Big Board Fines Broker for Using Net To Post False Rumors About Stocks
By MICHAEL RAPOPORT
Dow Jones Newswires
NEW YORK -- In what appears to be a first, the New York Stock Exchange has disciplined a former Bear Stearns Cos. broker over Internet postings in which the exchange said he improperly circulated rumors about a stock.
Alan C. Wolman, 47 years old, of Fort Lee, N.J., agreed to pay a $10,000 fine, without admitting or denying any wrongdoing.
The exchange said Mr. Wolman, on three occasions in early 1996 and without Bear Stearns's approval, posted messages to an Internet news group disparaging the short-sell recommendations of some analysts on Diana Corp., in which some of his customers had long positions.
In one posting, Mr. Wolman said that the "strategy [of short selling] will backfire" and that a "painful" short "squeeze" was likely. "[W]e are hearing that several large funds may be initiating long positions over the next few weeks," he said.
The postings, the exchange said, violated a New York Stock Exchange rule that prohibits the circulation of rumors "which might reasonably be expected to affect market conditions" on the New York Stock Exchange. Mr. Wolman also violated an exchange rule requiring a supervisor's preapproval before a Big Board member distributes any communications to the public, the exchange said.
The New York Stock Exchange said this was the first time it had tackled such a disciplinary case, and used it to issue a warning: Future violations involving such Internet postings will face much more severe penalties.
"Given the heightened sensitivity to the role of the Internet in investing today, a current violation would clearly require a bar or suspension," a Big Board hearing panel said in papers detailing the case.
Mr. Wolman, who now works for Legg Mason Wood Walker Inc., said that "I wasn't doing anything that I thought was illegal or wrong." In his mind, he said, "I was not circulating rumors. I was putting out a posting based on what I believe."
Mr. Wolman also noted that he didn't identify himself as a Bear Stearns broker in his postings. The exchange acknowledged that Mr. Wolman had "a good faith belief in what he said" and that there was no indication Mr. Wolman had engaged in any improper trading in Diana stock.
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