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					Disciplinary                     NASD Regulation, Inc. (NASD
                                 RegulationSM) has taken disci-
                                                                        procedures. The fines must be
                                                                        paid before requesting reentry into
Actions                          plinary actions against the follow-
                                 ing firms and individuals for
                                                                        the securities industry.

                                 violations of National Association     The expulsions and bars became
Disciplinary Actions             of Securities Dealers, Inc. (NASD®)    effective December 7, 2000.
                                 rules; federal securities laws,        (NASD Case #C07000037)
Reported For January
                                 rules, and regulations; and the        Monitor Investment Group, Inc.
                                 rules of the Municipal Securities      (CRD #31007, New York, New
                                 Rulemaking Board (MSRB). The           York), Michael Angelo Cavallo
                                 information relating to matters con-   (CRD #43518, Registered Princi-
                                 tained in this Notice is current as    pal, Old Bridge, New Jersey),
                                 of the end of December 27, 2000.       James Justin Garcia, Jr. (CRD
                                                                        #1144228, Associated Person,
                                 Firms Expelled,                        New York, New York), Scott
                                 Individuals Sanctioned                 Herkert (CRD #2092867, Regis-
                                                                        tered Representative, Staten
                                 Great American Financial Net-          Island, New York), Norman
                                 work, Inc. (CRD #14108, Nor-           Martin Lescht (CRD #1164306,
                                 cross, Georgia) and Edward Lee         Registered Principal, East
                                 Bates (CRD #1815183, Regis-            Brunswick, New Jersey),
                                 tered Principal, Duluth, Georgia)      William Francis Palla (CRD
                                 were fined $25,000, jointly and         #1101428, Registered Principal,
                                 severally, and were each suspend-      Narbeth, Pennsylvania), Jeffrey
                                 ed from association with the NASD      David Pokross (CRD #2358776,
                                 in all capacities for two years for    Associated Person, New York,
                                 failing to implement a continuing      New York), Salvatore Francisco
                                 education plan and failing to com-     Ruggiero (CRD #2521196,
                                 pletely respond to requests for        Brooklyn, New York), and
                                 information. The firm and Bates         Edward Christopher Telmany
                                 were also fined $80,000, jointly        (CRD #2574437, Registered
                                 and severally, and Bates was sus-      Representative, Staten Island,
                                 pended from association with any       New York). The firm was fined
                                 NASD member in any capacity for        $350,000 and expelled from NASD
                                 two years and barred from associ-      membership. Palla was fined
                                 ation with any NASD member in a        $350,000 and barred from associ-
                                 supervisory capacity failing to        ation with any NASD member in
                                 report customer complaints, filing      any capacity and Pokross was
                                 inaccurate FOCUS reports, filing        fined $300,000 and barred from
                                 an audit report in an untimely man-    association with any NASD mem-
                                 ner, and failing to file an audit       ber in any capacity. Herkert, Rug-
                                 report. In addition, the firm was       giero, and Telmany were each
                                 expelled from NASD membership          fined $100,000 and barred from
                                 and Bates was barred from associ-      association with any NASD mem-
                                 ation with NASD members in any         ber in any capacity. Cavallo, Gar-
                                 capacity for violating net capital     cia, and Lescht were each fined
                                 rules and failing to maintain cur-     $50,000 and barred from associa-
                                 rent, complete, and accurate           tion with any NASD member in
                                 books and records. Furthermore,        any capacity. The fines must be
                                 Bates was fined $5,000 and sus-         paid before reassociating with the
                                 pended from association with any       NASD. The sanctions are based
                                 NASD member in any capacity for        on findings that the firm, acting
                                 six months for failing to establish    through Palla and Pokross, know-
                                 adequate written supervisory           ingly and/or recklessly engaged in


NASD Notice to Members—Disciplinary Actions                                                  January 2001

                                                 41
a fraudulent scheme to manipulate      purchase shares of the security         which includes disgorgement of
the supply and price of a security,    by intentionally or recklessly          $481.63 in disgorgements earned.
charged fraudulent and excessive       mischaracterizing the nature of the
markups, and purchased, or             stock being sold and making base-       Without admitting or denying the
induced others to purchase, the        less price predictions. They also       allegations, the respondents con-
security while the firm was             failed to notify their customers that   sented to the described sanctions
engaged in a distribution. Palla       the price had been manipulated,         and to the entry of findings that, in
also directed and endorsed special     was not the result of free market       connection with the purchase by
selling methods to induce the sale     forces, and failed to disclose the      investors of custodialized certifi-
of the stock by promising econom-      firm’s trading activity in the stock.    cate of deposit investments (certifi-
ic inducements to the firm’s            Furthermore, the NASD found that        cates), the firm, acting through
brokers. The firm created and           Palla, Cavallo, Ruggiero, Herkert,      Christopher, Eichenberger, and
provided false order tickets to the    and Telmany failed to respond           Rondberg, engaged in various
NASD to reflect reduced commis-         truthfully to NASD requests for         practices and conduct designed to
sions on the tickets. The firm,         information. (NASD Case                 induce public customers to invest
acting through Palla, failed to        #C10970145)                             in certificates offered and sold
establish and maintain adequate                                                through the firm, and recklessly
written supervisory procedures         San Clemente Securities, Inc.           made untrue statements of materi-
reasonably designed to achieve         (CRD #21895, San Clemente,              al facts and omitted to state mate-
compliance with applicable securi-     California), Cooke Baille               rial facts necessary to make the
ties laws. In addition, the NASD       Christopher (CRD #1590203,              statements by them, in the light of
also found that the firm, acting        Registered Principal, San               the circumstances in which they
through Palla, failed to report cus-   Clemente, California), Thomas           were made, not misleading. The
tomer complaints and quarterly         Henri Sunderland (CRD                   findings also stated that the firm,
statistical and summary informa-       #1636630, Registered Principal,         acting through Christopher,
tion regarding the complaints to       San Clemente, California),              Eichenberger, and Rondberg,
the NASD.                              Douglas Grant Eichenberger              recklessly confused and misled
                                       (CRD #1821564, Registered               investors, failed to disclose to cus-
The findings also stated that           Representative, Ft. Collins,            tomers that sales commissions
Garcia conducted a securities          Colorado), and Randy Trager             and custodial fees on certificate
business without being registered      Rondberg (CRD #1826543,                 transactions would be taken “up
with the NASD. The firm, acting         Registered Representative,              front” from investors’ principal and
through Lescht, failed to properly     Gilbert, Arizona) submitted Offers      not from the earnings on their
register Garcia and knew he was        of Settlement in which the firm was      investment, and incorrectly repre-
conducting a securities business       expelled from NASD membership.          sented that the full principal paid
without being registered with the      Christopher was barred from asso-       by investors had been invested in
NASD. The firm, acting through          ciation with any NASD member in         their respective certificates. As
Cavallo, compensated Garcia for        any capacity, and Sunderland was        executive vice president and part
conducting securities transactions     censured, fined $40,000, and sus-        owner of the firm, the NASD deter-
when he was not registered and         pended from association with any        mined that Sunderland should
falsified books and records by          NASD member in any capacity for         have known of the deceptive con-
routing commissions charged on         two years. Sunderland was also          duct being perpetrated by the firm
Garcia’s transactions through the      required to requalify by exam as a      and Christopher against the cus-
registered representative numbers      general securities principal, and       tomers, deliberately ignored their
of other brokers. The firm, acting      his fine must be paid before reas-       deceptive practices, and failed to
through Palla, failed to ensure that   sociating with a member firm.            exercise his power and authority to
the firm had an adequate supervi-       Eichenberger was barred from            direct management and policies at
sory system to detect unregistered     association with any NASD mem-          the firm.
representatives and to prevent         ber in any capacity and required to
them from conducting a securities      disgorge $13,950 in commissions.        Sunderland’s suspension began
business.                              The disgorgement of commissions         December 18, 2000, and will con-
                                       earned by Eichenberger must be          clude at the close of business on
The NASD also found that               paid before requesting reassocia-       December 17, 2002. (NASD Case
Ruggiero, Herkert, and Telmany         tion with a member firm. Rondberg        #C02000042)
induced public customers to            was censured and fined $10,000


NASD Notice to Members—Disciplinary Actions                                                         January 2001

                                                        42
Firms Fined,                           fined $15,000, jointly and several-      funds for the sale of units in a con-
Individuals Sanctioned                 ly. In addition, Light was suspend      tingency offering, and withdrew
First Financial Equity Corpora-        ed from association with any            funds from the escrow account
tion (CRD #16507, Scottsdale,          NASD member in any capacity for         prior to selling the required mini-
Arizona) and George Edward             30 business days and required to        mum amount of units in bona fide
Fischer (CRD #1315706, Regis-          requalify as a general securities       transactions. The findings also
tered Principal, Scottsdale,           principal and registered options        stated that the firm, acting through
Arizona) submitted a Letter of         principal within nine months before     Christoph, failed to abide by the
Acceptance, Waiver, and Consent        acting in those capacities. Without     terms of its membership agree-
in which they were fined $15,000,       admitting or denying the allega-        ment, by failing to notify the NASD
jointly and severally. In addition,    tions, the respondents consented        promptly that it intended to materi-
the firm was censured and fined          to the described sanctions and to       ally change its business operations
$7,000, jointly and severally, with    the entry of findings that Light rec-    from “best efforts” underwritings to
another individual, and Fischer        ommended and effected in the            a firm commitment basis. Further-
was suspended from association         account of a public customer an         more, the NASD found that the
with any NASD member in any            options trading strategy that was       firm, acting through Christoph, sold
capacity for 10 business days.         unsuitable for the customer, failed     shares of stock at the initial public
Without admitting or denying the       to ascertain the customer’s risk tol-   offering price to accounts main-
allegations, the respondents con-      erance, experience and financial         tained by investment partnerships
sented to the described sanctions      position, and to make the required      or corporations, but failed to obtain
and to the entry of findings that the   independent determination of suit-      from the accounts information
firm, acting through Fischer, partic-   ability. The findings also stated        relating to the names and business
ipated in the offer and sale of debt   that the firm and Light entered into     connections of all persons having
securities in a private placement,     settlement agreements with cus-         a beneficial interest in each of the
received investor funds for the pur-   tomers that inaccurately disclosed      accounts in order to assure that
chase of notes, and failed to          the settlement below the amount         such sales were made in compli-
promptly transmit the funds to an      which would have required disclo-       ance with the NASD’s Free-Riding
account specified by the Securities     sure on Light’s Form U-4, and           and Withholding Interpretation.
and Exchange Commission (SEC).         failed to timely amend Light’s Form     The NASD also determined that
The findings also stated that the       U-4 to disclose the complaints and      the firm, acting through Christoph,
firm, acting through Fischer, con-      settlements.                            effected transactions in securities
tinued to offer and sell notes after                                           when it failed to maintain the mini-
                                       Light’s suspension began Decem-         mum required net capital and to
the date upon which the offering       ber 4, 2000, and will conclude at
should have been terminated due                                                accurately compute its net capital.
                                       the close of business on January        (NASD Case #C8A000073)
to the failure of the stated contin-   17, 2001. (NASD Case
gency. The firm also, acting            #C01000035)                             Precision Trading Group, LLC
through another individual, con-                                               (CRD #47858, Stamford, Con-
ducted a securities business while                                             necticut) and Dennis Gerard
failing to maintain the required       Firms And Individuals Fined             Boyd (CRD #1488976, Regis-
minimum net capital.                   Keystone Investment Advisors,           tered Principal, Fairfield,
Fischer’s suspension began Jan-        LLC (CRD #44856, Kansasville,           Connecticut) submitted a Letter of
uary 2, 2001, and will conclude at     Wisconsin) and Roger William            Acceptance, Waiver, and Consent
the close of business on January       Christoph (CRD #1182220, Reg-           in which they were censured and
16, 2001. (NASD Case                   istered Principal, Burlington,          fined $13,000, jointly and several-
#C3A000030)                            Wisconsin) submitted a Letter of        ly, which includes $3,000 of the
                                       Acceptance, Waiver, and Consent         financial benefit the firm obtained
Light Securities (CRD #23660,          in which the respondents were           by permitting representatives to
San Francisco, California) and         censured and fined $25,000, jointly      conduct a securities business
Walter Waitak Light (CRD               and severally. Without admitting        while unregistered. Without admit-
#1494331, Registered Principal,        or denying the allegations, the         ting or denying the allegations, the
Alameda, California) submitted a       respondents consented to the            respondents consented to the
Letter of Acceptance, Waiver, and      described sanctions and to the          described sanctions and to the
Consent in which the firm was cen-      entry of findings that the firm, act-     entry of findings that the firm,
sured, and the firm and Light were      ing through Christoph, received         acting through Boyd, allowed


NASD Notice to Members—Disciplinary Actions                                                         January 2001

                                                       43
unregistered employees to engage       firm was censured, fined $10,000,        registered persons. (NASD Case
in a securities business and to        and ordered to revise its written      #C06000030)
function as representatives. The       supervisory procedures relating to
findings also stated that the firm,      the SEC and NASD firm quote             First Security Van Kasper, Inc.
acting through Boyd, failed to         rules. Without admitting or denying    (CRD #7665, San Francisco, Cal-
ensure that individuals actively       the allegations, the firm consented     ifornia) submitted a Letter of
engaged in the trading of securi-      to the described sanctions and to      Acceptance, Waiver, and Consent
ties in the Nasdaq and Over-the-       the entry of findings that, as a reg-   in which the firm was censured,
Counter (OTC) markets were             istered market maker in securities,    fined $16,500, and required to
properly registered as equity          it failed to execute orders present-   revise its written supervisory pro-
traders in accordance with the         ed at the firm’s published bid or       cedures. Without admitting or
NASD’s Series 55 rule require-         offer in an amount up to its pub-      denying the allegations, the firm
ments. In addition, the NASD           lished quotation size and, thereby,    consented to the described sanc-
found that the firm, acting through     failed to honor its published quota-   tions and to the entry of findings
Boyd, failed to establish, maintain,   tion. The findings also stated that     that it failed, within 90 seconds
and enforce written supervisory        the firm’s supervisory system           after execution, to transmit through
procedures reasonably designed         failed to provide for supervision      ACT last sale reports of transac-
to achieve compliance with appli-      reasonably designed to achieve         tions in NNM securities, failed to
cable securities laws, regulations,    compliance with respect to the         designate through ACT such last
and NASD rules applicable to the       applicable securities laws and reg-    sale reports as late, failed to
processing of registration applica-    ulations concerning the SEC and        accept or decline to ACT transac-
tions. (NASD Case #C11000028)          NASD firm quote rules. (NASD            tions in eligible securities within 20
                                       Case #CMS000230)                       minutes of execution, and failed to
                                                                              report transactions to ACT within
Firms Fined                            EDI Financial, Inc. (CRD #15699,       90 seconds after execution. In
Bishop, Rosen & Co., Inc. (CRD         Dallas, Texas) submitted a Letter      addition, the NASD determined
#1248, New York, New York)             of Acceptance, Waiver, and Con-        that the firm reported transactions
submitted a Letter of Acceptance,      sent in which the firm was cen-         in high yield corporate debt securi-
Waiver, and Consent in which the       sured and fined $11,000, jointly        ties to the Fixed Income Pricing
firm was censured and fined              and severally. Without admitting or    SystemSM (FIPS) that it was not
$10,000. Without admitting or          denying the allegations, the firm       required to report, and executed
denying the allegations, the firm       consented to the described sanc-       short sale transactions and failed
consented to the described sanc-       tions and to the entry of findings      to report each of these transac-
tions and to the entry of findings      that it effected the sale of munici-   tions to ACT with a short sale indi-
that it failed, within 90 seconds      pal securities from its own account    cator. The NASD also found that
after execution, to transmit through   to that of a public customer at        the firm’s supervisory system
Automated Confirmation Transac-         aggregate prices that were unfair      failed to provide for supervision to
tion ServiceSM (ACTSM), last sale      and unreasonable in that the           ensure compliance with applicable
reports of transactions in Nasdaq      markups were 8.2 and 15.9 per-         security laws, regulations, and
National Market (NNM), Nasdaq          cent, respectively. The findings        NASD rules concerning ACT
SmallCapSM, eligible securities, and   also stated that the firm failed to     reporting, trade reporting, short
OTC Equity securities, and failed      designate a principal responsible      sales, and books and records.
to designate through ACT such          for the supervision of municipal       (NASD Case #CMS000245)
last sale reports as late. The find-    securities activities, and failed to
                                       establish, maintain, and enforce       Garban Corporates LLC (CRD
ings also stated that the firm failed                                          #2762, New York, New York)
to transmit through ACT last sale      written supervisory procedures
                                       designed to address municipal          submitted a Letter of Acceptance,
reports of transactions in ACT eli-                                           Waiver, and Consent in which the
gible securities within 90 seconds     securities transactions. Further-
                                       more, the NASD found that the          firm was censured and fined
of execution. (NASD Case                                                      $10,000. Without admitting or
#CMS000241)                            firm failed to adequately implement
                                       the Firm Element of the NASD’s         denying the allegations, the firm
Cantor Fitzgerald & Co. (CRD           Continuing Education Program in        consented to the described sanc-
#134, New York, New York)              that the firm failed to develop a       tions and to the entry of findings
submitted a Letter of Acceptance,      needs analysis and a written train-    that it failed, within 90 seconds
Waiver, and Consent in which the       ing plan for the firm’s covered         after execution, to transmit through


NASD Notice to Members—Disciplinary Actions                                                         January 2001

                                                       44
ACT last sale reports of transac-      failed to annotate an affirmative         inaccurate. The findings also stat-
tions in NNM and eligible securi-      determination for each of these          ed that the firm failed to report risk-
ties and to designate them as late.    transactions, and failed to report       less principal trades in a security,
The findings also stated that the       short sale transactions to ACT with      failed to promptly display or timely
firm failed to transmit within 90       a short sale indicator. In addition,     execute customer limit orders,
seconds last sale reports of trans-    the NASD found that the firm failed       and allowed an inactive registered
actions in ACT eligible securities.    to establish, maintain, and/or           representative to effect securities
(NASD Case #CMS000232)                 enforce written supervisory proce-       transactions for customers.
                                       dures reasonably designed to             (NASD Case #C07000083)
The J.B. Sutton Group, LLC,            achieve compliance with applica-
n/k/a Global Capital Markets,          ble NASD short sale rules.               Wien Securities Corporation
LLC (CRD #16191, Syosset,              (NASD Case #C9B000038)                   (CRD #10467, Jersey City, New
New York) submitted a Letter of                                                 Jersey) submitted a Letter of
Acceptance, Waiver, and Consent        Pond Equities, Inc. (CRD                 Acceptance, Waiver, and Consent
in which the firm was censured          #30934, Brooklyn, New York)              in which the firm was censured,
and fined $25,000. Without admit-       submitted a Letter of Acceptance,        fined $15,000, and required to
ting or denying the allegations, the   Waiver, and Consent in which it          revise its written supervisory pro-
firm consented to the described         was censured and fined $10,000.           cedures. Without admitting or
sanctions and to the entry of find-     Without admitting or denying the         denying the allegations, the firm
ings that it failed to indicate        allegations, the firm consented to        consented to the described sanc-
whether payment for order flow          the described sanctions and to the       tions and to the entry of findings
was received on customer confir-        entry of findings that it failed, with-   that, as a registered market maker
mation statements and failed to        in 90 seconds after execution, to        in securities, the firm failed to exe-
accept or decline trades within 20     transmit through ACT, last sale          cute orders presented at its pub-
minutes of execution with respect      reports of transactions in NNM,          lished bid or offer in an amount up
to NNM, Nasdaq SmallCap, OTC           SmallCap, eligible, and OTC Equi-        to its published quotation size and,
Equity, and Third Market trades.       ty securities, and failed to desig-      thereby, failed to honor its pub-
The findings also stated that the       nate through ACT such last sale          lished quotation. The findings also
firm traded ahead of customer limit     reports as late. The NASD also           stated that the firm’s supervisory
orders for securities in which the     found that the firm failed to trans-      system failed to provide for super-
firm made a market and failed to        mit last sale reports of transactions    vision reasonably designed to
update immediately its quotation       in ACT eligible securities within 90     achieve compliance with respect to
with respect to customer limit         seconds after execution. (NASD           the applicable securities laws and
orders or otherwise failed to exe-     Case #CMS000236)                         regulations concerning the SEC
cute those orders. (NASD Case                                                   and NASD firm quote rules.
#C10000206)                            Preferred Securities Group,              (NASD Case #CMS000228)
                                       Inc. (CRD #35704, Boca Raton,
Maple Partners, U.S.A., Inc.           Florida) submitted a Letter of           Wien Securities Corporation
(CRD #33947, Jersey City, New          Acceptance, Waiver, and Consent          (CRD #10467, Jersey City, New
Jersey) submitted a Letter of          in which the firm was censured,           Jersey) submitted a Letter of
Acceptance, Waiver, and Consent        fined $2,500, fined $3,000 jointly         Acceptance, Waiver, and Consent
in which the firm was censured          and severally with an individual         in which it was censured and fined
and fined $15,000. Without admit-       respondent, and fined $8,000              $12,500. Without admitting or
ting or denying the allegations, the   jointly and severally with another       denying the allegations, the firm
firm consented to the described         individual respondent. Without           consented to the described sanc-
sanctions and to the entry of find-     admitting or denying the allega-         tions and to the entry of findings
ings that it executed short sale       tions, the firm consented to the          that it failed, within 90 seconds
transactions in NNM securities, at     described sanctions and to the           after execution, to transmit through
or below the inside bid when the       entry of findings that it failed to       ACT last sale reports of transac-
current inside bid was below the       post inventory positions and mar-        tions in NNM, Nasdaq SmallCap,
preceding inside bid in each of the    gin balances to its general ledger,      and eligible securities and to des-
securities. The findings also stated    and, as a result, its books and          ignate through ACT such last sale
that the firm executed short sale       records, net capital computations,       reports as late. The findings also
transactions in certain securities,    and FOCUS reports were                   stated that the firm failed to



NASD Notice to Members—Disciplinary Actions                                                           January 2001

                                                        45
transmit through ACT transactions         Christopher Aden (CRD                  any NASD member in any capaci-
in ACT eligible securities. (NASD         #8977095, Associated Person,           ty. The sanction was based on
Case #CMS000235)                          Yonkers, New York) was barred          findings that Baas failed to
                                          from association with any NASD         respond to an NASD request to
W.S. Griffith & Co., Inc. (CRD             member in any capacity. The            appear for an on-the-record inter-
#10410, Los Angeles, California)          sanction was based on findings          view. (NASD Case #C10000115)
submitted a Letter of Acceptance,         that Aden engaged in the offer and
Waiver, and Consent in which the          sale of shares of stock through a      Nicolette Silvestra Borgia-
firm was censured and fined                 private placement offering to mem-     Beightol (CRD #1061842,
$25,000. Without admitting or             bers of the public, and induced        Registered Representative, Erie,
denying the allegations, the firm          investors to purchase or sell          Pennsylvania) submitted a Letter
consented to the described sanc-          shares of stock by means of            of Acceptance, Waiver, and Con-
tions and to the entry of findings         manipulative, deceptive, and other     sent in which she was barred from
that it failed to amend its Form BD,      fraudulent devices or contrivances.    association with any NASD mem-
and Forms U-5 and Forms U-4 for           In addition, Aden engaged in the       ber in any capacity. Without admit-
individuals, in a timely manner,          securities business and functioned     ting or denying the allegations,
after becoming aware of lawsuits          as a representative of his member      Borgia-Beightol consented to the
filed against the firm and individu-        firm prior to properly qualifying and   described sanction and to the
als alleging securities fraud, other      registering in the appropriate         entry of findings that she failed to
securities law violations, and other      capacity. Aden also failed to          respond to an NASD request for
misconduct. (NASD Case                    appear for an NASD on-the-record       information regarding allegations
#C01000032)                               interview. (NASD Case                  that she received funds from a
                                          #C8A990032)                            public customer for investment and
                                                                                 failed to apply the funds as
Individuals Barred Or                     Robert Babson Alling, III (CRD         instructed. (NASD Case
Suspended                                 #2063488, Registered Represen-         #C9A000042)
Stephen Robert Ackley (CRD                tative, Phoenix, Arizona) submit-
#1149303, Registered Represen-            ted a Letter of Acceptance,            Lawrence Dean Burke, Jr. (CRD
tative, Springfield, Ohio) submit-         Waiver, and Consent in which he        #2255621, Registered Represen-
ted a Letter of Acceptance,               was fined $10,000 and suspended         tative, Fresh Meadows, New
Waiver, and Consent in which he           from association with any NASD         York) submitted an Offer of Settle-
was barred from association with          member in any capacity for one         ment in which he was barred from
any NASD member in any capacity           month. The fine must be paid            association with any NASD mem-
and ordered to pay $32,919.38,            before reassociating with a mem-       ber in any capacity and ordered to
plus interest, in restitution to public   ber firm following the suspension.      pay $3,000 in restitution to a public
customers. Proof of restitution,          Without admitting or denying the       customer. Proof of restitution shall
with interest, shall be a prerequi-       allegations, Alling consented to the   be a prerequisite before reassoci-
site before reassociating with a          described sanctions and to the         ating with a member firm or before
member firm or before requesting           entry of findings that he submitted     requesting relief from statutory dis-
relief from any statutory disqualifi-      a Uniform Application for Securi-      qualification. Without admitting or
cation. Without admitting or deny-        ties Industry Registration or          denying the allegations, Burke
ing the allegations, Ackley               Transfer (Form U-4) to the NASD        consented to the described sanc-
consented to the described sanc-          and failed to disclose felony          tions and to the entry of findings
tions and to the entry of findings         convictions.                           that he engaged in private securi-
that he engaged in private securi-                                               ties transactions without providing
ties transactions, failed to provide      Alling’s suspension began Decem-       written notice to, or receiving writ-
his firm with detailed written notice      ber 18, 2000, and will conclude at     ten approval from, his member
of the transactions, his role there-      the close of business on January       firm. The findings also stated that
in, and to receive permission from        17, 2001. (NASD Case                   Burke converted and/or improperly
the firm to engage in the transac-         #C3A000044)                            used a $3,000 payment he
tions. (NASD Case #C8B000018)                                                    received from a public customer
                                          Matthew Francis Baas, III (CRD         and failed to respond to an NASD
                                          #2087476, Registered Represen-         request for information. (NASD
                                          tative, Rego Park, New York)           Case #C10000160)
                                          was barred from association with


NASD Notice to Members—Disciplinary Actions                                                           January 2001

                                                          46
Jeffrey John Chaimowitz (CRD            least $40,000 belonging to one of       ties. The NASD also found that
#2589437, Registered Principal,         his clients. (NASD Case                 Cutrone failed to respond to NASD
Rocky Point, New York) submit-          #C11000029)                             requests for information. (NASD
ted an Offer of Settlement in which                                             Case #CAF000009)
he was barred from association          William Michael Cutrone (CRD
with any NASD member in any             #2542314, Registered Represen-          William Charles DeMorrow, III
capacity. Without admitting or          tative, Woodbury, New York)             (CRD #1144637, Registered
denying the allegations,                submitted an Offer of Settlement in     Principal, Hudson, Florida)
Chaimowitz consented to the             which he was barred from associa-       submitted a Letter of Acceptance,
described sanction and to the           tion with any NASD member in            Waiver, and Consent in which he
entry of findings that he failed to      any capacity and ordered to pay         was barred from association with
respond to NASD requests to             $51,873.72, plus interest, in           any NASD member in any capaci-
appear for an on-the-record inter-      restitution to public customers.        ty. Without admitting or denying
view. (NASD Case #C10000066)            Proof of restitution is required        the allegations, DeMorrow
                                        before reassociating with a mem-        consented to the described sanc-
Richard Philip Chingos (CRD             ber firm or before requesting relief     tion and to the entry of findings
#2504767, Registered Represen-          from any statutory disqualification.     that he participated in the sale of
tative, Long Island City, New           Without admitting or denying the        promissory notes to public cus-
York) submitted an Offer of Settle-     allegations, Cutrone consented to       tomers and failed to give his mem-
ment in which he was barred from        the described sanctions and to the      ber firm prior written notice of
association with any NASD mem-          entry of findings that he directly       his participation in such sales.
ber in any capacity. Without admit-     and/or indirectly, singly and in con-   DeMorrow also failed to respond to
ting or denying the allegations,        cert, by use of the means or instru-    an NASD request for information
Chingos consented to the                mentalities of interstate commerce,     and documents. (NASD Case
described sanction and to the           or of the mails, and in connection      #C07000082)
entry of findings that he executed       with the purchase and sale of
transactions in the accounts of         securities, knowingly or recklessly     James Jay Dorney (CRD
public customers without their prior    engaged in, and/or induced others       #2335567, Registered Represen-
knowledge, authorization, or con-       to engage in a device, scheme, or       tative, Superior, Colorado)
sent. The findings also stated that      artifice to defraud, the use of          submitted a Letter of Acceptance,
Chingos failed to respond truthful-     untrue statements of material fact      Waiver, and Consent in which he
ly, accurately, non-deceptively,        and/or the omission of material         was barred from association with
and/or completely during an NASD        facts necessary to make state-          any NASD member in any capaci-
on-the-record interview. (NASD          ments made, in light of the circum-     ty. Without admitting or denying
Case #C10000095)                        stances, not misleading, and acts,      the allegations, Dorney consented
                                        practices, or courses of business       to the described sanction and to
Arthur William Clements (CRD            that operated as a fraud or deceit      the entry of findings that he appro-
#2112373, Registered Represen-          upon persons. Cutrone made mis-         priated for his own use approxi-
tative, Andora, Connecticut)            representations including specific       mately $25,000 that was intended
submitted a Letter of Acceptance,       price predictions for speculative       to be the principal of trusts for
Waiver, and Consent in which he         securities, omitted negative infor-     which he was the trustee. (NASD
was barred from association with        mation about a security being rec-      Case #C3A000048)
any NASD member in any capacity         ommended, and failed to make
and ordered to pay $40,000, plus                                                Stephen Kenneth Faber (CRD
                                        any disclosure of risk. The findings     #2132958, Registered Represen-
interest, in restitution to a public    also stated that Cutrone executed
customer. Satisfactory proof of                                                 tative, New York, New York) was
                                        unauthorized trades in the              barred from association with any
restitution payment, with interest,     accounts of public customers with-
shall be a prerequisite before                                                  NASD member in any capacity,
                                        out the necessary discretionary         ordered to pay $11,173, plus inter-
requesting relief from statutory dis-   trading authority, failed to execute
qualification. Without admitting or                                              est, in restitution, and ordered to
                                        customer sell orders, and failed to     disgorge $920.28 in commissions.
denying the allegations, Clements       disclose when he solicited pur-
consented to the described sanc-                                                The sanctions were based on find-
                                        chase orders that he would refuse       ings that Faber effected unautho-
tions and to the entry of findings       or discourage the sale of securi-
that he made improper use of at                                                 rized transactions in the account




NASD Notice to Members—Disciplinary Actions                                                         January 2001

                                                        47
of public customers without the          discretionary authority in the        tions, Gladstone consented to the
knowledge or consent of the cus-         accounts of a public customer by      described sanctions and to the
tomers and without written or oral       executing equity transactions with-   entry of findings that he purchased
authorization to exercise discretion     out the customer’s prior written      shares of stock in the account of a
in the account. The findings also         authorization and his member          public customer without the knowl-
stated that Faber failed to respond      firm’s written acceptance of the       edge or consent of the customer
to NASD requests for information.        accounts as discretionary. The        and in the absence of written or
(NASD Case #C10000112)                   findings also stated that Flowers      oral authorization to exercise
                                         shared in the profits of a cus-        discretion.
Robert John Faleska (CRD                 tomer’s account without prior writ-
#204040, Registered Represen-            ten authorization from his firm and    Gladstone’s suspension began
tative, Carteret, New Jersey)            executed purchase transactions in     December 18, 2000, and conclud-
submitted a Letter of Acceptance,        the account without the customer’s    ed at the close of business on Jan-
Waiver, and Consent in which he          prior knowledge, authorization, or    uary 2, 2001. (NASD Case
was barred from association with         consent.                              #C10000202)
any NASD member in any capaci-
ty. Without admitting or denying         Flowers’ suspension began Jan-        John Patrick Goldsworthy (CRD
the allegations, Faleska consented       uary 2, 2001, and will conclude       #730533, Registered Represen-
to the described sanction and to         January 1, 2003. (NASD Case           tative, Harahan, Louisiana) was
the entry of findings that he sub-        #C10000103)                           barred from association with any
mitted fictitious life insurance appli-                                         NASD member in any capacity.
cations to his member firm. (NASD         Gines Jose Garcia (CRD                The NAC imposed the sanctions
Case #C10000205)                         #2863499, Registered Represen-        following a remand by the SEC.
                                         tative, Paterson, New Jersey)         The sanction was based on find-
Matthew Craig Fine (CRD                  submitted a Letter of Acceptance,     ings that Goldsworthy engaged in
#2841607, Registered Represen-           Waiver, and Consent in which he       private securities transactions
tative, Fort Lee, New Jersey)            was fined $2,500 and suspended         without prior written notice to, and
submitted a Letter of Acceptance,        from association with any NASD        written approval from, his member
Waiver, and Consent in which he          member in any capacity for five        firm.
was barred from association with         business days. Without admitting
any NASD member in any capaci-           or denying the allegations, Garcia    Goldsworthy has appealed this
ty. Without admitting or denying         consented to the described sanc-      action to the SEC and all sanc-
the allegations, Fine consented to       tions and to the entry of findings     tions, other than the bar, are
the described sanction and to the        that he engaged in the unautho-       not in effect pending consideration
entry of findings that he failed to       rized purchase of shares of stock     of the appeal. (NASD Case
respond to NASD requests for             for the account of a public           #C05940077)
information. (NASD Case                  customer.                             Brett Howard Hamburger
#C9B000033)                                                                    (CRD #1974666, Registered Rep-
                                         Garcia’s suspension began
Darrell Wayne Flowers, Sr. (CRD          December 18, 2000, and conclud-       resentative, Sunrise, Florida)
#2242139, Registered Represen-           ed at the close of business on        was barred from association with
tative, Fairview, Tennessee)             December 22, 2000. (NASD Case         any NASD member in any capaci-
submitted an Offer of Settlement in      #C9B000031)                           ty. The sanction was based on
which he was fined $25,000 and                                                  findings that Hamburger effected
suspended from association with          Max Gordon Gladstone (CRD             unauthorized transactions in the
any NASD member in any capacity          #2220722, Registered Represen-        account of a public customer with-
for two years. The fine must be           tative, New York, New York)           out obtaining authorization from
paid before reassociating with any       submitted a Letter of Acceptance,     the customer. The findings also
NASD member following the sus-           Waiver, and Consent in which he       stated that Hamburger misrepre-
pension or before requesting relief      was fined $5,000 and suspended         sented his identity to a public cus-
from any statutory disqualification.      from association with any NASD        tomer and solicited the purchase
Without admitting or denying the         member in any capacity for 10         and sale of securities without
allegations, Flowers consented to        business days. The fine must be        being properly registered with the
the described sanctions and to the       paid before reassociating with an     NASD and the State of Illinois
entry of findings that he exercised       NASD member firm. Without              through a member firm. The NASD
                                         admitting or denying the allega-      also found that Hamburger failed


NASD Notice to Members—Disciplinary Actions                                                         January 2001

                                                         48
to respond to NASD requests to            connection with the transactions.      lessly made fraudulent misrepre-
appear for an on-the-record inter-                                               sentations and omissions to a pub-
view. (NASD Case #C10990210)              Hermes’ suspension began Jan-          lic customer regarding a security
                                          uary 2, 2001, and will conclude on     and failed to disclose material
Timothy Lane Hamilton (CRD                January 1, 2003. (NASD Case            information relating to the risks
#1049533, Registered Represen-            #C02000065)                            associated with an investment.
tative, Dayton, Ohio) submitted a                                                The findings also stated that
Letter of Acceptance, Waiver, and         William Edson Howard, III (CRD
Consent in which he was barred            #1395976, Registered Represen-         Kabir falsely informed the cus-
from association with any NASD            tative, Ft. Pierce, Florida) submit-   tomer that he was required to pur-
member in any capacity and                ted a Letter of Acceptance,            chase securities in the aftermarket.
ordered to pay $19,271.44, plus           Waiver, and Consent in which he        The NASD also found that Kabir
interest, in restitution to public cus-   was fined $10,000 and suspended         opened a new brokerage account
tomers. Proof of restitution, with        from association with any NASD         at his member firm for a customer
interest, shall be a prerequisite         member in any capacity for 12          without the customer’s prior knowl-
before reassociating with a mem-          months. The fine must be paid           edge, authorization, or consent
ber firm or before requesting relief       before reassociating with a mem-       and effected an unauthorized
from statutory disqualification.           ber firm or before requesting relief    transaction in the account. (NASD
Without admitting or denying the          from statutory disqualification.        Case #C10000071)
allegations, Hamilton consented to        Howard must also demonstrate
the described sanctions and to the        that he has paid $12,708, that rep-    Gordon Kerr (CRD #268444,
entry of findings that he engaged          resents his financial benefit from       Registered Representative,
in private securities transactions        private securities transactions, to    Walnut, California) was barred
away from his member firm, failed          the trustee in bankruptcy of a com-    from association with any NASD
to provide the firm with detailed          pany before reassociating with a       member in any capacity. The SEC
written notice of the transactions,       member firm or before requesting        affirmed the sanction following
his role therein, and to receive per-     relief from statutory disqualifica-     appeal of a December 1999 NAC
mission from the firm to engage in         tion. Without admitting or denying     decision. The sanction was based
the transactions. (NASD Case              the allegations, Howard consented      on findings that Kerr functioned as
#C8B000019)                               to the described sanctions and to      a securities principal while he was
                                          the entry of findings that he           barred from acting in that capacity.
Reinhard Hermes (CRD                      engaged in private securities          (NASD Case #C02980051)
#1597099, Registered Principal,           transactions without providing his
Laguna Niguel, California) sub-           member firm prior written notice of     Mohammad Ali Khan (CRD
mitted a Letter of Acceptance,            his intention to participate and       #1923986, Registered Represen-
Waiver, and Consent in which he           without seeking or receiving the       tative, Franklin Park, New
was fined $20,000 and suspended            permission of his member firm           Jersey) was barred from associa-
from association with any NASD            since the transactions were “for       tion with any NASD member in any
member in any capacity for two            compensation.”                         capacity. The sanction was based
years. The fine must be paid                                                      on findings that Khan failed to
before reassociating with a mem-          Howard’s suspension will begin         respond to NASD requests to
ber firm or before requesting relief       January 16, 2001, and will con-        appear for on-the-record inter-
from any statutory disqualification.       clude at the close of business on      views. (NASD Case #C10990220)
Without admitting or denying the          January 15, 2002. (NASD Case
                                          #C3A000047)                            Thomas Joseph Klima (CRD
allegations, Hermes consented to                                                 #2512872, Registered Represen-
the described sanctions and to the        Mizanul Kabir (CRD #2128146,           tative, Chandler, Arizona) sub-
entry of findings that he participat-      Registered Representative, New         mitted a Letter of Acceptance,
ed in private securities transac-         York, New York) was barred from        Waiver, and Consent in which he
tions and failed to provide written       association with any NASD mem-         was barred from association with
notice to the NASD describing in          ber in any capacity and ordered to     any NASD member in any capaci-
detail the proposed transactions,         pay $26,481.25, plus interest, in      ty. Without admitting or denying
his proposed role, and stating            restitution to a public customer.      the allegations, Klima consented to
whether he had received or might          The sanctions were based on find-       the described sanction and to the
receive selling compensation in           ings that Kabir knowingly or reck-     entry of findings that he transferred



NASD Notice to Members—Disciplinary Actions                                                           January 2001

                                                          49
funds from customer accounts,           denying the allegations, Loftus        the account of public customers,
and without the knowledge or            consented to the described sanc-       endorsed the checks with the pay-
consent of the customers, convert-      tions and to the entry of findings      ees’ signatures and his own signa-
ed the funds to his own use and         that he recommended the pur-           ture without the knowledge or
benefit. (NASD Case                      chase of shares of stock to a pub-     consent of the customers, deposit-
#C04000037)                             lic customer that was unsuitable       ed the funds into his personal bank
                                        given the customer’s financial          account, and converted funds
Timothy James Lease (CRD                status, investment objectives, and     totaling $13,623.71 to his own use
#1968334, Registered Principal,         investment experience.                 and benefit. Marx also failed to
Lancaster, Pennsylvania) sub-                                                  respond to NASD requests for
mitted a Letter of Acceptance,          Loftus’ suspension began Decem-        information. (NASD Case
Waiver, and Consent in which he         ber 4, 2000, and concluded at the      #C10000100)
was suspended from association          close of business on December
with any NASD member in any             15, 2000. (NASD Case                   Eugene McCall, Jr. (CRD
capacity for 18 months. In light of     #C10000193)                            #2276981, Registered Represen-
the financial status of Lease, no                                               tative, Elida, Ohio) submitted a
monetary sanction has been              Joaquin Lopez, III (CRD                Letter of Acceptance, Waiver, and
imposed. Without admitting or           #4068288, Registered Represen-         Consent in which he was barred
denying the allegations, Lease          tative, Aurora, Colorado)              from association with any NASD
consented to the described sanc-        submitted an Offer of Settlement in    member in any capacity and
tion and to the entry of findings        which he was barred from associa-      ordered to pay $241,344.55, plus
that he engaged in private securi-      tion with any NASD member in any       interest, in restitution to public cus-
ties transactions without prior writ-   capacity. Without admitting or         tomers. Proof of restitution must
ten notice to, or approval from, his    denying the allegations, Lopez         be submitted before reassociating
member firm. The findings also            consented to the described sanc-       with a member firm or before
stated that Lease recommended           tion and to the entry of findings       requesting relief from any statutory
and purchased promissory notes          that he failed to respond to NASD      disqualification. Without admitting
for the account of public customers     requests for information. (NASD        or denying the allegations, McCall
and failed to have reasonable           Case #C3A000035)                       consented to the described sanc-
grounds for believing that these        Francis Albert Lupo (CRD               tions and to the entry of findings
recommendations and resulting           #2387813, Registered Represen-         that he sold purported “invest-
transactions were suitable for the      tative, Staten Island, New York)       ments” to public customers totaling
customers on the basis of their         was barred from association with       $241,344.55 and received at least
financial situation, investment          any NASD member in any capaci-         $201,046.81 from the account into
objectives, and needs.                  ty. The sanction was based on          which these funds were placed
                                        findings that Lupo failed to            and used the funds for his own
Lease’s suspension began                                                       benefit, without the knowledge or
December 18, 2000, and will con-        respond to NASD requests to
                                        appear for on-the-record inter-        consent of the customers. The
clude at the close of business on                                              findings also stated that McCall
June 17, 2002. (NASD Case               views. (NASD Case #C10000096)
                                                                               provided materially false, inaccu-
#C9A000040)                             Anthony Andrew Marx, Jr. (CRD          rate, and misleading information in
Joseph Xavier Loftus, Jr. (CRD          #2180220, Registered Represen-         response to an NASD request for
#2725482, Registered Principal,         tative, Astoria, New York) was         information and failed to respond
Hoboken, New Jersey) submitted          barred from association with any       to NASD requests for information
a Letter of Acceptance, Waiver,         NASD member in any capacity            and documents. (NASD Case
and Consent in which he was fined        and ordered to pay $91,080.36,         #C8B000016)
$5,418.75, which included the dis-      plus interest, in restitution to his
                                        former member firm. The sanc-           Thomas Michael McDermott
gorgement of commissions earned                                                (CRD #326652, Registered Prin-
of $418.75, suspended from asso-        tions were based on findings that
                                        Marx effected unauthorized trans-      cipal, Bloomfield, New Jersey)
ciation with any NASD member in                                                submitted an Offer of Settlement in
any capacity for 10 business days,      actions in the account of public
                                        customers without their prior          which he was fined $5,000 and
and ordered to pay $6,612.50, plus                                             suspended from association with
interest, in restitution to a public    knowledge, authorization, or con-
                                        sent. The findings also stated that     any NASD member as a general
customer. Without admitting or                                                 securities principal for 60 days.
                                        Marx drew checks on the funds in


NASD Notice to Members—Disciplinary Actions                                                           January 2001

                                                        50
Without admitting or denying the        Douglas Takeshi Nonaka (CRD            Stearns Charles Pluff, III (CRD
allegations, McDermott consented        #1757727, Registered Represen-         #1056497, Registered Represen-
to the described sanctions and to       tative, Aiea, Hawaii) submitted a      tative, Austin, Texas) submitted a
the entry of findings that he failed     Letter of Acceptance, Waiver, and      Letter of Acceptance, Waiver, and
to implement, maintain, and             Consent in which he was barred         Consent in which he was fined
enforce an effective supervisory        from association with any NASD         $5,000 and suspended from asso-
system and written procedures           member in any capacity and             ciation with any NASD member in
that would have enabled his mem-        required to demonstrate, should he     any capacity for five business
ber firm to comply with federal          seek reentry into the securities       days. Without admitting or denying
securities laws and NASD rules to       industry, that he has paid $7,680      the allegations, Pluff consented to
detect and prevent illegal bidding      to the trustee in bankruptcy of an     the described sanctions and to the
for, purchasing, or inducing others     issuer or to individual investors.     entry of findings that he shared
to purchase a security in the sec-      Without admitting or denying the       directly in the losses in a cus-
ondary market while a distribution      allegations, Nonaka consented          tomer’s account when he trans-
was still in progress.                  to the described allegations and       ferred $49,995 to a customer to
                                        to the entry of findings that he        compensate the customer for loss-
McDermott’s suspension began            engaged in private securities          es and failed to obtain prior written
January 2, 2001, and will conclude      transactions without providing prior   authorization from his member
at the close of business on March       written notice to his member firm.      firm.
2, 2001. (NASD Case                     The NASD also found that Nonaka
#C10000029)                             failed to respond to NASD              Pluff’s suspension began Decem-
                                        requests for information. (NASD        ber 18, 2000, and concluded at the
Robin Bruce McNabb (CRD                                                        close of business on December
#1016598, Registered Principal,         Case #C3A000045)
                                                                               22, 2000. (NASD Case
San Jose, California) was cen-          Nelson Chukwunyere Onyejiaka           #C06000028)
sured, fined $50,000, and barred         (CRD #2864207, Registered Rep-
from association with any NASD          resentative, Southbound Brook,         David Andrew Roshco (CRD
member in any capacity. The SEC         New Jersey) was fined $5,000            #2013641, Registered Represen-
affirmed the sanctions following         and suspended from association         tative, New York, New York) was
appeal of a March 1999 NAC              with any NASD member in any            barred from association with any
decision. The sanctions were            capacity for 18 months. The fine        NASD member in any capacity.
based on findings that McNabb            must be paid before reassociating      The sanction was based on find-
participated in private securities      with a member firm following the        ings that Roshco failed to respond
transactions without giving prior       suspension. The Office of Hearing       to NASD requests to appear for an
written notification to his member       Officers (OHO) imposed the sanc-        on-the-record interview. (NASD
firm. The findings also stated that       tions following the call for review    Case #C10000090)
McNabb recommended to public            and remand by the NAC. The find-
customers the purchase of securi-                                              Robert David Ross (CRD
                                        ings stated that Onyejiaka failed to   #404593, Registered Principal,
ties without having reasonable          disclose his felony conviction on a
grounds for believing that the                                                 Boca Raton, Florida) submitted a
                                        Form U-4.                              Letter of Acceptance, Waiver, and
investments were suitable for the
customers in light of the facts dis-    Onyejiaka’s suspension began           Consent in which he was suspend-
closed by the customers regarding       January 2, 2001, and will conclude     ed from association with any
their other security holdings, and      at the close of business on July 1,    NASD member in any capacity for
their financial situation, and needs.    2002. (NASD Case #C10990121)           six months. In light of the financial
                                                                               status of Ross, no monetary sanc-
McNabb has appealed this action         Marlon Gerbacio Pamintuan              tion has been imposed. Without
to the U.S. Court of Appeals for        (CRD #2721666, Registered Rep-         admitting or denying the allega-
the Ninth Circuit and the sanctions,    resentative, Hayward, California)      tions, Ross consented to the
other than the bar, are not in effect   was barred from association with       described sanction and to the
pending consideration of the            any NASD member in any capaci-         entry of findings that he effected
appeal. (NASD Case                      ty. The sanction was based on          the purchase of shares of stock in
#C01970021)                             findings that Pamintuan failed to       the accounts of public customers
                                        respond to NASD requests for           without their prior knowledge,
                                        information. (NASD Case#               authorization, or consent.
                                        C02000033)

NASD Notice to Members—Disciplinary Actions                                                         January 2001

                                                        51
Ross’ suspension began Decem-           Schupp’s suspension began                 more, the NASD determined that
ber 11, 2000, and will conclude on      January 2, 2001, and will conclude        Simmons failed to submit written
June 10, 2001. (NASD Case               on January 1, 2002. (NASD Case            notice to, and obtain authorization
#CMS000237)                             #C11000030)                               from, the firm to continue in his
                                                                                  sales of promissory notes.
David Robert Scholle (CRD               Steven Arthur Scott (CRD
#2461242, Registered Represen-          #1174431, Registered Represen-            Simmons’ suspension will begin
tative, Pittsburgh, Pennsylvania)       tative, Laguna Hills, California)         January 16, 2001, and will con-
was barred from association with        submitted a Letter of Acceptance,         clude at the close of business on
any NASD member in any capaci-          Waiver, and Consent in which he           May 15, 2001. (NASD Case
ty. The sanction was based on           was fined $15,000 and suspended            #C07000093)
findings that Scholle received           from association with any NASD
approximately $3,500 from public        member in any capacity for two            Peter John Sinram (CRD
customers to pay premiums for           years. The fine must be paid               #825018, Registered Represen-
auto and homeowners insurance           before reassociating with a mem-          tative, Valley Stream, New York)
policies, failed to pay or direct the   ber firm following the suspension          submitted a Letter of Acceptance,
payment of the premiums, and            or before requesting relief from          Waiver, and Consent in which he
converted the $3,500 to his own         any statutory disqualification. With-      was barred from association with
use and benefit without the cus-         out admitting or denying the alle-        any NASD member in any capaci-
tomers’ knowledge or consent.           gations, Scott consented to the           ty. Without admitting or denying
The findings also stated that            described sanctions and to the            the allegations, Sinram consented
Scholle failed to respond to NASD       entry of finding that he participated      to the described sanction and to
requests for information. (NASD         in private securities transactions        the entry of findings that he
Case #C9A000021)                        and outside business activities           engaged in trading certain bond
                                        without providing prior oral or writ-     positions of his member firm and
Anthony Douglas Schupp                  ten notification to, and receiving         failed to disclose to the firm materi-
(CRD #1012126, Registered               permission from, his member firm.          al information pertaining to the
Representative, Shrewsbury,                                                       trading. The findings also stated
Massachusetts) submitted a Let-         Scott’s suspension will begin Jan-        that Sinram provided false and
ter of Acceptance, Waiver, and          uary 16, 2001, and will conclude at       misleading market valuations to
Consent in which he was fined            the close of business on January          his member firm with respect to
$5,000, suspended from associa-         15, 2003. (NASD Case                      the bond positions. The NASD
tion with any NASD member in any        #C02000069)                               also found that Sinram failed to
capacity for one year, ordered to                                                 respond to NASD requests for
disgorge the $2,608 in commis-          Russell Bruce Simmons (CRD                information. (NASD Case
sions received in connection with       #2934499, Registered Represen-            #C10000203)
the violative transactions, plus        tative, Valrico, Florida) submitted
interest, in partial restitution to a   a Letter of Acceptance, Waiver,           Jan Melvin Siroky (CRD
public customer. The fine must be        and Consent in which he was fined          #425443, Registered Represen-
paid and satisfactory proof of dis-     $5,000, suspended from associa-           tative, Colorado Springs,
gorgement and partial restitution,      tion with any NASD member in any          Colorado) submitted a Letter of
with interest, must be submitted        capacity for 120 days, and ordered        Acceptance, Waiver, and Consent
before reassociating with a mem-        to disgorge $6,035.97 in commis-          in which he was barred from asso-
ber firm following the suspension        sions to public customers. Without        ciation with any NASD member in
or before requesting relief from        admitting or denying the allega-          any capacity. Without admitting or
any statutory disqualification. With-    tions, Simmons consented to the           denying the allegations, Siroky
out admitting or denying the alle-      described sanctions and to the            consented to the described sanc-
gations, Schupp consented to the        entry of findings that prior to his        tion and to the entry of findings
described sanctions and to the          association with a member firm, he         that he accepted funds from a pub-
entry of findings that he engaged        engaged in the sale of promissory         lic customer intended for invest-
in private securities transactions      notes to public customers and             ment and retained possession and
without prior written notice to, or     failed to disclose this activity to the   control of the funds prior to apply-
approval from, his member firm.          firm, and continued to sell the            ing them to the intended invest-
                                        notes after he became an associ-          ment, thereby misusing customer
                                        ated person at the firm. Further-          funds. (NASD Case #C3A000049)


NASD Notice to Members—Disciplinary Actions                                                            January 2001

                                                         52
Virginia Marie Smith (CRD              Richard Lee Stevens (CRD               the financial status of Thayer, no
#3245980, Associated Person,           #852090, Registered Represen-          monetary sanction has been
Randolph, New Jersey) submit-          tative, Valley Cottage, New York)      imposed. Without admitting or
ted a Letter of Acceptance, Waiv-      submitted a Letter of Acceptance,      denying the allegations, Thayer
er, and Consent in which she was       Waiver, and Consent in which he        consented to the described sanc-
fined $5,000 and suspended from         was fined $5,000, and suspended         tion and to the entry of findings
association with any NASD mem-         from association with any NASD         that he failed to implement an
ber in any capacity for 30 days.       member in any capacity for 30          effective system for monitoring his
The fine must be paid before reas-      days. Without admitting or denying     member firm’s equities division to
sociating with a member firm.           the allegations, Stevens consented     prevent price manipulation of a pri-
Without admitting or denying the       to the described sanctions and to      vate placement, failed to monitor
allegations, Smith consented to        the entry of findings that he forged    the activities of an individual, and
the described sanctions and to the     the signature of public customers      failed to enforce provisions of the
entry of findings that she failed to    on insurance replacement forms         firm’s policy and procedure manu-
respond truthfully on a Form U-4       without their prior knowledge or       al. The findings also stated that
and failed to disclose that she had    consent.                               Thayer failed to establish, main-
pled guilty to several drug-related                                           tain, and enforce procedures rea-
charges in the State of New Jersey.    Steven’s suspension began Jan-         sonably designed to achieve
                                       uary 2, 2001, and will conclude at     compliance with the penny stock
Smith’s suspension began January       the close of business on January       rules. The NASD also found that
2, 2001, and will conclude at the      31, 2001. (NASD Case                   Thayer failed to disclose and con-
close of business on January 31,       #C9B000032)                            firm in writing to public customers
2001. (NASD Case #C9B000036)                                                  the control relationship between
                                       Charles Wesley Testino, Jr.
Renjun Song (CRD #2399859,             (CRD #1216651, Registered Rep-         his member firm and a security.
Registered Representative,             resentative, Tucson, Arizona)          Thayer’s suspension began Jan-
Philadelphia, Pennsylvania) was        was fined $177,000, suspended           uary 2, 2001, and will conclude on
barred from association with any       from association with any NASD         January 1, 2003. (NASD Case
NASD member in any capacity.           member in any capacity for six         #CAF000031)
The sanction was based on find-         months, and ordered to requalify
ings that Song failed to respond to    by exam as an investment compa-        Thomas K. Van Ahn (CRD
NASD requests for information.         ny and variable contracts products     #2117531, Registered Represen-
(NASD Case #C9A000024)                 representative before associating      tative, Oshkosh, Wisconsin)
                                       again with a member firm. The           submitted a Letter of Acceptance,
Michael Joel Spillert (CRD             Office of Hearing Officers imposed       Waiver, and Consent in which he
#1711695, Registered Represen-         the sanctions following a call for     was fined $5,000 and suspended
tative, Parsippany, New Jersey)        review and remand by the NAC.          from association with any NASD
submitted a Letter of Acceptance,      The sanctions were based on find-       member in any capacity for 10
Waiver, and Consent in which he        ings that Testino engaged in pri-      business days. Without admitting
was fined $10,000 and suspended         vate securities transactions without   or denying the allegations, Van
from association with any NASD         prior notice to his member firm.        Ahn consented to the described
member in any capacity for one                                                sanctions and to the entry of find-
year. Without admitting or denying     Testino’s suspension began             ings that he failed to send copies
the allegations, Spillert consented    December 4, 2000, and will con-        of order tickets for all trades
to the described sanctions and to      clude at the close of business         placed directly with the clearing
the entry of findings that he drafted   on June 4, 2001. (NASD Case            firm to the main office. The find-
a change of broker of record           #C3A990031)                            ings also stated that Van Ahn
request letter, and forged a public                                           placed options transactions for his
customer’s signature on the letter,    Robert Alden Thayer (CRD
                                       #874129, Registered Principal,         own account without the approval
without the customer’s prior knowl-                                           of the firm’s officers, general secu-
edge or consent.                       Colorado Springs, Colorado)
                                       submitted a Letter of Acceptance,      rities principals, or the registered
Spillert’s suspension began Jan-       Waiver, and Consent in which he        options principal.
uary 2, 2001, and will conclude on     was suspended from association         Van Ahn’s suspension began
January 1, 2002. (NASD Case            with any NASD member in any            December 18, 2000, and
#C9B000035)                            capacity for two years. In light of


NASD Notice to Members—Disciplinary Actions                                                        January 2001

                                                       53
concluded at the close of business      qualified and registered municipal      Wells’ suspension began January
on January 2, 2001. (NASD Case          securities principal, a financial and   2, 2001, and will conclude at the
#C8A000068)                             operations principal, and properly     close of business on May 1, 2001.
                                        qualified registered general            (NASD Case #C01000033)
Lester Henry Veltman, Jr. (CRD          securities principals. Furthermore,
#454075, Registered Represen-           Webb acted in the capacity of a        Eric John Whittemore (CRD
tative, Tulsa, Oklahoma) submit-        municipal securities principal with-   #2739516, Registered Represen-
ted a Letter of Acceptance,             out being properly qualified and        tative, Manchester, New Hamp-
Waiver, and Consent in which he         registered in such capacity, and       shire) submitted a Letter of
was fined $5,000 and suspended           failed to respond completely to        Acceptance, Waiver, and Consent
from association with any NASD          NASD requests for information and      in which he was barred from asso-
member in any capacity for one          documents. Webb also failed to         ciation with any NASD member in
month. Without admitting or deny-       disclose on Forms U-5 and U-4          any capacity. Without admitting or
ing the allegations, Veltman con-       that he was the subject of an          denying the allegations, Whitte-
sented to the described sanctions       NASD investigation.                    more consented to the described
and to the entry of findings that he                                            sanction and to the entry of find-
engaged in private securities           Webb’s suspension began Jan-           ings that he misappropriated
transactions without providing prior    uary 2, 2001, and will conclude at     $4,930 belonging to the branch
written notice to, and receiving        the close of business on July 1,       office of a member firm. (NASD
permission from, his member firm.        2001. (NASD Case #C8A980059)           Case #C11000027)
Veltman’s suspension will begin         Donny Randall Wells (CRD               Ira Marcrobert Zadikow (CRD
January 16, 2001, and will con-         #1089583, Registered Represen-         #1385075, Registered Principal,
clude at the close of business on       tative, Santa Rosa, California)        New York, New York) submitted a
February 15, 2001. (NASD Case           submitted a Letter of Acceptance,      Letter of Acceptance, Waiver, and
#C3A000050)                             Waiver, and Consent in which he        Consent in which he was fined
                                        was fined $20,000, suspended            $5,000 and suspended from asso-
Jonathan Hudson Webb (CRD               from association with any NASD         ciation with any NASD member in
#1408674, Registered Principal,         member in any capacity for four        any capacity for five days. Without
Evanston, Illinois) was fined            months, and required to requalify      admitting or denying the allega-
$10,000, barred from association        by taking and passing the Series 7     tions, Zadikow consented to the
with any NASD member in any             exam. Without admitting or deny-       described sanctions and to the
principal, supervisory, or propri-      ing the allegations, Wells consent-    entry of findings that he effected
etary capacity, and suspended           ed to the described sanctions and      transactions in a public customer’s
from association with any NASD          to the entry of findings that he        account without confirming such
member in any capacity for six          failed to inform public customers      transactions with the customer.
months. The NAC imposed the             and his member firm, that an indi-
sanctions following appeal and call     vidual subject to an NASD bar was      Zadikow’s suspension began
for review by the NAC of an Office       making false assertions and gen-       January 2, 2001, and concluded
of Hearing Officers decision. The        erating false documents to make        on January 6, 2001. (NASD Case
sanctions were based on findings         customers believe that their mutual    #C9B000034)
that a member firm, acting through       fund investments were invested
Webb, conducted business while          with or through a member firm.
failing to maintain the minimum                                                Individual Fined
                                        Furthermore, the NASD found that
required net capital, failed to com-    Wells failed to disclose to his        Robert D. Michaux (CRD
ply with the terms of its restrictive   present member firm, in a timely        #2780470, Registered Represen-
agreement by failing to maintain        manner, that he was named as a         tative, Richmond, Virginia) sub-
minimum net capital, prepared           defendant in lawsuits pertaining to    mitted a Letter of Acceptance,
inaccurate general ledger, trial bal-   the individual’s misconduct, and       Waiver, and Consent in which he
ance, and net capital computation,      failed to keep his registration        was fined $17,500. For six months
and filed inaccurate FOCUS Part          information current by amending a      following acceptance of the AWC,
IIA reports. In addition, the firm,      Form U-4 to disclose the lawsuits,     he may become associated with
acting through Webb, conducted          in a timely manner.                    an NASD member in a non-regis-
a municipal securities business                                                tered capacity, but may not
while failing to employ a properly                                             become associated with an NASD


NASD Notice to Members—Disciplinary Actions                                                        January 2001

                                                        54
member in any capacity that            ordered to sit for the supervisory      Complaints Filed
requires registration, including but   section of the Continuing               The following complaints were
not limited to, the solicitation and   Education Program, Regulatory           issued by the NASD. Issuance of a
recommendation of securities           Element, within 180 days from the       disciplinary complaint represents
transactions to customers or           date the decision becomes final.         the initiation of a formal proceed-
otherwise handling or servicing        Greer was also ordered to here-         ing by the NASD in which findings
customer accounts. For 12 months       after be employed by a member           as to the allegations in the com-
following the six-month period,        firm that will agree to have all new     plaint have not been made, and
Michaux may become associated          account forms for Greer and his         does not represent a decision as
with an NASD member in a regis-        customers reviewed by the firm’s         to any of the allegations contained
tered capacity, but only if the firm    compliance department. The sanc-        in the complaint. Because these
has adopted and implemented pro-       tions were based on findings that        complaints are unadjudicated,
cedures for supervising him. With-     Greer established an account for        you may wish to contact the
out admitting or denying the           a fictitious customer, completed         respondents before drawing
allegations, Michaux consented to      account forms for the fictitious         any conclusions regarding the
the described sanctions and to the     customer, and attempted to effect       allegations in the complaint.
entry of findings that he effected      a purchase in the account. The
unsuitable and excessive trades in     findings also stated that Greer          James Henry Bond, III (CRD
the account of a public customer.      established the account to effect       #2001777, Registered Represen-
The findings also stated that           personal transactions in a dishon-      tative, New York, New York) was
Michaux exercised discretion in        est manner to avoid detection from      named as a respondent in an
the accounts of public customers       his member firm.                         NASD complaint alleging that he
without having said discretion evi-                                            engaged in unauthorized transac-
denced in writing and without hav-     This action has been called for         tions in the accounts of public cus-
ing the account approved as            review by the NAC and the sanc-         tomers without their knowledge or
discretionary by his member firm.       tions are not in effect pending         consent and in the absence of writ-
In addition, the NASD determined       consideration of the review.            ten or oral authorization to exer-
that Michaux placed false informa-     (NASD Case #C05990035)                  cise discretion in their accounts.
tion regarding a customer’s margin     Kevin Lee Otto (CRD #1929973,           (NASD Case #C10000210)
trading experience on a margin         Registered Representative,
account approval form. (NASD                                                   Mark Alan Goldberg (CRD
                                       Milwaukee, Wisconsin) was cen-          #2481041, Registered Represen-
Case #C07000092)                       sured, fined $35,000, and barred         tative, Ft. Lauderdale, Florida)
                                       from association with any NASD          was named as a respondent in an
Decisions Issued                       member in any capacity. The SEC         NASD complaint alleging that he
                                       affirmed the sanctions following         recommended to public customers
The following decisions have been      appeal of a June 1999 NAC deci-
issued by the DBCC or the Office                                                the purchase of shares of stock
                                       sion. The sanctions were based on       and made predictions and misrep-
of Hearing Officers and have been       findings that Otto received $22,000
appealed to or called for review as                                            resentations concerning the stock,
                                       from a public customer and used         without having a reasonable basis
of December 22, 2000. The find-         the funds for some purpose other
ings and sanctions imposed in the                                              for his representations to cus-
                                       than for the benefit of the cus-         tomers. The complaint also alleges
decision may be increased,             tomer, without the customer’s
decreased, modified, or reversed                                                that Goldberg failed to respond to
                                       knowledge or authorization, before      NASD requests for information.
Initial decisions whose time for       he returned the funds to the
appeal has not yet expired will be                                             (NASD Case #C07000094)
                                       customer at a later date.
reported in the next Notices to                                                Kenneth Edward Hetlinger (CRD
Members.                               Otto has appealed this case to          #1260242, Registered Represen-
                                       the U.S. Court of Appeals for the       tative, Mundelein, Illinois) was
John Lawson Greer, III (CRD            Seventh Circuit and all sanctions,
#860076, Registered Principal,                                                 named as a respondent in an
                                       other than the bar, are not in effect   NASD complaint alleging that
Knoxville, Tennessee) was fined         pending consideration of the
$5,000, suspended from associa-                                                he caused over $74,000 to be
                                       appeal. (NASD Case                      wire-transferred from the account
tion with any NASD member in           #C8A970015)
any capacity for two weeks, and                                                of a public customer to his



NASD Notice to Members—Disciplinary Actions                                                         January 2001

                                                        55
attorney’s account, and used the      Moreno failed to respond to NASD       the truth or falsity of the state-
funds for either his own benefit       requests for information. (NASD        ments contained in the memoran-
or for some purpose other than        Case #C06000032)                       dum. The complaint also alleges
for the benefit of the customer,                                              that Salazar failed to disclose and
without the customer’s knowledge      Keith Richard Procovic (CRD            confirm in writing to public cus-
or consent. The complaint also        #2202049, Registered Represen-         tomers the control relationship
alleges that Hetlinger failed to      tative, Boca Raton, Florida) was       between his member firm and the
respond to NASD requests for          named as a respondent in an            security in which the firm made a
documents and information.            NASD complaint alleging that he        market. In addition, the complaint
(NASD Case #C8A000072)                effected the purchase of securities    alleges that Salazar failed to
                                      in the joint account of public cus-    respond to NASD requests for
George Honorato Malagon, Jr.          tomers without their knowledge or      information, documentation, and to
(CRD #2088064, Registered             prior authorization. The complaint     appear to give testimony. (NASD
Principal, Fresh Meadows, New         also alleges that Procovic failed      Case #CAF000048)
York) was named as a respondent       to respond to NASD requests for
in an NASD complaint alleging         information. (NASD Case                Vadim Steven Shapiro (CRD
that he engaged in unauthorized       #C07000087)                            #2562368, Registered Represen-
trading in the account of a public                                           tative, Baltimore, Maryland) was
customer without the discretionary    Walter Ray Reinhardt (CRD              named as a respondent in an
trading authority for the account.    #2468084, Registered Represen-         NASD complaint alleging that in
The complaint also alleges that       tative, Hillsborough, North Car-       connection with an inducement to
Malagon failed to disclose material   olina) was named as a respondent       purchase or sell a security,
facts to public customers that a      in an NASD complaint alleging that     through means or instrumentalities
reasonably prudent customer           he engaged in private securities       of interstate commerce or of the
would have wanted disclosed in        transactions by selling promissory     mails, knowingly or recklessly
making investment decisions and       notes to public customers and          employed a device, scheme or
that Malagon had a duty to dis-       failed to receive written permission   contrivance, omitted to state mate-
close. (NASD Case #CAF000046)         from his member firm to participate     rial facts necessary to make the
                                      in such transactions. The NASD         statements made, in light of the
Albert Medina (CRD #2730223,          also alleges that Reinhardt forged     circumstances under which they
Registered Representative,            the signatures of a public customer    were made, not misleading and
Lauderhill, Florida) was named        on several account transfer docu-      engaged in acts, practices, or
as a respondent in an NASD com-       ments without prior authorization      courses of business that operated
plaint alleging that he effected      from the customer. (NASD Case          as a fraud or deceit upon public
securities transactions without       #C07000090)                            customers. The complaint alleges
obtaining prior authorization from                                           that Shapiro made material mis-
the customers. In addition, the       Alfred Salazar (CRD #1059427,
                                      Registered Principal, Littleton,       representations including specific
complaint alleges that Medina                                                and substantial price predictions
failed to timely respond to NASD      Colorado) was named as a
                                      respondent in an NASD complaint        and omitted material facts regard-
requests for information. (NASD                                              ing a security’s losses and poor
Case #C07000086)                      alleging that by the use of means
                                      and instrumentalities of interstate    performance. The complaint also
Petra Moreno (CRD #1738689,           commerce, or of the mails, directly    alleges that Shapiro failed to exe-
Registered Representative, El         or indirectly, he made untrue state-   cute customer sell orders. (NASD
Paso, Texas) was named as a           ments of material fact in connec-      Case #C10000207)
respondent in an NASD complaint       tion with the purchase or sale of a    Donna Michelle Thomas-Gard-
alleging that she received checks     security. The complaint alleges        ner (CRD #2808748, Registered
totaling $427.46 that represented     that Salazar effected transactions     Representative, East Point,
payments for a life insurance poli-   by means of a manipulative,            Georgia) was named as a respon-
cy the customer purchased,            deceptive, or other fraudulent         dent in an NASD complaint alleg-
cashed the checks, and used the       device or contrivance and              ing that she caused a public
funds for her own use and benefit,     approved a private placement           customer’s name on a brokerage
without the authorization, knowl-     memorandum that contained              account at her member firm to be
edge, or consent of the customer.     materially false statements or         changed to the name of her land-
The complaint also alleges that       acted with reckless disregard as to    lord, and further changed the


NASD Notice to Members—Disciplinary Actions                                                      January 2001

                                                      56
address of record on the cus-         James W. Twohig & Company,         Individuals Suspended
tomer’s account, without the          Princeton, West Virginia (Decem-   Pursuant To NASD Rule 9540
authorization of the customer.        ber 6, 2000)                       Series For Failure To Provide
The complaint also alleges that                                          Information Requested Under
Thomas-Gardner caused cashier’s                                          NASD Rule 8210. (The date
checks to be issued that were         Firms Expelled For Failure To      the suspension began is
drawn against the customer’s          Pay                                listed after the entry.)
account and failed to submit the      Fines/Costs And/Or Provide         Bell, Timothy E., Winterville, Ohio
debit memoranda and copies of         Proof Of Payment In                (November 24, 2000)
the cashier’s checks to the home      Connection With Violations
office. As a result, the NASD                                             Grieg, Tommy A., Santa Maria,
alleges that while these checks       L.H. Alton & Company, San          California (December 8, 2000)
were honored by the member firm,       Francisco, California (November
they were not debited against the     20, 2000)                          Lewis, Gregory, Milwaukee,
account, and the checks were                                             Wisconsin (December 1, 2000)
                                      Trafalgar Financial Services,
negotiated and the proceeds were      Inc., Boston, Massachusetts
used for her own benefit. The          (November 20, 2000)                The American Stock
complaint further alleges that                                           Exchange, NASD Regulation,
Thomas-Gardner failed to respond                                         and the New York Stock
to NASD requests for information.     Individuals Whose                  Exchange Jointly Fine
(NASD Case #C07000081)                Registrations Were Revoked         Morgan Stanley & Co.
                                      For Failure To Pay Fines,          Incorporated $200,000
Vincent Bernard Tolbert (CRD          Costs And/Or Provide Proof
#2343655, Registered Represen-        Of Payment In Connection           The American Stock Exchange,
tative, Killeen, Texas) was           With Violations                    LLC, NASD Regulation, Inc., and
named as a respondent in an                                              the New York Stock Exchange,
NASD complaint alleging that he       Alton, Lewis H., San Francisco,    Inc., as a result of a coordinated
received $260 in cash from a pub-     California (November 20, 2000)     investigation, announced that Mor-
lic customer representing premium     Bauer, John L., Bronx, New York    gan Stanley & Co. Inc. consented
payments for a homeowner’s            (November 20, 2000)                to a censure and $200,000 fine for
insurance policy and converted the                                       violations arising from the inaccu-
funds to his own use and benefit       Elio, Carmen W., Jr., Medford,     rate reporting of short interest from
without the authorization, knowl-     Massachusetts (November 20,        November 1996 to August 1998.
edge, or consent from the cus-        2000)                              Morgan Stanley also has consent-
tomer. In addition, the complaint                                        ed to an undertaking regarding its
alleges that Tolbert failed to        Elio, Michael A., Medford, Mas-    procedures for reporting short
respond to NASD requests for          sachusetts (November 20, 2000)     interest to the three self-regulatory
information. (NASD Case               Eliscu, Mathew B., Chicago,        organizations (SROs). The disci-
#C06000034)                           Illinois (November 20, 2000)       plinary actions were brought by the
                                                                         three SROs and the fine imposed
                                      Fried, Brian A., Smithtown, New    will be paid jointly to them by Mor-
Firm Suspended                        York (November 20, 2000)           gan Stanley.
The following firm was suspended
from membership in the NASD for       Furman, Len K., Brandenton,        The Amex, NASD Regulation, and
failure to comply with formal writ-   Florida (November 20, 2000)        the NYSE found that during the
ten requests to submit financial                                          22-month period, Morgan Stanley
                                      Jasovsky, Darin, Bayonne, New      inaccurately reported to the three
information to the NASD. The          Jersey (November 20, 2000)
actions were based on the provi-                                         SROs short positions in numerous
sions of NASD Rule 8210 and Arti-     Pinchas, Rafael, Hillcrest, New    securities as required by the rules
cle VII, Section 2 of the NASD        York (November 20, 2000)           of the SROs. The inaccurate
By-Laws. The date the suspension                                         reporting resulted from Morgan
commenced is listed after the         Shvarts, Aleksandr, Brooklyn,      Stanley’s overstating short posi-
entry. If the firm has complied with   New York (November 20, 2000)       tions that ranged from over 1,000
the requests for information, the                                        shares to over 1 million shares in
                                      Vultaggio, Jack, Tewksbury, Mas-   certain securities. The SROs found
listing also includes the date the    sachusetts (November 20, 2000)
suspension concluded.                                                    that the inaccuracies were caused

NASD Notice to Members—Disciplinary Actions                                                   January 2001

                                                     57
by the firm’s failure to properly pro-     discovery of the inaccurate report-    In addition, NASD Regulation
gram its mainframe computer.              ing of short positions.                found that Providential and Fah-
                                                                                 man improperly operated unregis-
The SROs require each firm to              Morgan Stanley, which neither          tered branch offices, allowed
maintain a record of total “short”        admitted nor denied the SROs’          unregistered individuals to partici-
positions in all customer and pro-        allegations or findings, has under-     pate in its securities business, and
prietary firm accounts in listed           taken to review its procedures for     violated the NASD's advertising
securities and report the informa-        reporting short interest to the        rules in connection with the firm's
tion monthly to its SRO. A short          SROs and has agreed to imple-          Web site.
position occurs when a security is        ment the appropriate new proce-
sold that the seller does not own.        dures (in addition to procedures       Without admitting or denying
The security is borrowed by, or for       implemented by the firm in August       NASD Regulation's allegations,
the account of, the seller. The sell-     1998) to ensure compliance with        Providential and Fahman agreed
er maintains the short position           applicable SRO rules and the           to settle the charges. NASD Regu-
until, at a later date, it is purchased   federal securities laws.               lation's Los Angeles District Office
and/or delivered for the account.                                                investigated this matter.

The reporting inaccuracies were           NASD Regulation Sanctions              NASD Regulation wishes to
initially discovered by the Amex in       Providential Securities, Inc.          acknowledge the assistance in this
October 1998 as a result of an            And Bars Principal, Henry              matter provided by the staff of the
inquiry made to Morgan Stanley            Fahman                                 Senate Permanent Subcommittee
regarding a large change in the           NASD Regulation announced it           on Investigations of the Committee
reported short position in an             has sanctioned and fined Provi-         on Governmental Affairs. Henry
Amex-listed security. Morgan              dential Securities, Inc., of Orange    Fahman testified before the Sub-
Stanley did not disclose the matter       County, CA, $115,000 and has           committee during its hearings on
to all of the SROs until late             permanently barred its Chairman        day trading in February 2000.
November 1998, approximately              and CEO, Henry Fahman, for vio-
three months after it became              lation of numerous NASD rules
aware of the reporting inaccura-          and federal securities laws. In
cies.                                     addition, the firm agreed to return
The three SROs found that Mor-            funds to customers who invested
gan Stanley failed to provide rea-        in its private placement between
sonable supervision of its business       December 1998 and June 1999.
activities in reporting to the SROs       NASD Regulation found that
short positions in securities and         between December 1998 and
failed to establish and maintain          June 1999, Providential sold its
adequate procedures and controls          corporate shares to public cus-
to ensure compliance with its             tomers through Providential Secu-
reporting obligations. Among other        rities, Inc.'s private placement
things, the SROs found that the           memorandum. Providential and
firm failed to have in place ade-          Fahman misrepresented to
quate procedures to audit or              investors through, and failed to
review its computer systems to            provide them with complete and
ensure that short position reports        accurate information in, the private
were prepared in a manner consis-         placement memorandum in their
tent with SRO rules; written proce-       attempt to raise money for the firm.
dures for the supervision of the          NASD Regulation also found that
steps to be followed by firm per-          the customer funds generated
sonnel for the preparation and            from Providential's private place-
submission of short position              ment were not protected in accor-
reports; and systems and proce-           dance with the NASD's rules and
dures of follow-up and review ade-        federal securities laws, and ulti-
quate to ensure that the SROs             mately were used by the firm for
were promptly notified after the           purposes than originally described.


NASD Notice to Members—Disciplinary Actions                                                           January 2001

                                                          58

				
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