NASD Discloses Disciplinary Actions Vs Firms, Individuals
Dow Jones Newswires
NEW YORK -- NASD Regulation Inc., the regulatory arm of the National Association of Securities Dealers in Washington, disclosed disciplinary measures against a number of firms and individuals for alleged violations of NASD rules and securities laws.
Unless otherwise noted, the companies or individuals involved had no comment or couldn't be reached.
Actions against Firms
CALIFORNIA: Equity Programs Corp., of San Diego and Principal Barton Basel Switzer, of Ramona, Calif., were fined $25,000, jointly and severally without admitting or denying findings that the firm, acting through Mr. Switzer, failed to establish and enforce a system reasonably designed to achieve compliance with certain securities laws and rules at a branch office. The firm also knew, or should have known, that the branch office was offering and selling interests in a contingent offering. In response, Switzer said the assertion that equity programs had no compliance system for enforcement of securities laws is untrue. "It was through our own procedures of compliance that we discovered the problem and reported it," he said.
Kennedy Cabot & Co., of Beverly Hills, and Principal James Dominic Toussaint, of Los Angeles, were fined $25,000, jointly and severally, and the firm was fined an additional $2,000 without admitting or denying findings that the firm, acting through Toussaint, aired television commercials concerning registered investment companies without filing the advertisements with the NASD. The findings also stated that the firm, acting through Toussaint, engaged in communications to the public through television commercials that failed to provide a sound basis for evaluating the facts in regard to the securities offered, and omitted material facts and qualifications which, in light of the context of the material presented, caused the advertisements to be misleading. Moreover, the NASD found that the firm, acting through Toussaint, made exaggerated and unwarranted claims, and/or contained comparative references that were incomplete and unbalanced. The NASD also determined that the firm failed to establish and enforce adequate procedures to address the NASD's filing requirements for mutual fund advertisements, and to identify in its written supervisory procedures, a supervisory principal responsible for communications with the public.
MINNESOTA: Ascend Financial Services Inc., of St. Paul, was fined $20,000 and Barry Howard Burton, a broker, of Great Falls, Va., was fined $5,000 and suspended for 14 days without admitting or denying findings that the firm allowed a broker to sign a variable annuity application as the broker of record, falsely indicating that he had sold the investment, when, in fact, the variable annuity had been sold by another broker. Moreover, the NASD found that the firm accepted the variable annuity application knowing that the individual had never met with and/or discussed the variable annuity investment with the client. The findings also stated that Mr. Burton signed two variable annuities applications, falsely indicating that he had sold the investments, when, in fact, the variable annuities had been sold by another broker. Burton, however, shall not be required to serve the suspension since he served a 14-day suspension in July 1996 imposed by his firm.
MONTANA: Pellett Investments Inc. and Principal Ronald Neil Pellett, both of Missoula, Mont., were fined $10,000, jointly and severally without admitting or denying findings that the firm, acting through Pellett, participated in contingent offerings of limited partnership interests and failed to transmit funds received from investors to a proper escrow account as required. The findings also stated that the firm, acting through Pellett, failed to maintain records documenting the completion of the continuing education training plan for covered brokers, and failed to complete and implement a needs analysis and training plan for the NASD's continuing education requirement.
NEW YORK: Joseph Stevens & Co., of Manhattan, was fined $38,393 without admitting or denying findings that it permitted a registered person to continue to perform duties as a registered person even though the person had not complied with the NASD continuing education requirements.
W. J. Nolan & Co., of Manhattan, was fined $5,000, jointly and severally, with an individual, and required to disgorge $22,060 in excessive markups to customers within a certain time or be suspended until the payments are completed. The firm consented to the sanctions without admitting or denying findings that, acting through an individual, it effected municipal securities principal transactions at excessive markups. In response, a spokesman said the charge is over four years old, involved conduct that was the norm among bond firms at the time and doesn't not reflect company conduct now.
Actions Against Individuals
CALIFORNIA: Principal Clyde Joseph Bruff, of Oakland, was barred following an appeal of findings that Bruff exercised effective control over the account of a public customer and made recommendations to the customer that resulted in unsuitable excessive trading. This action has been appealed to the Ninth Circuit Court of Appeals and the sanctions are not in effect pending consideration of the appeal.
Principal Roger Harry Chlowitz, of Northridge, was fined $25,000 and barred based on findings that Chlowitz failed to respond to NASD requests for information and to provide documents. He has appealed this action and the sanctions are not in effect pending consideration of the appeal. In response, Chlowitz said he denies the charges and that's why he's appealing. "I deny the whole thing and they know it, too," he said. "It's all wrong."
Gregory Marclafaun Hawkins Jr., a broker, of Mission Viejo, was fined $112,900, barred, and ordered to pay $7,580 in restitution without admitting or denying findings that he solicited and sold an investment in a business entity he formed away from his firm. Although the customer gave Hawkins $20,000 for investment purposes, the customer received a promissory note evidencing only a $10,000 investment in the company. In addition, the NASD found that Hawkins proceeded to convert about $7,580 of the customer's funds to his personal use and benefit. The above-described transactions were effected outside the regular course and scope of his employment with his firm, and Hawkins failed to obtain prior written approval from, his firm.
Donerval Kevin Moreland, a broker, of San Clemente, was fined $65,000, barred, and ordered to pay $25,000 plus interest in restitution based on findings that Moreland recommended, offered, and sold securities without being properly registered. Furthermore, he recommended securities without having reasonable grounds for believing the securities were suitable for the customer. Moreland also failed to respond to NASD requests for information about his sales practices.
James Basil Peters, a broker, of Oxnard, was fined $5,000, suspended for 30 days, and required to requalify as a broker following an appeal of findings that he forged the signature of a bank branch manager on documents submitted to his firm that falsely reflected purchases involving new funds and thereby increased his commission payout.
Christopher John Plucinski, a broker, of Stevenson Ranch, was fined $255,000, barred, and ordered to pay $782.17 in restitution without admitting or denying findings that he received $35,000 from a customer for investment purposes but instead converted the funds to his own use and benefit.
Principal Daniel Wright Sisson, of Menlo Park, was fined $35,000, suspended for 10 business days, and required to requalify by exam as a broker following a review of findings that Sisson recommended trades that were unsuitable as to size and frequency in the accounts of customers.
COLORADO: Principal James Andrew Hyde, of Niwet, was fined $15,000, and suspended in any capacity for two years without admitting or denying findings that he failed to respond to NASD requests for information in a timely manner.
CONNECTICUT: Djoly Boliere , associated person, of Stamford, was fined $25,000, and barred without admitting or denying findings that he failed to respond to NASD requests for information.
DISTRICT OF COLUMBIA: Keith Robert Cottrell, a broker, of Washington, D.C., was fined $25,000 and barred based on findings that he failed to respond to NASD requests for information.
FLORIDA: Glenn Adam Davis, Principal, of West Palm Beach, was fined $75,000 and barred based on findings that he executed unauthorized transactions in a customer's account.
Principal Robert Gregory McCormack, of Fort Myers, was fined $60,000 and barred based on findings that he conducted a securities business while not registered. McCormack also forged abroker's signature on a new account application and failed to respond to NASD requests for information.
Arleigh Clayton Merrill, a broker, of Jacksonville, was fined $17,500 and suspended for six months based on findings that Merrill effected a private securities transaction and guaranteed a customer against a loss.
Jerome Edward Rosen, a broker, of Miami, was fined $62,000 and suspended for six months based on findings that he engaged in anti-competitive harassment of another market maker by making a series of telephone calls to the broker in which he attempted to harass the broker for engaging in competitive trading and entering competitive quotations, and otherwise attempted to improperly influence and/or interfere with the broker's competitive activities. Rosen also made certain threatening statements to the broker. The findings also stated that Rosen backed away from a specific order another broker placed with him at his quoted bid or offer for a Nasdaq SmallCap security. Rosen has appealed this action to the NAC and the sanctions are not in effect pending consideration of the appeal.
ILLINOIS: Gerald James Stoiber, a broker, of Mokena, was fined $450,000, for six months, and required to pay $450,000 in restitution following an appeal of findings that he engaged in private securities transactions while failing to give prior written notification to his firm.
Steve Tabaluyan, an associated person, of Palatine, was fined $5,000, and barred from, with the right to reapply in three years, without admitting or denying findings that he altered his industry Series 6 test results to show that he passed the exam, when in fact, he failed the exam, and presented the altered results to his firm.
IOWA: Donald Charles Panek, a broker, of Fort Madison, Iowa was fined $50,000 and barred without admitting or denying findings that he participated in private securities transactions without prior written notice to, and written approval and/or acknowledgment from, his firms.
KANSAS: Harvey Michael Burstein, a broker, of Leawood, Kansas, was fined $57,100, and suspended for one year without admitting or denying findings that he engaged in outside business activities for which he received compensation and engaged in private securities transactions without prior written notice to, and approval from, his firm.
James Dean Loeffelbein, a broker, of Bucyrus, Kansas, was fined $5,000 and suspended for one day without admitting or denying findings that he engaged in private securities transactions without prior approval from his firm.
KENTUCKY: John Jeffrey Walker, a broker, of Covington, Ky., was fined $25,000 and barred based on findings that Mr. Walker failed to respond to NASD requests for information.
MISSOURI: Principal Donald Eugene Radle, of Springfield, Mo. was fined $25,000 and barred. based on findings that he failed to respond to NASD requests to appear for an on-the-record interview.
MISSISSIPPI: Principal Wallace Efford Sheely, of Gulfport, Miss., was fined $6,800 and suspended for 10 days without admitting or denying findings that he exercised discretion in customer accounts without prior written authorization from the customers and prior written acceptance of the accounts as discretionary by his firm.
NEVADA: John Milford Buob, a broker, of Henderson, was barred without admitting or denying findings that he participated in private securities transactions and failed to provide prompt written notification to his firm prior to participating in such transactions. The findings also stated that, in connection with the offer or sale of limited partnership interests, Buob made misrepresentations to investors and failed to return investor funds when the terms of the contingency were not met and that he recommended and induced public customers to purchase the security by means of fraudulent and deceptive devices and contrivances in that he represented to customers that proceeds of a limited partnership offering would be used to pay the purchase price of real estate and office building improvements. The NASD found that Buob knew, or should have known, that only $64,399.43 of the necessary $212,500 had been raised and, therefore, the proceeds were insufficient to pay the purchase price of such real estate and were instead used to pay suppliers of goods or services consumed or used by Mr. Buob in the conduct of his business.
NEW JERSEY: Principal Alfred Gerald Block, of Livingston, was fined $2,500, and suspended as a principal for 30 days without admitting or denying findings that he failed to have a financial and operations principal registered with the NASD at his firm, and as a result, he was responsible for the firm's failure to file some of its required financial reports and to file its annual audit report.
Kirk Francis Ruffler, a broker, of Perrineville, was fined $25,000 and barred based on findings that he failed to respond to NASD requests for information.
NEW YORK: Principal Peter Thomas Chen, of Sayville, was fined $30,000 and barred based on findings that he failed to respond to NASD requests for information and failed to appear for testimony.
Principal Michael Henry Christ, of Lynbrook, was fined $50,000 and barred based on findings that he failed to respond to NASD requests for information.
Principal Ann Wei Ping Lo, of Manhattan., was fined $25,000 and barred based on findings that she failed to appear for an on-the-record interview.
Smail Loutfi, a broker, of Brooklyn, was fined $213,437.31 and barred without admitting or denying findings that he arranged to have an impostor take the industry's Series 7 exam on his behalf.
Vincent Michael Nunez, a broker, of Staten Island, was fined $50,000 and ordered to disgorge to the NASD all monies he earned in the securities industry before becoming registered, in the amount of at least $5,151 based on findings that Nunez arranged to have an impostor take the industry's Series 7 exam on his behalf. He also failed to respond to NASD requests to appear for on-the-record interviews.
Russell Marlowe Ryan, a broker, of Hempstead, was fined $25,000 and barred based on findings that he failed to respond to NASD requests to appear for on-the-record interviews.
Principal Steven Paul Sanders, of Jericho, was fined $25,000, and barred and Principal Daniel Mark Porush, of Oyster Bay Cove, was fined $250,000 and barred following an appeal of findings that Sanders charged excessive markups in the sale of warrants as a consequence of the firm's domination and control of the market for those securities and Porush failed to establish and enforce supervisory requirements that might have prevented the markup violations.
Steven Albert Seager, a broker, of Geneseo, was fined $275,000, barred and required to pay $49,935.37 in restitution to a firm without admitting or denying of findings that he caused loans totaling $49,935.37 to be made against the life insurance policies of customers and according to the findings, caused the checks for these loans to be mailed to a post office box under his control, endorsed the checks, and used the proceeds for his own benefit without the prior authorization or consent of the customers.
Steven Harry Vornea, a broker, of Brookville, was fined $700,000 and barred without admitting or denying findings that he acted as principal of his firm while failing to register as a principal with the NASD. The findings also stated that Vornea caused his firm and its registered representatives to purchase securities before the completion of each of the distributions. Furthermore, the NASD found that Vornea, through his direct and indirect actions, caused his firm to engage in numerous sales practice abuses including, but not limited to, baseless price predictions or guarantees, misrepresentations about issuers, failures to execute customer orders, and requiring customers to purchase aftermarket shares as a condition of receiving initial public offering units, and other high pressure tactics. In addition, the NASD determined that through his direct and indirect actions, he caused his firm and its brokers to manipulate the prices of securities in aftermarket trading, and as a result, the firm generated over $6 million in illegal profits. Vornea also failed to supervise the activities of his firm's registered representatives to ensure compliance with applicable securities laws, regulations, and NASD rules.
ALSO see Great Britain.
NORTH CAROLINA: Principal Andrew Neal Watson, of Raleigh, was fined $125,000, and barred from association with any NASD member in any capacity without admitting or denying findings that he misappropriated $19,137.78 from his firm by arranging to have himself paid unauthorized increases in his salary.
OHIO: Rudolph Crockett, Jr., a broker, of Westerville, was fined $925,000, barred, and required to pay $179,642 in restitution without admitting or denying findings that he received funds totaling $179,642 from customers and deposited these funds into accounts under his control without the customers' knowledge or permission and used the funds for his own benefit.
Todd Richard Woods, a broker, of Columbus, was censured, fined $5,000, and suspended for 60 days without admitting or denying findings that he forged a customer's signature onto documents that caused the customer's IRA accounts to be transferred to another firm, without the prior knowledge or consent of the customer.
PENNSYLVANIA: Dennis Wayne Cowden, a broker, of Pittsburgh, was suspended for two months, and required to requalify by exam based on findings that he recommended and effected securities transactions for the customer accounts without having reasonable grounds to believe that such transactions were suitable based on the information disclosed by the customers concerning their financial situations and needs.
Kirby Michael Hryn, a broker, of Clearfield, was fined $100,000, barred, and ordered to pay $18,000 in restitution to defrauded investment club members without admitting or denying the findings that he converted about $18,000 from members of an investment club, of which he was also a member, without the consent or authority of the club members.
Robert Jay Kendzierski, a broker, of Erie, was fined $80,000, and barred based on findings that he converted $6,000 in funds given to him by a customer by receiving checks totaling $10,000 to be deposited in an interest-bearing insurance policy but instead he wrote his name instead on the payee line of the checks, converted $6,000 of the funds to his own use and benefit. Also, Mr. Kendzierski made two payments to repay the customer for $1,000 and $5,050, and in an attempt to conceal his conversion, he backdated the $5,050 check. He has appealed this action and the sanctions are not in effect pending consideration of the appeal.
SOUTH CAROLINA: Lance Reed Dalton, a broker, of Isle of Palms, was fined $22,400 without admitting or denying findings that he engaged in numerous purchase and sale transactions in various securities without having reasonable grounds for believing that such recommendations were suitable for the customers and accounts in view of the frequency of the recommended transactions, the risks associated and the customers' financial situations.
TEXAS: Principal Terry Don Rader, of Dallas, was fined $25,000 and barred based on findings that he failed to respond to NASD requests for information. Rader has appealed this action and the sanctions aren't in effect pending consideration of the appeal.
UTAH: Craig Douglas Baker, a broker, of West Jordan, was fined $12,250, and barred without admitting or denying findings that he intercepted about $450 worth of gift certificates/checks intended to compensate other employees for overtime they had earned, deposited the checks into his own bank account, and used the money for his personal use. In response, Baker said the $450 in question was money he was paid for overtime work which was subsequently determined to have been paid in error. He said he has since paid the money back noting the punishment "seemed pretty harsh, comparatively speaking."
WASHINGTON: Principal Carlton Case Ellis, of Mercer Island, was fined $25,000, suspended for six months, and required to requalify by exam based on findings that he participated in private securities transactions without giving his firm prior written notification. Ellis also signed a letter agreement on behalf of his member's clearing firm without authority to do so.
WISCONSIN: Principal Norman Mathias Merz, of Brookfield, was fined $110,000 and barred following a review of findings that he engaged in private securities transactions without prior written notice to, and approval from, his firm. Merz also failed to give prompt written notice to his firm of compensation received from outside business activities.
Chad Robert Soerens, a broker, of Middleton, was fined $25,000 and barred based on findings that he failed to respond to NASD requests for information.
WEST VIRGINIA: Randel Arthur Russell, a broker, of Wheeling, was fined $5,000 and suspended for six months without admitting or denying findings that he received cash from a customer intended for deposit into a money market account and failed to handle the funds properly. According to the findings, Russell placed the funds in a non-secure location and certain funds were lost. The findings also stated that he accepted checks intended for employee contributions to a company-sponsored Individual Retirement Account and failed to forward those checks promptly to the mutual fund company for investment.
GERMANY: Carlos Christopher Tellez, a broker, of Darmstadt, was fined $13,000 and suspended for 45 days without admitting or denying findings that he misused $155,000 belonging to a customer. According to the findings, Tellez deposited the funds in his personal business account, failed to purchase mutual fund shares for the customer, and failed to promptly return the funds to the customer as requested.
GREAT BRITAIN: PRINCIPAL: William H. Gerhauser Sr., of Surrey, and Principal William C. Gerhauser Jr., of Brentwood, N.Y., were fined $15,000, jointly and severally. In addition, William H. Gerhauser was required to requalify by exam as a financial and operations principal, and William C. Gerhauser was required to requalify by exam as a general securities principal. The SEC imposed the sanctions following appeal findings that the two men, acting on behalf of a firm, conducted a securities business while failing to maintain adequate net capital. The firm, acting through William H. Gerhauser, filed certain inaccurate industry financial reports, failed to maintain accurate books and records, and failed to give telegraphic notice of a net capital deficiency.
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