Frank, I was told that you and John are big ski buddies, is this true?
By: Mr_Mike_Gold $$$$$
04 Nov 2002, 04:58 PM EST Msg. 53909 of 53911
WASHINGTON, Oct. 30 /PRNewswire/ -- NASD announced today that its National
Adjudicatory Council (NAC) affirmed an NASD Hearing Panel's decision that John
Fiero and Fiero Brothers, Inc. of New York, NY, violated NASD and federal
securities antifraud laws when they colluded to manipulate the market for
several small cap securities through a massive short-selling campaign. The
NAC also found that Mr. Fiero and Fiero Brothers violated NASD affirmative
determination requirements by executing numerous short sales without having
determined that they could borrow the securities or otherwise provide for
delivery. The NAC fined John Fiero and Fiero Brothers $1 million, barred Mr.
Fiero in all capacities, and expelled Fiero Brothers from membership.
The NAC determined that John Fiero and Fiero Brothers participated in a
"bear raid," a coordinated, manipulative action in which short selling is used
to drive down the price of a security by creating a false imbalance of sell-
side interest. Fiero and Fiero Brothers engaged in a manipulation and
deception that "violated public trust and jeopardized market integrity,"
according to the decision.
Specifically, John Fiero and the firm intentionally drove down the prices
of several small cap securities by amassing sizeable short positions in those
securities with the aim of demonstrating a large demand to sell the
securities. The underwriter of the manipulated securities, who held large
proprietary positions in the securities, was coerced to sell Fiero Brothers
blocks of the manipulated securities at deeply discounted prices. Mr. Fiero
used the discounted securities to cover the firm's short positions at a
sizeable profit and sold the remaining securities to other short sellers to
cover their short positions, thereby generating significant profits for them
and additional profits for Fiero Brothers.
The NAC also found that Fiero Brothers, after covering its short
positions, commenced a second wave of illegal short selling in the same
securities that eventually drove Hanover Sterling & Co., Inc., the underwriter
of the securities, out of business and led to the bankruptcy of its clearing
firm, Adler Coleman Clearing Corp.
A key aspect of Mr. Fiero and Fiero Brothers' manipulative conduct was its
violation of NASD's affirmative determination rule. The affirmative
determination rule requires a securities firm to determine, prior to selling a
stock short, that it can borrow securities or provide for delivery by
settlement date before effecting a short sale of the securities. The rule
prevents short selling by those who do not have, and have no intention of
delivering, the stock that they are selling. The NAC found that, over the
course of two months and in connection with Fiero Brothers' short sales of the
manipulated securities, Mr. Fiero and the firm violated NASD's affirmative
determination rule in a number of instances.
The NAC concluded that, as a result of John Fiero and Fiero Brothers'
manipulative conduct, they intentionally injected into the marketplace
inaccurate information regarding the level of interest in the manipulated
securities because it was the concerted efforts of Mr. Fiero and Fiero
Brothers and not the free forces of supply and demand that created the
appearance in the marketplace of a massive selling effort.
The NAC is a 14-person committee composed of seven industry and seven non-
industry members that decides appeals from disciplinary, membership, and
exemption decisions; rules on statutory disqualification applications; and
advises on other policy matters. Before John Fiero and Fiero Brothers
appealed this case to the NAC, an NASD Hearing Panel heard the matter. A
Hearing Panel consists of an NASD Hearing Officer along with two members of
the securities industry.
NASD is the leading private-sector provider of financial regulatory
services, dedicated to bringing integrity to the markets and confidence to
investors through effective and efficient regulation and complementary
compliance and technology-based services. NASD touches virtually every aspect
of the securities business -- from registering and educating all industry
participants, to examining securities firms, enforcing both NASD rules and the
federal securities laws, and administering the largest dispute resolution
forum for investors and members firms. For more information, please visit the
Web Site.
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SOURCE NASD
-0- 10/30/2002
/CONTACT: Nancy A. Condon, +1-202-728-8379, or Michael Shokouhi,
+1-202-728-8304, both of NASD/
/Web site: nasd.com
CO: NASD; Fiero Brothers
ST: District of Columbia, New York
IN: FIN
SU: LAW
-0- Oct/30/2002 17:15 GMT |
