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Microcap & Penny Stocks : TGL WHAAAAAAAT! Alerts, thoughts, discussion. -- Ignore unavailable to you. Want to Upgrade?

To: LANCE B who wrote (115001)	5/20/2003 1:44:40 PM
From: Jim Bishop	Respond to of 150070

Regulators ban trader over stock price scheme By Bruce V. Bigelow STAFF WRITER May 20, 2003 Wall Street regulators yesterday barred San Diego stock trader Amr "Anthony" Elgindy from the securities business for life, after finding that he had schemed to manipulate the price of a penny stock. A lawyer for Elgindy vowed to appeal the banishment by the National Association of Securities Dealers. When the association's National Adjudicatory Council considered the case last year, Elgindy was unable to defend himself, said Gerald B. Lefcourt, a New York defense attorney. That is because Elgindy's assets were frozen at the request of federal prosecutors when he was arrested in a separate investigation last May and charged with racketeering, securities fraud, extortion and obstruction. "This is one of those travesties that occur when one agency starts piling onto what another government agency is doing," Lefcourt said. He described the National Association of Securities Dealers as a quasi-governmental agency that often works hand in hand with the Securities and Exchange Commission. "They knew (Elgindy) was incarcerated, and they knew he was unrepresented by counsel," said Lefcourt, who is representing Elgindy in the racketeering case. Elgindy was a successful stock speculator before his arrest, with a $2.2 million home and a collection of expensive cars. He made his money through short-selling, meaning that he borrowed stock, immediately sold it and waited for the price to go down. He then replaced the borrowed shares by buying at a lower price and kept the difference for himself. Short-sellers sometimes expedite their bets by trading in negative information to drive down a company's stock price. Also charged last year were two of Elgindy's associates and two FBI agents who allegedly passed along negative information about companies that Elgindy had targeted. One of the FBI agents admitted to most of the accusations against him, including allegations that he dug up information about companies in regulatory or criminal trouble in FBI databases and passed it on to Elgindy. Nancy Condon, a spokeswoman for the securities dealers association, said its enforcement action was unrelated to the federal investigation against Elgindy, which is still pending. Association market regulators alleged Elgindy and his firm, Key West Securities, acted to falsely bid up the price of shares in Saf T Lok, a Pennsylvania company that made trigger locks for firearms. Saf T Lok's share price rocketed from 43 cents to $4.56 in two days, after the Clinton administration announced an agreement with gun makers that would require child-safety locks on most handguns sold in the United States. Among other things, regulators said Elgindy exploited his status as a market maker in Saf T Lok shares by submitting increasingly high bid prices during a four-week period, beginning Oct. 9, 1997. Elgindy methodically increased his short position in Saf T Lok's shares. Association regulators alleged Elgindy anticipated the stock price would plummet because he believed the company was near bankruptcy and the Clinton administration's announcement would have no effect on its business. Elgindy and Key West Securities later urged investors to sell their Saf T Lok shares in news releases that were harshly critical of the company. The National Association of Securities Dealers said its investigation began in 2000. On Dec. 28, 2001, a three-person panel found that Elgindy and Key West Securities had violated rules by making high bids without intending to honor them and by disseminating recommendations without disclosing the firm's market maker status. But the panel also said Elgindy had not manipulated the market for Saf T Lok shares because his role in pumping up the share price was "minuscule," accounting for .0038 percent of the stock's total trading volume. On Jan. 18, 2002, the association's department of market regulation appealed the panel's ruling, saying the panel had applied the wrong legal standard. The 14-member National Adjudicatory Council agreed, ruling May 7 that the panel erred in formulating the legal standard and reversed the decision. The council said regulators were not required to prove that Elgindy's conduct had an actual effect on the price of Saf T Lok's stock. They only had to prove that Elgindy took actions that were intended to artificially affect the price of Saf T Lok stock. Elgindy was barred for life from the industry while Key West Securities was permanently expelled from the brokerage business. Both Elgindy and the company were jointly fined $51,000 yesterday. Elgindy is scheduled to go to trial on the federal charges Jan. 12 before U.S. District Judge Raymond J. Dearie in New York. -------------------------------------------------------------------------------- Bruce Bigelow: (619) 293-1314; bruce.bigelow@uniontrib.com signonsandiego.com