Disciplinary Actions

NASD Notices to Members—Disciplinary Actions August 1998

535

Disciplinary

Actions

Reported For August

NASD Regulation, Inc. (NASD

Regulation

) has taken disciplinary

actions against the following ﬁrms

and individuals for violations of

National Association of Securities

Dealers, Inc. (NASD

) rules; federal

securities laws, rules, and regula-

tions; and the rules of the Municipal

Securities Rulemaking Board

(MSRB). Unless otherwise indicated,

suspensions will begin with the open-

ing of business on Monday, August

17, 1998. The information relating to

matters contained in this

Notice

current as of the end of July 24.

Firms Expelled

Stratton Oakmont, Inc. (Lake Suc-

cess, New York) submitted an Offer

of Settlement pursuant to which the

ﬁrm was expelled from membership

in the NASD. Without admitting or

denying the allegations, the ﬁrm con-

sented to the described sanction and

to the entry of ﬁndings that, acting

through its registered principals and

registered representatives, the ﬁrm

engaged in a practice of executing

unauthorized transactions in the

accounts of its customers when it did

not have discretionary trading author-

ity for any of these accounts. The

ﬁndings also stated that the ﬁrm

attempted to convince public cus-

tomers to enter into transactions, and

executed the transactions despite the

customers’ refusal to do so. Further-

more, the NASD determined that the

ﬁrm executed trades without any

communication with the customers

and at times when its registered rep-

resentatives knew that the customers

were on vacation or were otherwise

unavailable, and exceeded the

authorized dollar or share amount in

transactions authorized by the cus-

tomers. In addition, the NASD found

that the ﬁrm executed authorized sell

orders but used the proceeds to buy

other securities without, or contrary

to, the customers’ authorization or

instructions.

Firms Fined, Individuals

Sanctioned

Sunpoint Securities, Inc.

(Longview, Texas) and Mary Ellen

Wilder (Registered Principal,

Longview, Texas) submitted a Let-

ter of Acceptance, Waiver and Con-

sent pursuant to which they were

censured and ﬁned $50,000, jointly

and severally. In addition, Wilder

was suspended from association with

any NASD member in the capacity of

a ﬁnancial and operations principal

for 10 days and must requalify by

examination prior to future associa-

tion with any NASD member in the

capacity of a ﬁnancial and operations

principal. Further, Sunpoint must

engage for at least six months an

independent consultant to review

ﬁnancial and operational matters,

including but not limited to, matters

involving internal controls, net capital

computations, and reserve computa-

tions. Such consultant must be

acceptable to the NASD and must

provide the NASD with its analysis

and ﬁndings on a quarterly basis,

with such consultant being made

available for discussions with NASD

staff members in the event such

request is made. Without admitting

or denying the allegations, the

respondents consented to the

described sanctions and to the entry

of ﬁndings that the ﬁrm, acting

through Wilder, effected transactions

in securities when it failed to have

and maintain sufﬁcient net capital

and failed to make a required deposit

to its Reserve Bank Account in con-

nection with its reserve computa-

tions.

Firms and Individuals Fined

J. B. Oxford & Co. (Beverly Hills,

California) and Kevin Michael Bea-

dles (Registered Principal, Long

Beach, California) submitted a Let-

ter of Acceptance, Waiver and Con-

sent pursuant to which they were

censured and ﬁned $20,000, jointly

and severally. Without admitting or

NASD Notices to Members—Disciplinary Actions August 1998

536

denying the allegations, the respon-

dents consented to the described

sanctions and to the entry of ﬁndings

that the ﬁrm, acting through Beadles,

failed to disclose the difference in the

price securities were purchased from

and sold to customers and the ﬁrm's

contemporaneous offsetting pur-

chase or sale price to or from a Mar-

ket Maker in contravention of

Securities and Exchange Commis-

sion (SEC) Rule 10b-10(a)(2)(ii)(A).

Speciﬁcally, the ﬁrm failed to send

public customers the requisite written

notiﬁcation or conﬁrmation in securi-

ties transactions that it was not a

Market Maker in these securities.

PIM Financial Services, Inc. (San

Diego, California), Jack Kendrick

Heilbron (Registered Principal,

Poway, California) and Mary Rose

Limoges (Registered Principal,

Poway, California) submitted a Let-

ter of Acceptance, Waiver and Con-

sent pursuant to which they were

censured and ﬁned $10,000, jointly

and severally. Without admitting or

denying the allegations, the respon-

dents consented to the described

sanctions and to the entry of ﬁndings

that the ﬁrm, acting through Heilbron

and Limoges, failed to transmit

promptly $285,000 in investor funds

received in connection with a contin-

gent offering of securities to a proper-

ly established bank escrow account.

Firms Fined

International Correspondent Trad-

ing, Inc. (Jersey City, New Jersey)

submitted a Letter of Acceptance,

Waiver and Consent pursuant to

which the ﬁrm was censured and

ﬁned $10,000. In addition, the ﬁrm

must undertake to revise immediately

its written supervisory procedures

regarding short-sale rules. Without

admitting or denying the allegations,

the ﬁrm consented to the described

sanctions and to the entry of ﬁndings

that it executed short-sale orders in

securities and failed to maintain a

written record of the afﬁrmative deter-

mination made for such orders. The

ﬁndings also stated that the ﬁrm

failed to establish, maintain, and

enforce adequate written supervisory

procedures reasonably designed to

achieve compliance with Short-Sale

Rules.

Parker/Hunter Incorporated (Pitts-

burgh, Pennsylvania) submitted a

Letter of Acceptance, Waiver and

Consent pursuant to which the ﬁrm

was censured and ﬁned $29,707 and

ﬁned an additional $1,000, jointly and

severally, with an individual. Without

admitting or denying the allegations,

the ﬁrm consented to the described

sanctions and to the entry of ﬁndings

that it acted as a junior co-managing

underwriter in a negotiated offering of

securities by an issuer with which it

was precluded from engaging in a

municipal securities business. The

ﬁndings also stated that the ﬁrm

failed to ﬁle quarterly reports timely

and failed to include certain informa-

tion on quarterly reports ﬁled with the

MSRB. Furthermore, the NASD

determined that the ﬁrm failed to pre-

pare and/or maintain the listing and

records in the proper format and

failed to implement certain of its

established written policies and pro-

cedures to achieve compliance with

MSRB Rules G-8(a)(xvi) and G-37.

Individuals Barred or

Suspended

Alicia Allen (Registered Represen-

tative, Laurel, Maryland) submitted

an Offer of Settlement pursuant to

which she was censured, ﬁned

$20,000, and barred from association

with any NASD member in any

capacity. Without admitting or deny-

ing the allegations, Allen consented

to the described sanctions and to the

entry of ﬁndings that she failed to

respond to NASD requests for infor-

mation.

Gerard Joseph Arrigale, Jr. (Regis-

tered Representative, Middle Vil-

lage, New York) was censured,

ﬁned $20,000, suspended from asso-

ciation with any NASD member in

any capacity for six months, ordered

to requalify by exam as a corporate

securities limited representative, and

ordered to complete the Regulatory

Element of the NASD’s Continuing

Education Program as a condition to

his return to the securities industry

following completion of the suspen-

sion. The sanctions were based on

ﬁndings that Arrigale falsely repre-

sented himself to be another broker,

and requested the execution of secu-

rities transactions under the account

number of a public customer, without

the customer’s knowledge, authoriza-

tion, or consent.

Walter Vance Bailey (Registered

Principal, Brantley, Alabama) sub-

mitted a Letter of Acceptance, Waiv-

er and Consent pursuant to which he

was censured and barred from asso-

ciation with any NASD member in

any capacity. Without admitting or

denying the allegations, Bailey con-

sented to the described sanctions

and to the entry of ﬁndings that he

failed to timely update his Form U-4

to reﬂect ﬁndings by the U.S. District

Court, Northern District of Florida,

that he had made a false statement

to the Department of Agriculture,

whose ﬁndings subjected him to

statutory disqualiﬁcation.

Avin E. Bakal (Registered Repre-

sentative, Brooklyn, New York)

was censured, ﬁned $25,000, and

barred from association with any

NASD member in any capacity. The

sanctions were based on ﬁndings

that Bakal failed to respond to NASD

requests for information concerning a

customer complaint.

Donald J. Berg (Registered Repre-

sentative, Broomall, Pennsylvania)

was censured and barred from asso-

ciation with any NASD member in

NASD Notices to Members—Disciplinary Actions August 1998

537

any capacity. The sanctions were

based on ﬁndings that Berg made

unsuitable recommendations to pub-

lic customers and engaged in exces-

sive trading in their accounts, and

presented one customer a document

that purported to show that his secu-

rities account was worth substantially

less than it was actually worth in

order to deceive the customer. In

numerous instances involving sever-

al customers without the respective

customer’s knowledge or authoriza-

tion, Berg requested his member ﬁrm

to issue a check to the customer,

obtained possession of the check,

and either caused the check to be

deposited to the securities account of

another customer or converted the

funds to his own beneﬁt. In several

instances, Berg caused a check

payable to a customer by a third

party to be credited to the securities

account of another customer without

the knowledge or authorization of the

customer to whom the check was

payable. Moreover, Berg obtained

possession of blank checks issued to

a customer for writing checks against

her money market fund, wrote

checks payable to himself, and con-

verted the funds to his own beneﬁt.

Berg also failed to respond to NASD

requests for information.

Steven E. Blonde (Registered Prin-

cipal, Ft. Lauderdale, Florida) sub-

mitted a Letter of Acceptance,

Waiver and Consent pursuant to

which he was censured, ﬁned

$15,000, barred from association

with any NASD member in any

capacity, required to pay $38,000

plus interest in restitution to a public

customer, and also required to pay

restitution to another customer in

accordance with a previous settle-

ment agreement. Without admitting

or denying the allegations, Blonde

consented to the described sanctions

and to the entry of ﬁndings that he

sold securities to public customers

outside the scope of his regular

employment with his member ﬁrm

without giving prior notiﬁcation to his

member ﬁrm or receiving the ﬁrm’s

prior written approval.

Matthew L. Bloom (Registered

Representative, New York, New

York) submitted an Offer of Settle-

ment pursuant to which he was cen-

sured, suspended from association

with any NASD member in any

capacity for two years, and ordered

to requalify by exam prior to becom-

ing associated with any NASD mem-

ber. Without admitting or denying the

allegations, Bloom consented to the

described sanctions and to the entry

of ﬁndings that he failed to execute,

refused to accept, or aggressively

discouraged sell orders from public

customers and engaged in unautho-

rized trading in customer accounts.

The ﬁndings also stated that Bloom

made baseless and improper price

predictions pertaining to highly spec-

ulative securities and falsely

promised to limit a customer’s poten-

tial loss. Furthermore, Bloom

promised to make up prior losses

with new trading.

Kenneth Alan Brown (Registered

Representative, Murrysville, Penn-

sylvania) submitted an Offer of Set-

tlement pursuant to which he was

censured, ﬁned $2,500, and sus-

pended from association with any

NASD member in any capacity for six

months. Without admitting or denying

the allegations, Brown consented to

the described sanctions and to the

entry of ﬁndings that he failed to

respond to NASD requests for infor-

mation.

Eric D. Brumagin (Registered Rep-

resentative, Winston-Salem, North

Carolina) submitted a Letter of

Acceptance, Waiver and Consent

pursuant to which he was censured,

ﬁned $25,000, suspended from asso-

ciation with any NASD member in

any capacity for two years, ordered

to disgorge $37,138 in commissions

to public customers, and required to

requalify as a general securities rep-

resentative by taking and passing the

Series 7 exam. Without admitting or

denying the allegations, Brumagin

consented to the described sanctions

and to the entry of ﬁndings that he

participated in private securities

transactions and failed to request or

receive permission to engage in

these transactions from his member

ﬁrm.

Samuel George Busada (Regis-

tered Principal, Saddle Brook,

New Jersey) submitted an Offer of

Settlement pursuant to which he was

censured, ﬁned $620,000, and

barred from association with any

NASD member in any capacity. With-

out admitting or denying the allega-

tions, Busada consented to the

described sanctions and to the entry

of ﬁndings that he misappropriated

customer funds totaling $123,853.83

for his own use. The ﬁndings also

stated that Busada aided in the

fraudulent assignment of a deceased

public customer’s partnership interest

and allowed a $1,500 check to be

deposited into his account even

though he knew it was an asset of

the customer’s estate.

Arthur A. Bykonen (Registered

Representative, Charlottesville,

Virginia) submitted a Letter of

Acceptance, Waiver and Consent

pursuant to which he was censured,

ﬁned $15,000, and suspended from

association with any NASD member

in any capacity for one month. With-

out admitting or denying the allega-

tions, Bykonen consented to the

described sanctions and to the entry

of ﬁndings that he established a joint

securities account in the name of a

public customer and the customer’s

son, signed the customers’ names on

the account form, initialed the form

with both their initials, falsely stated

the son’s birth date in order to con-

ceal the fact that the son was a

minor, and submitted the form with-

out disclosing either that the signa-

NASD Notices to Members—Disciplinary Actions August 1998

538

ture and initials of the son were not

authentic or that the date of birth was

false. The ﬁndings also stated that

Bykonen’s signature guaranteed

stock powers signed by the customer

with his own name and that of his

son while knowing that the purported

signatures of the son were not

authentic.

B. Alicia Campos (Associated Per-

son, Northbrook, Illinois) was cen-

sured, ﬁned $40,000, and barred

from association with any NASD

member in any capacity. The sanc-

tions were based on ﬁndings that a

member ﬁrm acting through Campos

effected transactions in securities

when it failed to maintain its mini-

mum required net capital, prepared

inaccurate trial balances and net

capital computations, and ﬁled inac-

curate FOCUS Part I and IIA reports.

In addition, Campos was associated

with a member ﬁrm while failing to

qualify and/or register in the appropri-

ate capacity prior to engaging in such

capacity. Campos also failed to

respond fully to NASD requests for

information.

John Melvin Davis (Registered

Representative, Bellwood, Illinois)

submitted a Letter of Acceptance,

Waiver and Consent pursuant to

which he was censured and sus-

pended from association with any

NASD member in any capacity for

two years. Without admitting or deny-

ing the allegations, Davis consented

to the described sanctions and to the

entry of ﬁndings that he participated

in private securities transactions and

failed to give prior written notice or

receive approval from his member

ﬁrm of his intention to engage in such

activities.

Glenn Mitchell Dobbs (Registered

Principal, Chelan, Washington)

submitted a Letter of Acceptance,

Waiver and Consent pursuant to

which he was censured, ﬁned

$42,700, and suspended from asso-

ciation with any NASD member in

any capacity for 18 months. Without

admitting or denying the allegations,

Dobbs consented to the described

sanctions and to the entry of ﬁndings

that he participated in private securi-

ties transactions and failed to provide

prior written notice to his member

ﬁrm describing in detail the proposed

transactions and his proposed role

therein, and stating whether he

would receive selling compensation

in connection with the transactions.

Debbie Ann Fairley (Registered

Representative, Jackson, Missis-

sippi) submitted a Letter of Accep-

tance, Waiver and Consent pursuant

to which she was censured and

barred from association with any

NASD member in any capacity. With-

out admitting or denying the allega-

tions, Fairley consented to the

described sanctions and to the entry

of ﬁndings that she established a

credit card account by using the

name and social security number of

a co-worker’s spouse, and charged

approximately $14,000 to the credit

card for her own beneﬁt without the

co-worker’s knowledge or consent.

Michael J. Falco (Registered Rep-

resentative, Marshﬁeld, Mas-

sachusetts) was censured, ﬁned

$6,000, suspended from association

with any NASD member in any

capacity for six months, and required

to requalify by exam as an invest-

ment company and variable con-

tracts products representative. The

sanctions were based on ﬁndings

that Falco forged a public customer’s

signature on an insurance document

without the customer’s knowledge or

consent. Falco also failed to respond

to NASD requests for information.

Raymond Andrew Frias (Regis-

tered Representative, Merrick,

New York) submitted an Offer of

Settlement pursuant to which he was

censured, ﬁned $10,000, and sus-

pended from association with any

NASD member in any capacity for 10

days. Without admitting or denying

the allegations, Frias consented to

the described sanctions and to the

entry of ﬁndings that he executed

securities transactions in the account

of a public customer without the cus-

tomer’s knowledge, authorization, or

consent.

Darren Ginas (Registered Princi-

pal, Medford, New York) submitted

an Offer of Settlement pursuant to

which he was censured, suspended

from association with any NASD

member in any capacity for four

months, required to requalify by

exam as a general securities repre-

sentative, and required to pay

$70,735 in restitution to public cus-

tomers. Without admitting or denying

the allegations, Ginas consented to

the described sanctions and to the

entry of ﬁndings that he made materi-

al misrepresentations, omitted mate-

rial information, and made fraudulent

price predictions in the offer and sale

of securities.

Donald Cletus Girard (Registered

Principal, Federal Way, Washing-

ton) submitted a Letter of Accep-

tance, Waiver and Consent pursuant

to which he was censured, ﬁned

$30,000, and barred from association

with any NASD member in any

capacity. Without admitting or deny-

ing the allegations, Girard consented

to the described sanctions and to the

entry of ﬁndings that he participated

in private securities transactions and

failed to provide prior written notice to

his member ﬁrm, describing in detail

the proposed transactions, his pro-

posed role therein, and stating

whether he had received or might

receive selling compensation.

Robert Walter Gleiche (Registered

Principal, Timonium, Maryland)

submitted a Letter of Acceptance,

Waiver and Consent pursuant to

which he was censured, ﬁned

$37,500, suspended from associa-

NASD Notices to Members—Disciplinary Actions August 1998

539

tion with any NASD member in any

capacity for 10 business days, and

required to requalify by exam as a

general securities representative.

Without admitting or denying the alle-

gations, Gleiche consented to the

described sanctions and to the entry

of ﬁndings that, on numerous occa-

sions, he purchased shares of stock

that traded at a premium in the

immediate aftermarket, in contraven-

tion of the Board of Governors’ Inter-

pretation on Free-Riding and

Withholding. The ﬁndings also stated

that Gleiche failed to give written

notice to his member ﬁrm that he

opened accounts with other ﬁrms,

and failed to provide written notiﬁca-

tion to the executing ﬁrms of his

association with the member ﬁrm.

Eliezer Gurfel (Registered Repre-

sentative, San Mateo, California)

was censured and barred from asso-

ciation with any NASD member in

any capacity. The National Adjudica-

tory Council (NAC) afﬁrmed the

sanctions following appeal of a

Washington D.C. District Business

Conduct Committee decision. The

sanctions were based on ﬁndings

that Gurfel forged the endorsement

of the president of his member ﬁrm

on checks, negotiated each check,

and converted the proceeds to his

own use and beneﬁt.

Gurfel has appealed this action to the

SEC and the sanctions, other than

the bar, are not in effect pending con-

sideration of the appeal.

Henry A. Hale (Registered Princi-

pal, Marietta, Georgia) was cen-

sured, ﬁned $10,000 and suspended

from association with any NASD

member in any principal or supervi-

sory capacity for 10 business days.

The sanctions were based on ﬁnd-

ings that Hale failed to supervise rea-

sonably the sales activities of an

individual in order to prevent and/or

detect the unsuitable trading that

occurred in the account of a public

customer.

Mark Arthur Hanna (Registered

Representative, Manhasset, New

York) submitted an Offer of Settle-

ment pursuant to which he was cen-

sured, ﬁned $20,000, and barred

from association with any NASD

member in any capacity. Without

admitting or denying the allegations,

Hanna consented to the described

sanctions and to the entry of ﬁndings

that he failed to respond completely

to NASD requests for information.

Akiko L. Hasegawa (Registered

Representative, Westminster, Cali-

fornia) was censured, ﬁned $82,500,

and barred from association with any

NASD member in any capacity. The

sanctions were based on ﬁndings

that Hasegawa converted public cus-

tomers’ funds totaling $16,500.

Speciﬁcally, Hasegawa received per-

sonal checks from the customers for

investment purposes. Instead of

making the investments, Hasegawa

deposited the checks in a bank

account controlled by her, gave false

conﬁrmation statements indicating

that the money had been invested,

and used the funds for personal

expenses. Hasegawa made no effort

to make restitution until her ﬁrm dis-

covered the conversion of a public

customer’s funds, and then, did not

disclose the conversion of other cus-

tomers’ funds.

Frederick B. Hornick, Jr. (Regis-

tered Principal, Englewood, Col-

orado) submitted a Letter of

Acceptance, Waiver and Consent

pursuant to which he was censured,

ﬁned $30,000, and barred from asso-

ciation with any NASD member in

any capacity. Without admitting or

denying the allegations, Hornick con-

sented to the described sanctions

and to the entry of ﬁndings that he

participated in private securities

transactions without giving his mem-

ber ﬁrm prior written notice of his

activities. Hornick also failed to

respond to NASD requests for infor-

mation.

Dale Fuller Jackson (Registered

Principal, Wall, New Jersey) sub-

mitted an Offer of Settlement pur-

suant to which he was censured,

ﬁned $15,000, and suspended from

association with any NASD member

in any capacity for six months. With-

out admitting or denying the allega-

tions, Jackson consented to the

described sanctions and to the entry

of ﬁndings that he recommended and

effected purchases of limited partner-

ship units and/or shares by public

customers without having a reason-

able basis for believing the recom-

mendations were suitable for these

customers in light of their investment

objectives, ﬁnancial situations, and

needs. The ﬁndings also stated that

Jackson participated in private secu-

rities transactions without prior writ-

ten notice to and acknowledgment

from his member ﬁrm. According to

the ﬁndings, Jackson breached his

ﬁduciary duty with a public customer

by behaving in a manipulative,

deceptive, and intimidating manner

during settlement discussions with

the customer which was heightened

by his superior knowledge of the

securities industry and the cus-

tomer’s relative lack of knowledge,

her age, and her reliance on and

trust in Jackson.

Paul George Karkenny (Registered

Representative, Amityville, New

York) submitted a Letter of Accep-

tance, Waiver and Consent pursuant

to which he was censured, ﬁned

$283,008.13, and barred from asso-

ciation with any NASD member in

any capacity. Without admitting or

denying the allegations, Karkenny

consented to the described sanctions

and to the entry of ﬁndings that he

had an impostor take the Series 7

exam on his behalf. The ﬁndings also

stated that Karkenny solicited an

aftermarket purchase for shares of

stock from a public customer prior to

the effective registration date of the

security by the SEC and failed to fol-

low the customer’s instructions

regarding the purchase. Karkenny

NASD Notices to Members—Disciplinary Actions August 1998

540

also executed securities transactions

in the account of public customers

without the customers’ prior knowl-

edge, authorization, or consent.

Reynold Bradford Kern (Registered

Representative, Scottsdale, Ari-

zona) was censured, ﬁned $5,000,

and suspended from association with

any NASD member in any capacity

for 10 business days. The sanctions

were based on ﬁndings that Kern par-

ticipated in private securities transac-

tions without providing prior written

notiﬁcation to his member ﬁrm.

Alan M. Kletchka (Registered Rep-

resentative, Port Jefferson, New

York) submitted a Letter of Accep-

tance, Waiver and Consent pursuant

to which he was censured, ﬁned

$50,000, barred from association

with any NASD member in any

capacity, and ordered to pay

$327,180 in restitution to public cus-

tomers. Without admitting or denying

the allegations, Kletchka consented

to the described sanctions and to the

entry of ﬁndings that he made mate-

rial misrepresentations and omitted

to disclose material facts in connec-

tion with his recommendations of

securities to public customers. The

ﬁndings also stated that in connec-

tion with his recommendations of

securities to public customers,

Kletchka made fraudulent price pre-

dictions.

Paul Kevin Knutson (Registered

Representative, Carmichael, Cali-

fornia) submitted an Offer of Settle-

ment pursuant to which he is

censured, ﬁned $1,500, and barred

from association with any NASD

member in any capacity. Without

admitting or denying the allegations,

Knutson consented to the described

sanctions and to the entry of ﬁndings

that he submitted a Form U-4 to a

member ﬁrm that failed to disclose

that he had been convicted of a

felony.

Joseph Oscar Mader (Registered

Representative, Lewiston, Idaho)

was censured, ﬁned $10,000, sus-

pended from association with any

NASD member in any capacity for

two years, and required to requalify

as a general securities representa-

tive following the completion of the

suspension. The sanctions were

based on ﬁndings that Mader failed

to respond fully to NASD requests for

information.

Joseph Paul Malyszek (Registered

Representative, Clarks Summit,

Pennsylvania) submitted a Letter of

Acceptance, Waiver and Consent

pursuant to which he was censured,

ﬁned $3,000,000, and barred from

association with any NASD member

in any capacity. Without admitting or

denying the allegations, Malyszek

consented to the described sanctions

and to the entry of ﬁndings that he

received approximately $600,000

from public customers intended for

investment purposes, failed to invest

the funds as represented, and

instead, converted the funds to his

own use and beneﬁt without the cus-

tomers’ knowledge or consent.

Michael McCormick (Registered

Representative, Bethel, Connecti-

cut) was censured, ﬁned $125,000,

and barred from association with any

NASD member in any capacity. The

sanctions were based on ﬁndings

that McCormick withheld and misap-

propriated at least $23,052.35 from

public customers and converted the

funds to his own use and beneﬁt.

McCormick also failed to respond to

NASD requests for information.

Paul Joseph Montessoro (Regis-

tered Representative, Boerne,

Texas) was censured, ﬁned

$20,000, and barred from associa-

tion with any NASD member in any

capacity. The sanctions were based

on ﬁndings that Montessoro failed to

respond to NASD requests for infor-

mation and to provide testimony.

William John Mooney (Registered

Principal, Bayside, New York) was

censured, ﬁned $20,000 and sus-

pended from association with any

NASD member in any capacity for

two years. The sanctions were

based on ﬁndings that Mooney failed

to timely respond to NASD requests

for information.

James M. Ortiz (Associated Per-

son, Chicago, Illinois) was cen-

sured, ﬁned $20,000, and barred

from association with any NASD

member in any capacity. The sanc-

tions were based on ﬁndings that

Ortiz failed to respond to NASD

requests for information.

Rafael Pinchas (Registered Repre-

sentative, Hillcrest, New York) was

censured, ﬁned $219,821, and barred

from association with any NASD

member in any capacity. The NAC

imposed the sanctions following

appeal of a New York District Busi-

ness Conduct Committee (DBCC)

decision. The sanctions were based

on ﬁndings that Pinchas made recom-

mendations to and effected securities

and options transactions in public cus-

tomers’ accounts including margin

transactions that were excessive and

unsuitable without having reasonable

grounds to believe that the transac-

tions were appropriate for the cus-

tomers in light of their investment

objectives, other security holdings,

and ﬁnancial situation and needs. In

addition, Pinchas engaged in a

scheme to misappropriate funds from

the same customer’s account by giv-

ing his member ﬁrm a letter of autho-

rization purportedly signed by the

customer authorizing the transfer of

$6,000 to the account of another cus-

tomer. The funds were subsequently

given to Pinchas without the cus-

tomer’s authorization.

This action has been appealed to the

SEC and the sanctions, other than

the bar, are not in effect pending

consideration of the appeal.

NASD Notices to Members—Disciplinary Actions August 1998

541

Mark A. Reilly (Associated Person,

Doylestown, Pennsylvania) was

censured, ﬁned $20,000, and barred

from association with any NASD

member in any capacity. The sanc-

tions were based on ﬁndings that

Reilly failed to respond to NASD

requests for information.

Reaynaden Denina Relatores

(Registered Representative, Hunt-

ington Beach, California) submitted

an Offer of Settlement pursuant to

which she was censured, and sus-

pended from association with any

NASD member in any capacity for

ﬁve years, and ordered to requalify

by exam in all capacities. The sanc-

tions were based on ﬁndings that

Relatores participated in private

securities transactions without pro-

viding prior written notiﬁcation to her

member ﬁrm and without receiving

prior written approval from her ﬁrm.

Robert Rondinella (Registered

Representative, Brooklyn, New

York) was censured, ﬁned $20,000,

and barred from association with any

NASD member in any capacity. The

sanctions were based on ﬁndings

that Rondinella failed to respond to

NASD requests for information and

to appear for an on-the-record inter-

view.

Joseph Russo III (Registered Rep-

resentative, Staten Island, New

York) submitted a Letter of Accep-

tance, Waiver and Consent pursuant

to which he was censured, ﬁned

$50,000, barred from association

with any NASD member in any

capacity, and ordered to disgorge

$202,990.97 to the NASD. Without

admitting or denying the allegations,

Russo consented to the described

sanctions and to the entry of ﬁndings

that he arranged to have an impostor

take the Series 7 exam on his behalf.

Russo also failed to respond truthful-

ly to the NASD during an on-the-

record interview.

Benito Sauceda (Registered Prin-

cipal, Denver, Colorado) and

Glenn Pellone (Registered Repre-

sentative, Denver, Colorado) sub-

mitted a Letter of Acceptance,

Waiver and Consent pursuant to

which Sauceda was censured, ﬁned

$15,000, suspended from associa-

tion with any NASD member in any

capacity for 15 business days, sus-

pended from association with any

NASD member in any principal

capacity for an additional 15 busi-

ness days, and required to requalify

as a registered principal by passing

the Series 24 exam. Pellone was

censured, ﬁned $2,500, suspended

from association with any NASD

member in any capacity for 30 busi-

ness days, and required to requalify

as a registered representative by

passing the Series 7 exam. In addi-

tion, Pellone was required to make

recision or restitution to public cus-

tomers of stock purchases, jointly

and severally, with a member ﬁrm.

Without admitting or denying the alle-

gations, the respondents consented

to the described sanctions and to the

entry of ﬁndings that Pellone solicited

public customers and made recom-

mendations to purchase securities

without having reasonable grounds

for believing that his recommenda-

tions were suitable for the customers

based upon the facts disclosed by

the customers as to their other secu-

rity holdings, their ﬁnancial situation,

and needs. The ﬁndings also stated

that Sauceda failed to supervise Pel-

lone’s activities properly by allowing

him to make unsuitable recommen-

dations and to effect unsuitable

securities transactions. Furthermore,

the NASD determined that Sauceda

prepared new account forms, order

tickets, and conﬁrmations of sale that

falsely reﬂected that he was the rep-

resentative of record handling cus-

tomers’ accounts when, in reality, he

had had no prior contact with the

customers and it was Pellone who

was actually the representative of

record for such accounts.

Anthony Dennis Schiano (Regis-

tered Representative, Franklin

Square, New York) was censured,

ﬁned $7,500, suspended from asso-

ciation with any NASD member in

any capacity for 30 days, and

required to requalify in all capacities

prior to functioning again in any

capacity that requires requaliﬁcation.

The sanctions were based on ﬁnd-

ings that Schiano failed to comply

with Regulation T of the Federal

Reserve Board in that he purchased

shares of stock in his own cash

account at his member ﬁrm when he

knew or should have known that he

did not have sufﬁcient funds in his

account to pay for the purchase.

Moreover, Schiano never had the

intent to make full cash payment for

the stocks in a prompt fashion or oth-

erwise before selling them. In addi-

tion, Schiano wrote purchase order

tickets and entered orders via com-

puter or telephone for his personal

securities account at a time when he

knew he was not qualiﬁed to do so.

Larry R. Schlappi (Registered

Representative, Orem, Utah) sub-

mitted a Letter of Acceptance, Waiv-

er and Consent pursuant to which he

was censured, ﬁned $12,000, and

suspended from association with any

NASD member in any capacity for 15

business days. Without admitting or

denying the allegations, Schlappi

consented to the described sanctions

and to the entry of ﬁndings that he

participated in private securities

transactions without giving his mem-

ber ﬁrm prior written notice of his

activities and his role therein.

Aleksandr Shvarts (Registered

Principal, Brooklyn, New York)

submitted an Offer of Settlement pur-

suant to which he was censured,

ﬁned $25,000, suspended from

association with any NASD member

in any capacity for 10 business days,

and suspended from association with

any NASD member in any principal

capacity for 30 business days. In

NASD Notices to Members—Disciplinary Actions August 1998

542

addition, Shvarts must requalify by

exam as a general securities princi-

pal and will be suspended until he

requaliﬁes. Without admitting or

denying the allegations, Shvarts con-

sented to the described sanctions

and to the entry of ﬁndings that he

failed to timely execute customers

orders to sell stock on either a princi-

pal or agency basis.

Josh I. Sisler (Registered Repre-

sentative, Rocky Point, New York)

submitted a Letter of Acceptance,

Waiver and Consent pursuant to

which he was censured, ﬁned

$18,850, suspended from associa-

tion with any NASD member in any

capacity for 18 months, and required

to pay $33,148 in restitution to public

customers. Without admitting or

denying the allegations, Sisler con-

sented to the described sanctions

and to the entry of ﬁndings that, in

connection with the solicitation of

securities transactions, he made

material misrepresentations and

omitted to disclose material informa-

tion concerning securities to public

customers.

Lawrence Todd Smith (Registered

Representative, Jericho, New

York) submitted an Offer of Settle-

ment pursuant to which he was cen-

sured, ﬁned $20,000, suspended

from association with any NASD

member in any capacity for two

years, and required to requalify by

exam prior to becoming associated

with any NASD member ﬁrm. With-

out admitting or denying the allega-

tions, Smith consented to the

described sanctions and to the entry

of ﬁndings that he made unautho-

rized trades in the account of a public

customer and made baseless and

improper price predictions as to

speculative securities to customers.

The ﬁndings also stated that Smith

falsely promised to limit customer

losses, induced a customer to pur-

chase an unsuitably risky security,

and falsely told the customer that the

security was not risky. Furthermore,

the NASD determined that Smith

failed to execute a customer sell

order, made false representations to

a customer as to an issuer’s busi-

ness prospects, and falsiﬁed the new

account documentation of a cus-

tomer to create the appearance that

the customer could and wanted to

invest in speculative securities. Smith

also failed to testify truthfully to the

NASD regarding its investigation of

the matter.

Steven Edward Smith (Registered

Representative, Bakersﬁeld, Cali-

fornia) submitted an Offer of Settle-

ment pursuant to which he was

censured, ﬁned $10,000, barred from

association with any NASD member

in any capacity, and required to pay

$45,000 in restitution to a member

ﬁrm. Without admitting or denying

the allegations, Smith consented to

the described sanctions and to the

entry of ﬁndings that he participated

in private securities transactions

without providing prior written notice

to his member ﬁrm. The ﬁndings also

stated that in order to induce public

customers to invest in stock, Smith

made untrue statements of material

facts and omitted to state material

facts necessary in order to make the

statement not misleading.

Kevin Lee Spencer (Registered

Principal, Castle Rock, Colorado)

submitted a Letter of Acceptance,

Waiver and Consent pursuant to

which he was censured, ﬁned

$20,000, and suspended from asso-

ciation with any NASD member in

any principal capacity for three

months. Without admitting or denying

the allegations, Spencer consented

to the described sanctions and to the

entry of ﬁndings that he participated

in a private placement offering sub-

ject to a minimum sales contingency

and failed to deposit investor funds

into an escrow account. The ﬁndings

also stated that Spencer failed to

return funds to investors when terms

of the contingency were not met and

failed to supervise an individual prop-

erly.

Darryl Leon Strom (Registered

Representative, Mill Creek, Wash-

ington) and Irvin Nels Strom (Reg-

istered Representative, Auburn,

Washington) submitted Offers of

Settlement pursuant to which Darryl

Strom was censured, ﬁned $69,994,

and barred from association with any

NASD member in any capacity; Irvin

Strom was censured, ﬁned $45,489,

and barred from association with any

NASD member in any capacity.

Without admitting or denying the alle-

gations, the respondents consented

to the described sanctions and to the

entry of ﬁndings that they participat-

ed in private securities transactions

and failed to provide their member

ﬁrm prior written notice describing in

detail the proposed transactions and

their roles therein, and stating

whether they would receive selling

compensation in connection with the

transactions. The ﬁndings also stated

that Darryl Strom failed to respond to

an NASD request for information.

Chichiang Tang (Registered Rep-

resentative, Hollywood, Florida)

was censured, ﬁned $20,000, and

barred from association with any

NASD member in any capacity. The

sanctions were based on ﬁndings

that Tang attempted to share in a

customer account. Tang also failed

to respond to NASD requests for

information.

Wyder L. Tutiven (Registered Rep-

resentative, Patchogue, New York)

was censured, ﬁned $75,000, barred

from association with any NASD

member in any capacity, and

ordered to pay $102,322.57 in resti-

tution to public customers. The sanc-

tions were based on ﬁndings that, in

soliciting customers to purchase

securities, Tutiven misrepresented

and failed to disclose material facts

concerning securities and fraudulent-

NASD Notices to Members—Disciplinary Actions August 1998

543

ly predicted signiﬁcant price increas-

es for securities to induce public cus-

tomers to purchase them. Tutiven

also effected an unauthorized trade

in a customer’s account and failed to

follow the customer’s instructions to

sell stock.

Emilio Fernando Valdes (Regis-

tered Representative, Holmdel,

New Jersey) submitted an Offer of

Settlement pursuant to which he was

censured, ﬁned $20,000, and sus-

pended from association with any

NASD member in any capacity for

two years. Without admitting or deny-

ing the allegations, Valdes consent-

ed to the described sanctions and to

the entry of ﬁndings that he falsiﬁed

records by signing transfer authoriza-

tion forms causing the transfer of

funds between public customers’

accounts in order to win a sales con-

test sponsored by his member ﬁrm.

The ﬁndings also stated that Valdes

failed to respond fully to NASD

requests for information.

Ronald L. Wallen (Registered Prin-

cipal, Farmington, Michigan) sub-

mitted a Letter of Acceptance,

Waiver and Consent pursuant to

which he was censured, ﬁned

$500,000, and barred from associa-

tion with any NASD member in any

capacity. Without admitting or deny-

ing the allegations, Wallen consent-

ed to the described sanctions and to

the entry of ﬁndings that he obtained

a total of $201,673.85 from public

customers with instructions to use

the funds to purchase mutual funds

and high interest mortgage loans.

The ﬁndings stated that Wallen failed

to follow the customers’ instructions

and used the funds for investments

in other companies, to pay his ﬁrm’s

ofﬁce expenses, to pay himself, and

for purposes other than the beneﬁt of

the customers. Wallen also failed to

respond fully to NASD requests for

information.

Weese Roosevelt Alex Watson

(Registered Representative, King-

wood, Texas) was censured, ﬁned

$20,000, and barred from associa-

tion with any NASD member in any

capacity. The sanctions were based

on ﬁndings that Watson failed to

respond to NASD requests for infor-

mation.

Edward Lee Willis Sr. (Registered

Principal, Southhampton, New

Jersey) submitted a Letter of Accep-

tance, Waiver and Consent pursuant

to which he was censured, ﬁned

$300,000, barred from association

with any NASD member in any

capacity, and ordered to pay

$143,500 in restitution to public cus-

tomers. Without admitting or denying

the allegations, Willis consented to

the described sanctions and to the

entry of ﬁndings that he received

checks totaling $143,500 from public

customers for the purpose of pur-

chasing franchises. The NASD

determined that Willis never complet-

ed the purchases, and instead, con-

verted the funds to his own use and

beneﬁt without the customers’ knowl-

edge or consent.

Michael Lee Yancey (Registered

Representative, Lake Park, Geor-

gia) was censured, ﬁned $1,000,

suspended from association with any

NASD member in any capacity for

six months, and further suspended

until he requaliﬁes by exam as an

investment company and variable

contracts product representative.

The NAC imposed the sanctions fol-

lowing appeal of an Atlanta DBCC

decision. The sanctions were based

on ﬁndings that Yancey received

$100 from a public customer in part

to pay premiums due on insurance

policies and to apply to an outstand-

ing loan. Yancey deposited $80 of

those funds in his personal checking

account.

Individuals Fined

Dale Buddington Dir (Registered

Representative, Visalia, California)

submitted a Letter of Acceptance,

Waiver and Consent pursuant to

which he was censured and ﬁned

$21,500. Without admitting or deny-

ing the allegations, Dir consented to

the described sanctions and to the

entry of ﬁndings that he opened a

securities account at a member ﬁrm

and failed to provide written notice to

the ﬁrm of his registration status and

failed to provide written notice to his

employer member ﬁrm that he had a

beneﬁcial interest in this securities

account at the time he opened the

account. The ﬁndings also stated

that Dir purchased shares of stock

that traded at a premium in the

immediate aftermarket in contraven-

tion of the Board of Governors Free-

riding and Withholding Interpretation.

Decisions Issued

The following decisions have been

issued by the DBCC or the Ofﬁce of

Hearing Ofﬁcers and have been

appealed to or called for review by

the NAC as of June 30, 1998. The

ﬁndings and sanctions imposed in

the decision may be increased,

decreased, modiﬁed, or reversed by

the NAC. Initial decisions whose time

for appeal has not yet expired will be

reported in the next

Notice to Mem-

bers

Edward Golick (Registered Princi-

pal, Del Mar, California) was cen-

sured, ﬁned $20,000 and barred

from association with any NASD

member in any capacity. The sanc-

tions were based on ﬁndings that

Golick failed to respond to NASD

requests to appear for an on-the-

record interview.

Golick has appealed this action to

the NAC and the sanctions are not in

effect pending consideration of the

appeal.

NASD Notices to Members—Disciplinary Actions August 1998

544

Complaints Filed

The following complaints were

issued by the NASD. Issuance of a

disciplinary complaint represents the

initiation of a formal proceeding by

the NASD in which ﬁndings as to the

allegations in the complaint have not

been made, and does not represent

a decision as to any of the allega-

tions contained in the complaint.

Because these complaints are unad-

judicated, you may wish to contact

the respondents before drawing any

conclusions regarding the allegations

in the complaint.

Stanley Alan Anderson, Jr. (Regis-

tered Representative, Cartersville,

Georgia) was named as a respon-

dent in an NASD complaint alleging

that he received a proceeds check

from the redemption of a public cus-

tomer’s savings bonds in the amount

of $8,732.04 and converted

$5,709.00 of the funds to his own

use and beneﬁt. The complaint

alleges that Anderson withdrew

$2,029.66 from the customer’s sav-

ings account, sold the customer’s

securities for $34,219.71, and used

the funds and proceeds totaling

$36,249.37 to purchase shares of a

government fund, all without the cus-

tomer’s knowledge or authorization.

The complaint also alleges that

Anderson effected unauthorized

sales totaling $15,224.61, made mis-

representations that the redemption

checks were sent in error and that

the funds were intended to be invest-

ed in another fund, asked the cus-

tomer to endorse the checks, or

forged the customer’s endorsement

in one instance, and converted the

total amount by depositing it in his

bank account. Additionally, the com-

plaint alleges that Anderson

redeemed the customer’s Certiﬁcate

of Deposit without her knowledge or

authorization, forged the customer’s

endorsement on $94,332.14 pro-

ceeds checks, of which $48,983.14

he converted by cashing or deposit-

ing at his bank. Furthermore, the

complaint alleges that Anderson

falsely stated to the customer that he

was going to invest $82,516.72 of

the customer’s funds, falsely repre-

sented himself in a telephone con-

versation with the customer as a

ﬁctitious representative of a ﬁrm in an

attempt to discover what the cus-

tomer had told the compliance

department of the ﬁrm, and falsely

told the customer and the compli-

ance department of the ﬁrm that he

had invested the customer’s funds

with a ﬁctitious representative of

another ﬁrm. The complaint also

alleges that Anderson failed to

respond to NASD requests for infor-

mation.

Mark S. Balbirer (Registered Rep-

resentative, Sunrise, Florida) was

named as a respondent in an NASD

complaint alleging that he effected

securities transactions in the account

of a public customer without the cus-

tomer’s prior knowledge or authoriza-

tion.

Biltmore Securities, Inc., (n/k/a

Midas Investment Group, Inc., Fort

Lauderdale, Florida), Elliott Akiva

Loewenstern, (Registered Princi-

pal, Boca Raton, Florida) and

Richard Bruce Bronson (Regis-

tered Principal, Golden Beach,

Florida) were named as respon-

dents in an NASD complaint alleging

that Biltmore Securities, Inc., acting

through Loewenstern and Bronson,

recommended and sold to public

customers units of an initial public

offering and failed to disclose to the

customers during the review period

of the offering material facts that

should have been disclosed by the

ﬁrm to its customers, including the

fact that the respondents had an

adverse interest in the offering.

Arthur E. Cohen (Registered Rep-

resentative, Pittsburgh, Pennsyl-

vania) was named as a respondent

in an NASD complaint alleging that

he requested that a check in the

amount of $15,000 be issued against

the securities account of a public

customer, physically obtained the

check, endorsed it with the purported

endorsement of the customer and

his own endorsement, and deposited

it in his own bank account, all without

the authorization of the customer.

The complaint also alleges that

Cohen caused $14,000 to be trans-

ferred from the securities account of

one public customer to the bank

account of another, without the prior

authorization or consent of the ﬁrst

customer.

Robert Vance Manuel English

(Registered Principal, San Diego,

California) was named as a respon-

dent in an NASD complaint alleging

that he received a check in the

amount of $20,571.69 from a public

customer to be used for investment

purposes and, without the cus-

tomer’s knowledge or consent, con-

verted the funds to his own use and

beneﬁt by depositing the check in his

ﬁrm’s general operating bank

account and writing checks on the

account payable to himself and cash.

The complaint also alleges that

English provided the customer with

fabricated statements to mislead the

customer into believing that her

funds had been safely invested and

were accumulating interest, when in

fact, no investments had been made

on the customer’s behalf and the

accumulating interest never existed.

The complaint also alleges that

English failed to respond to NASD

requests to provide information.

Raymond D. Eisenberg (Regis-

tered Representative, Bridgeton,

New Jersey) was named as a

respondent in an NASD complaint

alleging that he received $23,803.71

from public customers as payment of

insurance premiums, failed to submit

these funds on the customers’

behalf, and instead converted the

funds to his own use and beneﬁt,

without the customers’ knowledge or

NASD Notices to Members—Disciplinary Actions August 1998

545

consent. The complaint also alleges

that Eisenberg failed to respond to

NASD requests to provide informa-

tion.

Carl J. Hagmaier (Registered Rep-

resentative, San Luis Obisbo, Cali-

fornia) was named as a respondent

in an NASD complaint alleging that

he received $70,000 from public cus-

tomers for investment in mutual

funds and, instead of investing the

funds as instructed, deposited the

checks into a bank account and mis-

used the funds himself and/or permit-

ted others to misuse the funds. The

complaint alleges that in order to

conceal the misconduct, Hagmaier

prepared and sent a fabricated

account statement to a public cus-

tomer which falsely stated that her

funds had been invested in a cash

and stock fund as instructed. The

complaint also alleges that Hagmaier

sold a pension plan to a company to

provide retirement beneﬁts for its

employees, represented that the

periodic contributions to the plan by

the company would be placed in life

insurance policies, bonds, notes, and

money market funds, then misused

approximately $110,951.91 of the

plan’s funds for unrelated business

and personal expenses which did not

beneﬁt the plan. The complaint

alleges that Hagmaier sold life insur-

ance policies to public customers

and a general partnership, had

$160,000.00 worth of loans taken on

the value of the policies without the

knowledge or consent of the cus-

tomers or partnership, forged or

caused to be forged the signatures of

a customer and one of the general

partners, and deposited the funds in

an account. Neither the customers

nor the partnership received any

beneﬁt from the $160,000.00, which

was never repaid. The complaint

also alleges that Hagmaier failed to

produce documents requested by

the NASD.

John Vernon Hiers (Registered

Representative, Canyon Lake, Cal-

ifornia) was named as a respondent

in an NASD complaint alleging that

he received $7,500 from a public

customer for deposit in a new trading

account in the customer’s name and

authorization to execute in the cus-

tomer’s account a single day trade

involving shares of securities. Hiers

converted the funds to his own use

and beneﬁt by depositing the check

into his own securities account with-

out the customer’s knowledge or

consent. The complaint alleges that

Hiers dissipated all but $1,393.23 of

the customer’s funds through reck-

less and risky trading in the account.

The complaint also alleges that in

order to conceal the misconduct and

to lull the customer into believing that

a trading account existed in the cus-

tomer’s name, Hiers falsely repre-

sented to the customer that account

statements reﬂecting the trade that

the customer had authorized in his

account would be forthcoming,

when, contrary to these representa-

tions, no such statements were ever

provided to the customer because no

account was ever established in the

customer’s name.

Frank J. Hutton (Registered Rep-

resentative, Raymond, Mississip-

pi) was named as a respondent in

an NASD complaint alleging that he

effected securities transactions in the

joint account of public customers

without prior authorization from the

customers. The complaint alleges

that Hutton caused a check in the

amount of $29,972.71 to be issued

from the joint account, which repre-

sented the proceeds from the unau-

thorized transactions, and converted

the funds to his own use and beneﬁt

by forging the customers’ signatures

to the check and depositing the

check into a bank account under his

control. The complaint also alleges

that, in an effort to conceal the trans-

actions from the customers’ account,

Hutton prepared and mailed to the

customers a ﬁctitious account state-

ment that did not reﬂect the liquida-

tion of certain stock, nor his

withdrawal of funds in the amount of

$29,972.71. In addition, the com-

plaint alleges that Hutton effected

securities transactions totaling

$96,552.40 in a joint account of other

public customers, without their prior

written or oral authorization, and con-

verted these funds to his own use

and beneﬁt by forging the customers’

signatures on checks and maintain-

ing possession of the funds, without

the customers’ knowledge or con-

sent. Finally, the complaint alleges

that Hutton failed to respond to

NASD requests for information.

James Andrew Hyde (Registered

Principal, Niwot, Colorado) was

named as a respondent in an NASD

complaint alleging that he effected

the purchase of securities transac-

tions in the account of a public cus-

tomer without the prior authorization

of the customer. The complaint also

alleges that Hyde failed to respond to

NASD requests to provide informa-

tion.

Harold Lee Jenkins (Registered

Representative, Bronx, New York)

was named as a respondent in an

NASD complaint alleging that he

received tellers checks from public

customers for investment in mutual

funds and/or insurance products, and

instead of investing the funds on their

behalf, converted $30,171.61 of

those funds to his own use and ben-

eﬁt. The complaint also alleges that

Jenkins failed to appear for an on-

the-record interview requested by the

NASD.

Robert J. Kendzierski (Registered

Representative, Erie, Pennsylva-

nia) was named as a respondent in

an NASD complaint alleging that he

converted $6,000 in funds given to

him by a public customer. The com-

plaint alleges that Kendzierski

received checks from the customer

NASD Notices to Members—Disciplinary Actions August 1998

546

to deposit in the customer’s interest-

bearing insurance policy, altered

these checks by drawing a line

through the payee’s name and writ-

ing his name instead on the payee

line of the checks, endorsed the

checks in an attempt to conceal his

conversion and deposited them in his

personal bank account. The com-

plaint further alleges that in an

attempt to conceal his conversion,

Kendzierski backdated a repayment

check.

Keogler, Morgan & Co., Inc.

(Atlanta, Georgia), Craig R. Smith

(Registered Principal, Duluth,

Georgia), Chris S. Guerin (Regis-

tered Principal, Marietta, Georgia),

and Douglas A. Dyer (Registered

Representative, Chattanooga,

Tennessee) were named as respon-

dents in an NASD complaint alleging

that the ﬁrm, acting through Smith

and Dyer, effected principal purchas-

es of common stock from public cus-

tomers of the ﬁrm with excessive

mark-downs and at prices which

were not fair taking into consideration

all relevant circumstances. The

complaint also alleges that the ﬁrm,

acting through Smith, failed to report

trades Smith effected on behalf of

the ﬁrm, including a majority of the

trades at issue in the mark-downs,

failed to report trades within 90 sec-

onds of execution without employing

the requisite “.SLD” modiﬁer, incor-

rectly reported wholesale trades as

retail trades, and incorrectly reported

the price on trades. The complaint

alleges that Guerin failed to ade-

quately supervise Smith’s trading in

common stock and, as a result, failed

to detect that Smith and Dyer were

purchasing stock from public cus-

tomers subject to excessive mark-

downs. The complaint alleges that

Dyer effected securities transactions

in the accounts of his public cus-

tomers without the customers’ prior

knowledge or authorization.

Robert Joseph Kernweis (Regis-

tered Representative, Burbank,

California), Glenn Peter Kernweis

(Registered Representative, Deer-

ﬁeld Beach, Florida) and Greg

Steven Sklar (Registered Repre-

sentative, Los Angeles, California)

were named as respondents in an

NASD complaint alleging that Robert

Kernweis recommended purchase

and sale securities transactions to a

public customer without having rea-

sonable grounds for believing that

they were suitable for the customer

and the account in view of the size,

frequency and nature of the recom-

mended transactions and the facts

disclosed by the customer as to his

ﬁnancial situation, objectives, circum-

stances and needs. The complaint

alleges that the recommended

trades constituted unsuitably exces-

sive trading and that Robert Kern-

weis induced the transactions by

means of manipulative, deceptive or

other fraudulent devices or con-

trivances. The complaint also

alleges that Robert Kernweis, Glenn

Kernweis and Sklar conducted busi-

ness as a group under one invest-

ment executive number, and, as

members of the group, Glenn Kern-

weis and Sklar knew or should have

known that the recommendations

were unsuitable for the customer and

that the account was excessively

traded. The complaint alleges that

Glenn Kernweis and Sklar failed to

take appropriate action to prevent

the violative activity and that they

substantially beneﬁted from the viola-

tive trading activity as equal partici-

pants who shared commissions

equally from all activity of the group.

James Richard Mancuso (Regis-

tered Principal, Patchogue, New

York) was named as a respondent in

an NASD complaint alleging that he

made material misrepresentations to

public customers and failed to dis-

close material facts to the customers

in order to induce them to purchase

securities. The complaint alleges

that Mancuso made fraudulent price

predictions to public customers in

connection with his recommenda-

tions.

John Joseph Viscogliosi (Regis-

tered Representative, Chicago, Illi-

nois) was named as a respondent in

an NASD complaint alleging that he

executed discretion in the accounts

of public customers and purchased

securities without the knowledge or

consent of the customers.

Firm Expelled For Failure To

Pay Fines, Costs, And/Or

Provide Proof Of Restitution In

Connection With Violations

Murphey, Marseilles, Smith &

Nammack, Inc., New York, New

York (June 29, 1998)

Firms Suspended/Canceled

The following ﬁrms were suspended

from membership in the NASD for

failure to comply with formal written

requests to submit ﬁnancial informa-

tion to the NASD. The actions were

based on the provisions of NASD

Rule 8210 and Article VII, Section 2

of the NASD By-Laws. The date the

suspensions commenced is listed

after the entry. If the ﬁrm has com-

plied with the requests for informa-

tion, the listing also includes the date

the suspension concluded.

Carlisle Investment Group, Chica-

go, Illinois (June 29, 1998)

Duke & Co., Inc., New York, New

York (July 2, 1998)

TBD Capital Markets Trust, Miami,

Florida (July 2, 1998)

NASD Notices to Members—Disciplinary Actions August 1998

547

Firms Suspended Pursuant To

NASD Rule Series 9510 For

Failure To Pay Arbitration

Award

Euro-Atlantic Securities, Inc., Boca

Raton, Florida (June 26 , 1998)

Investors Associates, Inc., Hack-

ensack, New Jersey (July 14, 1998)

Jonathan Alan & Co., Inc., Katon-

ah, New York (June 29, 1998)

J.S. Securities, Inc., Point Pleasant

Beach, New Jersey (June 25, 1998)

Maidstone Financial, Inc., New

York, New York (June 26, 1998)

Marsh Block & Co., Inc., New York,

New York (July 14, 1998)

Printon, Kane Group, Inc., Wall

Township, New Jersey (June 29,

1998)

State Street Capital Markets Corp.,

New York, New York (July 15, 1998)

Individuals Whose

Registration Were Revoked

For Failure To Pay Fines,

Costs And/Or Provide Proof Of

Restitution In Connection With

Violations

Cooper, Theodore F., New

Scabury, Massachusetts (June 29,

1998)

Frederick, Douglas Glen, Miami,

Florida (July 16, 1998)

Roach, Donna R., Murrieta, Califor-

nia (June 29, 1998)

Shah, Ashvin, R., Elmhurst, Illinois

(June 29, 1998)

Wallace, Robert L., Naples, Florida

(June 29, 1998)

Winchester, James E., Metairie,

Louisiana (June 29, 1998)

Individuals Suspended

Pursuant To NASD Rule Series

9510 For Failure To Pay

Arbitration Award

Barnes, Milton R., Phoenix, Arizona

(June 26, 1998)

Basile, Jack Robert, Brooklyn, New

York (June 29, 1998)

Bent, Radcliff St. Aubyn, Colts

Neck, New Jersey (July 16, 1998 -

July 22, 1998)

Bronzino, Michael A., Princeton,

New Jersey (June 29, 1998)

Caso, Michael, Brooklyn, New York

(July 21, 1998)

Densing, Keith, Melville, New York

(June 29, 1998 - July 13, 1998)

Donovan, Gale R., New York, New

York (June 26, 1998)

Hosang, Ian, Brooklyn, New York

(June 26, 1998)

Klotsman, Eugene a/k/a Gennady

Ilya Klotsman, Brooklyn, New York

(July 21, 1998)

Kohlhass, Neal, Novato, California

(June 24, 1998)

Langer, Thomas Mark, Congers,

New York (July 16, 1998)

Mahon, Kevin Michael, Manalapan

New Jersey (July 14, 1998)

Mandile, Kenneth Alan, Staten

Island, New York (June 26, 1998 -

July 14, 1998)

McCartney, Peter Bernard, Middle

Village, New York (July 14, 1998)

McKay, Jr., Edward Arthur, New

York, New York (July 14, 1998)

Philip, Robert Colin, Baldwin, New

York (June 29, 1998)

Seymour, Patricia Ann, Sandy

Hook, Connecticut (June 29, 1998)

Sigfrid, Daniel, Champlin, Minneso-

ta (July 8, 1998)

Szur, Jeffrey S., Sea Bright, New

Jersey (June 25, 1998)

Van Blarcom, Jeffrey, Mahwah,

New Jersey (June 26, 1998)

Verola, Victor, Vero Beach, Florida

(July 20, 1998)

NASD Regulation Sanctions

Colorado Broker; Restitution

Ordered

NASD Regulation announced that it

barred Winston Carroll Dennis from

the securities industry and ﬁned him

$525,000 in connection with the theft

of $75,000 from a customer, and for

other violations. Dennis, who was

also censured, was ordered to make

full restitution to the customer.

NASD Regulation found that Dennis

twice forged the signature of his cus-

tomer on an insurance policy loan

application in September and Octo-

ber 1997. The insurance company

subsequently issued the funds –

which Dennis then converted to his

own use.

Following a referral by the Colorado

Division of Insurance, NASD Regula-

tion found that Dennis had borrowed

$735,000 from 12 customers by issu-

ing Promissory Notes to the

investors. NASD rules forbid brokers

from engaging in private securities

transactions – such as issuing these

types of Promissory Notes – without

ﬁrst notifying their employer.

NASD Regulation also found that in

April 1998, Dennis told one investor

that in order to collect a loan that had

come due, an additional $5,000 was

required. Dennis later converted

these funds to his own use as well.

NASD Notices to Members—Disciplinary Actions August 1998

548

Dennis also maintained personal

brokerage accounts at 10 different

brokerage ﬁrms and failed to dis-

close the existence of these

accounts in violation of NASD rules.

At the time of these violations, Den-

nis maintained an ofﬁce under the

name of “Dennis Insurance and

Investments” in Grand Junction, CO.

He had clients across the state’s

Western Slope, in Grand Junction,

Montrose, Austin, Naturita, Nucla,

Leadville, Clifton, and Eckert.

This case was brought by NASD

Regulation’s District 3 Ofﬁce in Den-

ver. Dennis neither admitted nor

denied NASD Regulation’s ﬁndings.

NASD Regulation Fines

Troster Singer For Intentional

Late Trade Reporting; Six Bro-

kers Also Sanctioned

NASD Regulation ﬁned Troster

Singer $950,000 and censured the

ﬁrm for fraud in connection with a

series of 28 intentional trade report-

ing violations. Six Troster Singer

employees were also sanctioned and

ﬁned a total of $100,000.

Troster Singer, which neither admitted

nor denied NASD Regulation’s ﬁnd-

ings, was sanctioned for intentionally

failing to report within 90 seconds

Nasdaq Stock Market trades – many

of which were made with large institu-

tional customers. This conduct

occurred between April and October

1994.

NASD rules require that every secu-

rity’s price – and the amount sold –

be promptly displayed to the market-

place so that all market participants

have equal access to the informa-

tion. Troster Singer deliberately

delayed reporting its trades in order

to gain a competitive advantage by

depriving other market participants of

information regarding purchases and

sales made by institutional and other

investors.

Deliberately delaying trade reporting

allows a brokerage ﬁrm to cover its

positions while at a signiﬁcant infor-

mational advantage over other mar-

ket participants. NASD Regulation

found that Troster Singer – knowing

of these large unreported trades

while the market did not – bought

and sold shares from other dealers

and customers in deceptive propri-

etary trading.

Troster Singer also was sanctioned

for unintentionally reporting 18 other

trades as late. When these 46 late

trades were eventually reported, they

were marked with an incorrect exe-

cution time, did not include the prop-

er late designation, or both. In total,

16 securities were involved. Troster

Singer’s intentional late trade report-

ing practices were evidenced in con-

versations taped by the ﬁrm.

NASD Regulation found that Troster

Singer’s traders directed the ﬁrm’s

institutional sales representatives

(who were assigned to speciﬁc insti-

tutional customers, and acted as

liaisons between the institutional cus-

tomers and the traders) to delay

trade reports, or to falsely document

that certain trades were stopped

orders. In a stopped order, a broker-

age ﬁrm agrees to execute the trade

at a speciﬁc, or better, price.

NASD Regulation also found that

while Troster Singer knew about and

cautioned its traders to stop these

late trade reporting practices, they

nevertheless continued. As part of its

agreement with NASD Regulation,

Troster Singer will hire an indepen-

dent consultant to review its trade

reporting practices.

Six Troster Singer employees were

sanctioned:

• Lowell Millar, trader, was ﬁned

$25,000, suspended in all capacities

for 25 days, and censured.

• Michael Ling, trader, was ﬁned

$25,000, suspended in all capacities

for 25 days, and censured.

• John Quigley, trader, was ﬁned

$20,000, and censured.

• Lisa Bozzi Albanese, institutional

sales representative, was ﬁned

$10,000, and censured.

• Charles Esposito, institutional sales

representative, was ﬁned $10,000,

and censured.

• Steve Cline, institutional sales rep-

resentative, was ﬁned $10,000, and

censured.

NASD Regulation thanked the SEC

for its substantial assistance in this

case.

Over the last few years, NASD Regu-

lation has developed and implement-

ed a series of initiatives to protect

investors and enhance compliance

with market rules. These include:

• Order Audit Trail System - The ﬁrst

phase of the Order Audit Trail Sys-

tem (OATS) will begin collecting

information on all electronic orders

received by market makers and

Electronic Communication Networks

(ECNs) on March 1, 1999. This sys-

tem will track orders from the time

they are entered until ﬁnal execution.

• Exam Program - Beginning in 1996,

NASD Regulation’s Market Regula-

tion Department initiated a compre-

hensive program to examine Nasdaq

Market Makers for compliance with

trading and reporting rules.

• Advanced Detection System - The

Advanced Detection System (ADS)

began operation in July 1997. Using

sophisticated data mining, artiﬁcial

intelligence, statistical analysis, and

visualization technologies, ADS

detects and evaluates patterns in

trading data to search for potential

violations of NASD trade reporting,

market integrity, and best execution

rules. ADS processes about 800,000

quotes every day.

• Hot Lines - NASD Regulation’s Mar-

ket Regulation Department instituted

toll-free hot lines for the reporting of

potential market harassment and

potential backing away violations.