TODAYS NEWS!!!
$1 Million Fine for Illegal Short Sales, Market Manipulation and Extortion
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NASD Regulation Bars John Fiero, Expels Fiero Brothers, Inc., and Imposes $1 Million Fine for Illegal Short Sales, Market Manipulation and Extortion
WASHINGTON, Jan. 8 /PRNewswire/ -- NASD Regulation, Inc., today announced that a NASD Regulation Hearing Panelbarred John Fiero, expelled his firm, Fiero Brothers, Inc. and ordered a fine of $1 million for engaging in a fraudulent short selling, extortion and manipulation scheme.
On Feb. 6, 1998, NASD Regulation filed a complaint against Fiero and other co-conspirators alleging that they colluded to drive down the price of 10 Nasdaq securities underwritten by now-defunct Hanover Sterling & Co. during January 1995, and February 1995, through illegal short selling of those securities. This ``bear raid' scheme involved Fiero and others obtaining nearly 1 million shares, units and warrants from Hanover Sterling at below market prices through the use of threats and coercion to cover their illegally-created short positions. Ultimately, the short selling scheme led to the failure of Hanover Sterling on Feb. 24, 1995, which was quickly followed by the collapse of its clearing firm, Adler, Coleman Clearing Corp., and the appointment of a Security Investors Protection Corporation trustee for Adler Coleman.
In the decision, the Hearing Panel found that Fiero participated in an extortion scheme by purchasing $12.1
million of securities from Hanover, at prices $866,500 below the then-prevailing market price. Fiero used these securities to cover his firm's short positions, and resold the rest, primarily to other short sellers involved in the
scheme. Hanover agreed to sell the discounted securities to Fiero in attempt to end the shorting of the stocks.
The Hearing Panel also found that Fiero violated short selling rules from Jan. 20 through Feb 23, 1995 by failing to make the required affirmative determinations prior to engaging in short sales of the Hanover Sterling stocks. NASD rules restrict ``naked' short sales, that is selling a stock short without ensuring that the stock can be borrowed or otherwise provided for by settlement date, also known as an affirmative determination. The Hearing Panel concluded that Fiero was not entitled to the market maker exemption from the affirmative determination rule during the time his firm wasregistered as a market maker because it was not engaged in bona fide market- making transactions. Fiero manipulated the market for the Hanover securities through his purchases and resale of the extorted stock and his illegal, naked short selling.
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