vFinance Investments (CRD #25121, Boca Raton, Florida) and Steven David
Schwartz (CRD #832419, Registered Principal, Mt. Laurel, New Jersey)
submitted a Letter of Acceptance, Waiver, and Consent in which they were
censured and fined $70,000, jointly and severally. The firm was fined an
additional $5,000 and Schwartz was fined an additional $10,000, barred from
association with any NASD member in any principal or supervisory position, and
suspended from association with any NASD member in any capacity for 30 days.
Without admitting or denying the allegations, the respondents consented to the
described sanctions and to the entry of findings that the firm, acting through
Schwartz, issued transaction confirmations to public customers that were
materially inaccurate in that they failed to disclose its capacity in the transactions
as "dual agent" when acting as principal and failed to disclose the markup or
markdown it derived in addition to the disclosed commission. The findings also
stated that the firm failed to meet the requirements of NASD Conduct Rule
2320(g) in non-Nasdaq securities transactions.
In addition, the NASD found that the firm failed to properly report through the
Automated Confirmation Transaction Service(r) (ACT(r)) transactions in National
Market System securities, Nasdaq SmallCapSM securities, and over-the-counter
(OTC) Equity securities; failed to timely report certain trades; improperly
aggregated certain trades into a single report; reported an incorrect volume for
certain trades; failed to accept or decline transactions in ACT in eligible securities
within 20 minutes after execution; and failed to report to ACT the correct symbol
indicating whether the firm executed transactions in eligible securities
in a principal or agency capacity.
Moreover, the NASD found that the firm, acting through Schwartz, failed to
disclose in writing to public customers information regarding payment for order
flow in which the firm acted as agent and, in penny stock transactions, failed to
provide public customers a penny stock risk disclosure document and obtain a
manually signed and dated written acknowledgement of receipt of the document
from the customers. Furthermore, the firm failed to cause its director of
investment banking to become registered as a general securities principal or to
preclude him from performing functions and activities requiring registration in
that capacity. The NASD also found that the firm participated in public offerings
of securities that traded in the immediate aftermarket and failed to comply with
IM-2110-1 in that in each offering the firm effected sales and retained securities
that were part of the offering in firm accounts. In addition, the NASD found that
the firm submitted materially false and inaccurate Free-Riding and Withholding
Questionnaires to the NASD and failed to transmit funds from investors to whom
it sold units to a bank escrow account or to deposit the funds into a separate bank
account as agent or trustee. Finally, the NASD found that the firm and Schwartz
failed to establish a supervisory system, and failed to establish and maintain
written policies and procedures reasonably designed to prevent the above
violations.
Schwartz' suspension began March 18, 2002, and will conclude at the close of
business April 16, 2002. (NASD Case #C9A020007) |
