Euro-Atlantic on the list of diciplined firms
Copyright 1998 Law Bulletin Publishing Company
Chicago Daily Law Bulletin
September 21, 1998, Monday
SECTION: Pg. 6
LENGTH: 614 words
HEADLINE: Taping rule to unmask fraud
BYLINE: JAMES J ECCLESTON
BODY:
In my previous column I explored how investors can protect themselves against the boiler rooms," chop shops" and bucket shops" of the brokerage world -- firms known for perpetrating investment scams, such as Concorde Capital, Biltmore Securities, A.R. Baron & Co., Sterling Foster & Co., Stratton Oakmont and LaJolla Capital.
Although several of these notorious brokerage firms have been closed down, the problem persists. That's because many of their brokers, branch managers and owners often transfer to other firms, continuing their investment scams with new affiliations. Given this risk of recidivism, the question becomes, How can investors protect themselves against the next Stratton Oakmont?
Fortunately, the Securities and Exchange Commission recently approved a rule that should greatly benefit investors. It's called the Taping Rule.
The rule requires certain firms to record conversations between their brokers and both existing and prospective customers for a period of two years. Special supervisory procedures must be established. These requirements are designed to discourage abusive sales practices.
Most firms do not record conversations voluntarily, and under the Taping Rule, only a minority of firms will be required to do so. Which firms? Firms that have hired a specified percentage of brokers from so-called disciplined firms." Disciplined firms are those firms that have been expelled from membership or participation in any self-regulatory organization (such as the National Association of Securities Dealers), or that have had their securities registration revoked by the SEC.
The NASD updates this list of so-called disciplined firms on a monthly basis and publishes it on its Internet site. For August, the disciplined firms are:
A.R. Baron & Company Inc.
Beacon Securities Inc.
Capital Investment Managers Inc.
Coastline Financial Inc.
Escalator Securities Inc.
Euro-Atlantic Securities Inc.
F.N. Wolf & Company Inc.
Feltman & Co.
H.L. Camp & Co.
Hibbard Brown & Company Inc.
Johnston Kent Securities Inc.
L.C. Wegard & Company Inc.
M.H. Novick & Company Inc.
M.G.S.I. Securities Inc.
Penn Capital Financial Services Inc.
Prime Investors Inc.
Selheimer & Co.
Shaner & Company Inc.
Stratton Oakmont Inc.
Townsley Associates & Company Inc.
U.S. Securities Corporation of Washington, D.C.
Westcap Securities, L.P.
Firms that hire a specified percentage of brokers from these disciplined firms may be subject to the Taping Rule depending on the size of the firm:
- A firm with five to nine brokers, if 40 percent of them have been employed by one or more disciplined firms within the last three years.
- A firm with 10 to 19 brokers, if at least four of them have been employed by one or more disciplined firms within the last three years.
- A firm, with at least 20 brokers, if at least 20 percent of them have been employed by one or more disciplined firms within the last three years.
Consequently, the Taping Rule may provide aggrieved investors with superior documentary evidence of abuses in brokerage sales. Brokers practicing the hook, pump and dump" will be caught on tape, and claims against them to recover investment losses will be easier to prove. Profitable Counsel By James J. Eccleston Eccleston is a securities attorney, representing investors as well as brokers and brokerage firms nationwide. He is a registered investment adviser and licensed principal of the National Association of Securities Dealers. Further information, including previous articles, investor alerts and an annual check-up for investors, can be found at www.FinancialCounsel.com on the Internet.
LANGUAGE: ENGLISH
LOAD-DATE: September 22, 1998 |
