CMS030233/December 2003)
Effected NASDAQ NMS short sales at or below the current inside bid when such was below the preceding.  Supervisory system not compliant concerning short selling. 

  • A.B. Watley, Inc. 
    Censured; Fined $10,000; Must revise

Burlington Capital Markets, Inc. (AWC/CMS030209/November 2003)
Executed short sales and failed to make an affirmative determination prior to execution.  Inadequate supervisory system for compliance with short sale rules.

  • Burlington Capital Markets, Inc.
    Censured; Fined $12,500; Must revise supervisory procedures concerning short-sales within 30 business days.

Summit Trading, Inc. and William Neal Sunshine
(
OS/C06030015/November 2003)

In addition to various Net Capital and books and records violations, firm failed to indicate on the order memorandum for short-sale transactions whether the order was long or short and failed to include the short-sale modifier for ACT trades.  Also effected Nasdaq NMS shorts at or below the inside bid when the current inside bid was below the preceding inside bid.

  • Summit Trading, Inc. 
    Censured, Fined $17,500 ($7,500 jointly and severally with Sunshine)
  • William Neal Sunshine
    Fined $5,000 (plus $7,500 jt/several with Summit); Suspended 6 months all capacities.

 

Andover Brokerage and Michael Picozzi, III
(
AWC/CMS030184/Oct 2003)

Andover executed short-sale transactions at or below the preceding (best) NASDAQ inside bid; and failed to

  • make and annotate an affirmative determination for short-sale orders and reported transactions to the Automated Confirmation Transaction Service (ACT) as long sales when the firm's records indicate the transactions were, in fact, short sales; 
  • maintain and preserve certain trade records relating to its short sales; 
  • adequately supervise its short-sale transactions and failed to institute a supervisory system and establish and implement written procedures reasonably designed to prevent and detect the violations of the short sale rules;
  • submit required information to the Order Audit Trail System (OATS) on 222 business days and transmitted to OATS execution reports that contained inaccurate, incomplete, or improperly formatted data; and
  • timely report to OATS Reportable Order Events. 

Andover Brokerage 
Censured, Fined $320,000 ($300,000 jointly and severally with Picozzi,III)

Michael Picozzi, III
Fined $300,000 joint and several with Andover Brokerage,Barred in Supervisory capacity with right to re-apply after 5 years; Suspended 22 business days in all capacities


Blackbeard Securities, LLC
(
AWC/C01030022/Oct 2003)

Firm failed to record the time of entry on order tickets and incorrectly reported, via the ACT system, principal transactions as agency transactions, failed to keep a written record of its "affirmative determination" obligation for short-sale transactions, and relevant written supervisory procedures and supervisory system were not reasonably designed to achieve compliance NASD transaction-reporting requirements 

Blackbeard Securities, LLC 
Censured, Fined $12,000


E*Trade Professional Trading, LLC 
(
AWC/
CMS030201/Oct 2003)

Firm executed NNM short-sale transactions at or below the current inside bid when the current inside bid was below the preceding inside bid in the securities. Firm's supervisory system did not provide for supervision reasonably designed to achieve NASD Conduct Rule 3350 compliance and the reporting of short-sale transactions to NASD. 

E*Trade Professional Trading, LLC 
Censured; Fined $20,000; and required to revise its NASD Conduct Rule 3350 written supervisory procedures within 30 business days. 


Hold Brothers On-Line Investment Services LLC 
(
AWC/CMS030196/Oct 2003)

Firm executed

  • short-sale transactions in NNM securities at or below the current inside bid when the current inside bid was below the preceding inside bidin each of the securities;
  • short-sale transactions and failed to report each of these transactions to ACT with a short-sale modifier; and
  • short-sale orders and failed to properly mark the order tickets as short for those orders. 

Additionally, Firm executed long-sale transactions and incorrectly reported each of these transactions to ACT with a short-sale modifierand failed to submit required information to OATS on 92 business days. Finally, firm's supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable securities laws and regulations concerning short sales and OATS. 

Hold Brothers On-Line Investment Services LLC
Censured, Fined $40,000, and required to revise its written supervisory procedures with respect to the applicable securities laws and regulations concerning short sales and OATS within 30 business days.


Peters Securities Co., L.P. 
(
AWC/CMS030202/Oct 2003)
 

Firm executed short-sale transactions in NNM securities at or below the current inside bid when the current inside bid was below the proceeding inside bid. Firm reported incorrect ACT buy, sell, sell short, sell short exempt, or cross symbol. Firm failed to accurately mark sale order tickets for securities listed on a national exchange as long or short. Supervisory system did not provide for compliant NASD Rule 3350 supervision.

Peters Securities Co., L.P.
Censured, Fined $19,500, and required to revise its NASD Rule 3350 written supervisory procedures within 30 business days.  

 







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Fax at 720-559-2800
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