Hi A@P; What a con. This had to be the egregious abuse of regulatory power I've seen. They basically accused you of giving good market advice. What a joke, you should sue these losers for putting you through this. Let's immortalize some of it on SI:
NASD Hearing Panel Saf-T-Lok Decision
Case # CMS000015, December 28, 2001
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First, Mr. Elgindy's role in the October 9, 1997 LOCKC market was miniscule. Of the twelve million shares which changed hands on October 9, 1997, only 46,000 were handled by his firm (RX-7). Respondent's LOCKC trading on that day thus accounted for only .0038 percent of the total volume. In contrast, fourteen market makers each traded over 100,000 shares on that day - with three of them accounting for over 6.4 million shares. During the period between October 1 and October 13 of 1997, Key West was responsible for only .08 percent of the total volume of LOCKC trades (Tr. 322).
Respondents were so insignificant that a trader for Knight Securities, one of the three biggest market makers (handling over 2.4 million LOCKC shares on the day in question), had no recollection of Key West - other than its status as another market maker (Tr. 590). She did not know Mr. Elgindy, had no memory of his price quotes, and no information that the LOCKC market was being manipulated on October 9 or October 10, 1997 (Tx. 592, 595(.
On this record, the Panel is not persuaded that Elgindy had sufficient power to influence anyone. The Panel believes that his activities did not rise to the level of manipulation.
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On this record, the Panel finds that the declines were more likely caused by other negative news than by Elgindy's recommendations. In such circumstances, as noted above in the context of the allegedly manipulated price increases, Market Regulation failed to carry its burden of proving manipulation by a preponderance of the evidence (see, Reynonlds, supra).
Nor were the recommendations deceptive. Elgindy testified that every sentence was true; Market Regulation's witness testified that she knew of nothing in the releases which was untrue; and the Department's counsel acknowledged that the prosecution was not trying to prove the falsity of any statement in them (Tr. 247-248, 394, 439, 522). If the Department's attorneys had evidence of such falsity, they would have introduced it, especially where they were striving to prove fraud. In these circumstances, it is a fair inference that the releases accurately reflected Mr. Elgindy's opinions and the factual bases for them.
The dissemination of accurate information cannot be regarded as artificially changing a stock's price for purposes of manipulation. In re Olympia Brewing Company Securities Litigation, 613 F, Supp. 1286 (N.D. Ill. 1985). As the court there said, "f anything, the information concerning the overpricing was a service to the market, as it injected information into the market tending to indicate that the ... shares were overpriced when this was in fact the case" (Id.). ... On this record, the Panel is unwilling to adopt a theory whereby truthful statements about the issuer and its product somehow constitute fraudulent manipulation.
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Moreover, the record shows that Mr. Elgindy did disclose his market maker status during the time in question. He testified, without contradiction, that on October 9 or 10, 1997, he wrote a LOCKC research report, which he distributed to investors on request, and which disclosed that his firm made a market in the stock (Tr. 521). He similarly disclosed that fact to the Bloomberg service, which circulated two reports (at 10:29 a.m. and 11:13 a.m. on October 10, 1997), which quoted Elgindy's negative comments about LOCKC and his disclosure that Key West was a market maker in the security (RX-16; CX-13, P. 22; CX-17; Tr. 521-22).
3.) Conclusion
Market Regulation failed to prove that Mr. Elgindy's high bids or sell recommendations manipulated the market in LOCKC stock. Though each manipulation case must be judged on its own facts, the misconduct generally has certain "hallmarks" or "earmarks": a rapid price surge dictated by a firm that controlled the market, little investor interest, an abundant supply of shares, and the absence of any known prospects for the issuer or favorable developments affecting it. In re Castle Securities Corporation, Exchange Act Rel. No. 39523, 1998 SEC LEXIS 24 at *8 (January 7, 1998); Department of Enforcement v. Galasso, 2001 NASD Discip. LEXIS 2 at *12 (NAC, February 12, 2001). The instant case lacks any of these characteristics.
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-- Carl |
