Thanx RBM
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For Release:
Media Contacts:
Monday, July 27, 1998
Nancy A. Condon - (202) 728-8379
Michael W. Robinson - (202) 728-8304
Other Contact:
Barry R. Goldsmith - (202) 974-2850
NASD Regulation Fines Troster Singer For Intentional Late Trade
Reporting; Six Brokers Also Sanctioned
Washington, D.C.-NASD Regulation, Inc., today fined Troster Singer
$950,000 and
censured the firm for fraud in connection with a series of 28 intentional trade
reporting
violations. Six Troster Singer employees were also sanctioned and fined a
total of $100,000.
Troster Singer, which neither admitted nor denied NASD Regulation's
findings, was sanctioned
for intentionally failing to report within 90 seconds Nasdaq Stock Market
trades - many of
which were made with large institutional customers. This conduct occurred
between April and
October 1994.
National Association of Securities Dealers, Inc. (NASDr) rules require that
every security's
price - and the amount sold - be promptly displayed to the marketplace so
that all market
participants have equal access to the information. Troster Singer deliberately
delayed reporting
its trades in order to gain a competitive advantage by depriving other market
participants of
information regarding purchases and sales made by institutional and other
investors.
Deliberately delaying trade reporting allows a brokerage firm to cover its
positions while at a
significant informational advantage over other market participants. NASD
Regulation found that
Troster Singer - knowing of these large unreported trades while the market
did not - bought
and sold shares from other dealers and customers in deceptive proprietary
trading.
Troster Singer also was sanctioned for unintentionally reporting 18 other
trades as late. When
these 46 late trades were eventually reported, they were marked with an
incorrect execution
time, did not include the proper late designation, or both. In total, 16
securities were involved.
Troster Singer's intentional late trade reporting practices were evidenced in
conversations
taped by the firm.
NASD Regulation found that Troster Singer's traders directed the firm's
institutional sales
representatives (who were assigned to specific institutional customers, and
acted as liaisons
between the institutional customers and the traders) to delay trade reports, or
to falsely
document that certain trades were stopped orders. In a stopped order, a
brokerage firm agrees
to execute the trade at a specific, or better, price.
NASD Regulation also found that while Troster Singer knew about and
cautioned its traders to
stop these late trade reporting practices, they nevertheless continued. As
part of its agreement
with NASD Regulation, Troster Singer will hire an independent consultant to
review its trade
reporting practices.
Six Troster Singer employees were sanctioned:
Lowell Millar, trader, was fined $25,000, suspended in all capacities for 25
days, and
censured.
Michael Ling, trader, was fined $25,000, suspended in all capacities for 25
days, and
censured.
John Quigley, trader, was fined $20,000, and censured.
Lisa Bozzi Albanese, institutional sales representative, was fined $10,000,
and
censured.
Charles Esposito, institutional sales representative, was fined $10,000, and
censured.
Steve Cline, institutional sales representative, was fined $10,000, and
censured.
NASD Regulation thanked the Securities and Exchange Commission (SEC)
for its substantial
assistance in this case.
Over the last several years, NASD Regulation has developed and
implemented a series of
initiatives to protect investors and enhance compliance with market rules.
These include:
Order Audit Trail System - The first phase of the Order Audit Trail System
(OATS) will begin collecting information on all electronic orders received by
market makers and Electronic Communication Networks (ECNs) on March
1, 1999. This system will track
orders from the time they are entered until final execution.
Exam Program - Beginning in 1996, NASD Regulation's Market Regulation
Department initiated a comprehensive program to examine Nasdaqr market
makers for compliance with trading and reporting rules.
Advanced Detection System - The Advanced Detection (ADS) system
began
operation in July 1997. Using sophisticated data mining, artificial
intelligence, statistical
analysis, and visualization technologies, ADS detects and evaluates patterns
in trading
data to search for potential violations of NASD trade reporting, market
integrity, and
best execution rules. ADS processes about 800,000 quotes every day.
Hot Lines - NASD Regulation's Market Regulation Department instituted
toll-free hotlines for the reporting of potential market harassment and
potential backing awayviolations.
Investors can obtain the disciplinary record of any NASD-registered broker
or brokerage firm by
calling (800) 289-9999, or by sending an e-mail through NASD Regulation's
Web Site
(www.nasdr.com).
NASD Regulation oversees all U.S. stockbrokers and brokerage firms.
NASD Regulation,
along with The Nasdaq Stock Market, Inc., are subsidiaries of the National
Association of
Securities Dealers, Inc. (NASD), the largest securities-industry self-regulatory
organization in
the United States.
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