NASD Regulation, Inc. (NASD request to appear for an on-the- DISCIPLINARY RegulationSM) has taken disciplinary record interview. actions against the following firms and individuals for violations of Euro-Atlantic Securities Inc. (Boca ACTIONS National Association of Securities Raton, Florida), David P. Melillo Dealers, Inc. (NASD¨) rules; federal (Registered Principal, Pinellas securities laws, rules, and regula- Park, Florida), Robert E. Hines tions; and the rules of the Municipal (Registered Representative, Brook- Securities Rulemaking Board. Unless lyn, New York), Charles M. Fran- Disciplinary Actions otherwise indicated, suspensions will cis (Registered Representative, begin with the opening of business Staten Island, New York), and Reported For November on Monday, November 17, 1997. The Peter J. Matera, Jr. (Registered information relating to matters con- Representative, Brooklyn, New tained in this Notice is current as of York). Melillo submitted an Offer of the end of October 24. Settlement pursuant to which he was fined $100,000 and barred from asso- ciation with any NASD member in Firms Expelled, Individuals any capacity, with the right to reap- Sanctioned ply after two years only as a regis- Cressida Capital, Inc. a/k/a Nor- tered representative. In a separate folk Securities Corp. (New York, decision, the firm was fined New York) and Ian Richard $200,000, required to disgorge Hosang (Registered Principal, $1,762,409 to its customers, and Brooklyn, New York) were fined expelled from membership in the $50,000, jointly and severally. In NASD. Francis was fined $5,000, addition, the firm was expelled from suspended from association with any NASD membership and Hosang was NASD member in any capacity for barred from association with any 30 days, required to pay $2,017.55 in NASD member in any capacity. The restitution to customers, and required sanctions were based on findings that to requalify by exam as a general the firm, acting through Hosang, per- securities representative. Matera was mitted registered persons at the firm fined $5,000, suspended from associ- to continue to perform duties as reg- ation with any NASD member in any istered persons at such times as they capacity for 30 days, required to pay had not complied with the regulatory $5,437.50 in restitution to customers, and firm elements of the Securities and required to requalify by exam as Industry Continuing Education Pro- a general securities representative. gram. Furthermore, the firm, acting Hines was fined $50,000, barred through Hosang, failed to delegate from association with any NASD responsibility for compliance with member in any capacity, and required the regulatory element and failed to to pay $39,984.50 in restitution to maintain written procedures for com- customers. pliance with the regulatory and firm elements. In addition, the firm, acting Without admitting or denying the through Hosang, failed to maintain allegations, Melillo consented to the written supervisory procedures that described sanctions and to the entry would mandate an annual needs anal- of findings that the firm, acting ysis, a written training plan, and an through Melillo, used manipulative, implementation plan, and failed to deceptive or other fraudulent devices maintain books and records in com- in connection with the sale of war- pliance with the firm element of the rants, and dominated and controlled continuing education rules. Hosang both the wholesale and retail markets also failed to respond to an NASD for a security such that there was no independent, competitive market in

NASD Notices to Members—Disciplinary Actions November 1997 705 the security. The findings also stated effected a series of transactions in transactions to ACT and failed to that the firm, acting through Melillo, equity securities, and failed to com- designate transactions in Nasdaq charged fraudulently excessive mark- ply with SEC Rule 10b-10 in con- National Market securities as late to ups to retail customers in principal firming each transaction to its ACT. The findings also stated that transactions, with mark-ups ranging customers in that the firm failed to the firm failed to accept or decline a from 5.26 to 63.16 percent over the disclose over $12,500 in mark-ups transaction within 20 minutes after prevailing market price. Francis, and mark-downs. execution, to preserve a memoran- Matera, and Hines engaged in unfair dum of a brokerage order for a period pricing regarding the sale of warrants of not less than three years, and to to public customers in that the gross Firms and Individuals Fined preserve the memoranda of each commissions they earned on the sales The Exchange, Inc. (Austin, Texas) member-to-member limit order of warrants ranged from 15 to 32 per- and Christian Paul Garces (Regis- received by the firm. Furthermore, cent of their customers’ total invest- tered Representative, Austin, the NASD determined that the firm ment and they failed to question the Texas) submitted a Letter of Accep- failed to establish, maintain, and fairness of the prices being charged tance, Waiver and Consent pursuant enforce written supervisory proce- to the firm’s retail customers. The to which they were fined $17,500, dures reasonably designed to achieve NASD also determined that Melillo jointly and severally. Without admit- compliance with the applicable secu- failed to supervise his member firm’s ting or denying the allegations, the rities laws and regulations regarding salesman adequately. respondents consented to the trade reporting, limit orders, best exe- described sanction and to the entry of cution, and use of SOES. findings that the firm, acting through Firms Fined, Individuals Garces, conducted a securities busi- Sanctioned ness while failing to maintain its Individuals Barred or Suspended Dominion Capital Corporation minimum required net capital. The Thomas A. Arpante (Registered (Dallas, Texas) and Douglas findings also stated that the firm, act- Representative, Holden, Mas- Woodrow Powell (Registered Prin- ing through Garces, failed to register sachusetts) was fined $70,000 and cipal, Dallas, Texas) submitted a five employees as representatives and barred from association with any Letter of Acceptance, Waiver and failed to require these individuals to NASD member in any capacity. The Consent pursuant to which they were pass the required qualifications sanctions were based on findings that fined $35,000, jointly and severally, exams while allowing them to con- Arpante failed to respond to NASD and Powell was suspended from duct activities requiring registration. requests for information. Arpante association with any NASD member Furthermore, the NASD determined also forged documents in transac- in any principal capacity for five that the firm, acting through Garces, tions with customers. business days. Without admitting or failed to maintain the physical securi- denying the allegations, the respon- ty of Small Order Execution Sys- John Brett Ballon (Registered Rep- dents consented to the described temSM (SOESSM) equipment to prevent resentative, Malibu, California) sanctions and to the entry of findings the unauthorized entry of information submitted a Letter of Acceptance, that the firm, acting through Powell, into SOES. The NASD also found Waiver and Consent pursuant to failed to comply with Securities and that the firm failed to identify nine which he was fined $60,000 and Exchange Commission (SEC) Rules transactions input to the Automated barred from association with any 17a-3 and 17a-4 in that its books and Confirmation Transaction Service NASD member in any capacity. records were either inaccurate, (ACTSM) as short sales. Without admitting or denying the incomplete, or not maintained. The allegations, Ballon consented to the findings also stated that the firm, act- described sanctions and to the entry ing through Powell, failed to main- Firms Fined of findings that he churned a public tain and enforce adequate written Furman Selz LLC (New York, customer’s account by recommend- supervisory procedures and failed to New York) submitted a Letter of ing and executing 91 purchase and maintain adequate procedures regard- Acceptance, Waiver and Consent sale transactions for the customer’s ing its compliance with the Securities pursuant to which the firm was fined account without having reasonable Industry Continuing Education Pro- $12,500. Without admitting or deny- grounds for believing that such rec- gram. The findings also stated that ing the allegations, the firm consent- ommendations were suitable in view the firm, acting through Powell, ed to the described sanction and to of the frequency of the recommended failed to submit quarterly statistical the entry of findings that it failed to transactions and the customer’s data regarding customer complaints, report the order entry firm in 61 financial situation, objectives, cir-

NASD Notices to Members—Disciplinary Actions November 1997 706 cumstances, and needs. The findings sanctions and to the entry of findings and suspended from association with also stated that Ballon effected unau- that he accepted funds totaling any NASD member in a principal thorized transactions in a customer’s $4,000 from a public customer by capacity for 30 days. Without admit- account and failed to respond to representing that such funds were ting or denying the allegations, Casil- NASD requests to appear for an on- payments for the preparation of a lo consented to the described the-record interview. financial plan and failed either to pro- sanctions and to the entry of findings vide such a plan or return the funds. that he failed to implement, maintain, Daniel Grady Bayer (Registered The findings also stated that Brafford and enforce adequate supervisory Representative, Kansas City, Mis- failed to respond to NASD requests procedures in connection with direct- souri) submitted a Letter of Accep- for information. ing brokers during an initial public tance, Waiver and Consent pursuant offering. to which he was fined $62,425 and Scott I. Brown (Registered Repre- barred from association with any sentative, Hallandale, Florida) was Vita Marie Colangelo (Registered NASD member in any capacity. fined $7,500, suspended from associ- Representative, Cherry Hill, New Without admitting or denying the ation with any NASD member in any Jersey) submitted an Offer of Settle- allegations, Bayer consented to the capacity for 10 business days and ment pursuant to which she was fined described sanctions and to the entry thereafter until he qualifies by exam $5,000, suspended from association of findings that he received $20,485 as a general securities representative, with any NASD member in any from public customers for investment and ordered to disgorge $1,498.62 to capacity for 18 months, and ordered purposes, failed to apply the funds as public customers. The sanctions were to requalify by exam. Without admit- directed by the customers, and based on findings that Brown execut- ting or denying the allegations, instead misused and converted the ed purchase and sale transactions in Colangelo consented to the described funds to his own use and benefit the securities accounts of public cus- sanctions and to the entry of findings without the customers’ knowledge or tomers without their knowledge or that she established three fictitious consent. consent. accounts at her member firm for pub- lic customers, completed purchase Jere L. Beasley, Jr. (Registered Clyde Joseph Bruff (Registered applications, and prepared a fictitious Representative, Montgomery, Principal, Oakland, California) check on behalf of a customer with- Alabama) submitted a Letter of was barred from association with any out their prior knowledge, authoriza- Acceptance, Waiver and Consent NASD member in any capacity. The tion or consent. pursuant to which he was fined National Business Conduct Commit- $8,100, suspended from association tee (NBCC) affirmed the sanction Paul Dennett Crawford (Regis- with any NASD member in any following appeal of a San Francisco tered Representative, Minneapolis, capacity for one week, and required District Business Conduct Commit- Minnesota) submitted a Letter of to requalify by exam as a general tee (DBCC) decision. The sanction Acceptance, Waiver and Consent securities representative. Without was based on findings that Bruff pursuant to which he was suspended admitting or denying the allegations, exercised effective control over the from association with any NASD Beasley consented to the described account of a public customer and rec- member in any capacity for two sanctions and to the entry of findings ommended to her the purchase and years and required to requalify by that he executed unauthorized trans- sale of securities that were unsuitable exam as a general securities repre- actions in the accounts of public cus- for the customer in view of the size sentative. Without admitting or deny- tomers without their knowledge or and frequency of the transactions and ing the allegations, Crawford consent. her other securities holdings, finan- consented to the described sanctions cial situation, and needs. and to the entry of findings that he Kevin J. Brafford (Registered Rep- participated in private securities resentative, Tempe, Arizona) sub- Bruff has appealed this action to the transactions without giving prior mitted an Offer of Settlement SEC and the sanctions, other than the written notice to, and receiving writ- pursuant to which he was fined bar, are not in effect pending consid- ten approval from, his member firm. $30,000, barred from association eration of the appeal. with any NASD member in any My Ngoc Dang (Registered Repre- capacity, and required to reimburse Frank J. Casillo (Registered Prin- sentative, Alameda, California) his member firm $4,000. Without cipal, Farmingdale, New York) submitted a Letter of Acceptance, admitting or denying the allegations, submitted an Offer of Settlement pur- Waiver and Consent pursuant to Brafford consented to the described suant to which he was fined $10,000 which he was fined $10,000 and

NASD Notices to Members—Disciplinary Actions November 1997 707 barred from association with any NASD member in any capacity for exam as a general securities repre- NASD member in any capacity. 31 days, ordered to disgorge sentative. Without admitting or deny- Without admitting or denying the $22,815, and required to requalify by ing the allegations, Dove consented allegations, Dang consented to the exam. Without admitting or denying to the described sanctions and to the described sanctions and to the entry the allegations, DeYoung consented entry of findings that he effected vari- of findings that he failed to notify his to the described sanctions and to the ous purchases and sales in securities current member firm of the existence entry of findings that he participated in the account of public customers of accounts with other member firms in private securities transactions and without the knowledge or consent of and failed to advise the other firms outside business activities while fail- the customers. that he was associated with his cur- ing to provide prior written notice to rent member firm. The findings also his member firm of his participation James E. Dunniway, Sr. (Regis- stated that Dang signed memoranda in such activities. The findings also tered Principal, Newark, Califor- stating that he did not have a securi- stated that DeYoung made false, ficti- nia) was fined $74,105 and barred ties account with any brokerage firm, tious, and misleading representations from association with any NASD despite the existence of his member to his member firm. member in any capacity. The NBCC firm accounts. affirmed the sanctions following Joseph Marc DiLeo (Registered appeal of a San Francisco DBCC Harold Lee Deavours (Registered Representative, Davis, California) decision. The sanctions were based Representative, Kingwood, Texas) was fined $40,000 and suspended on findings that Dunniway engaged submitted an Offer of Settlement pur- from association with any NASD in excessive trading in a customer’s suant to which he was fined member in any capacity for 30 days. account and engaged in a deceptive $165,000 and barred from associa- The sanctions were based on findings and fraudulent scheme to generate tion with any NASD member in any that DiLeo signed customer names to commissions. capacity. Without admitting or deny- documents and submitted them to his ing the allegations, Deavours con- member firm. Leonard Sterling Dyer (Registered sented to the described sanctions and Representative, Teaneck, New Jer- to the entry of findings that he Ann Marie Doty (Registered Prin- sey) was fined $25,000 and barred engaged in outside business activities cipal, Marina Del Rey, California) from association with any NASD and failed to provide prompt written submitted a Letter of Acceptance, member in any capacity. The sanc- notice to his member firm of such Waiver and Consent pursuant to tions were based on findings that activities. The findings also stated which she was suspended from asso- Dyer received $416 from a public that Deavours made false, fictitious, ciation with any NASD member in customer intended for the purchase and misleading representations to his any registered capacity for 60 days of an insurance policy and gave the member firm and failed to respond to and required to requalify by exam customer a receipt indicating the full NASD requests for information. before acting in any capacity requir- payment of the premium. However, ing registration as a registered Dyer never opened a policy and con- Randall J. DeMatteo (Registered options principal. Without admitting verted the funds to his own use. Dyer Representative, Bridgeport, Con- or denying the allegations, Doty con- also failed to respond to NASD necticut) was fined $27,500 and sented to the described sanctions and requests for information. barred from association with any to the entry of findings that, while NASD member in any capacity. The taking the registered options princi- Jeff Alan Einfalt (Registered Rep- sanctions were based on findings pal qualification exam, Doty was resentative, Lincoln, Nebraska) that DeMatteo failed to respond to found to be in possession of notes submitted a Letter of Acceptance, NASD requests for information. relating to the subject matter of the Waiver and Consent pursuant to DeMatteo also engaged in private exam. which he was fined $8,013, suspend- securities transactions and failed to ed from association with any NASD receive authorization from his mem- Glenn A. Dove (Registered Repre- member in any capacity for 10 busi- ber firm to engage in such activities. sentative, Sunset Beach, Califor- ness days, and required to requalify nia) submitted a Letter of by exam. Without admitting or deny- Dennis John DeYoung (Registered Acceptance, Waiver and Consent ing the allegations, Einfalt consented Principal, Northridge, California) pursuant to which he was suspended to the described sanctions and to the submitted an Offer of Settlement pur- from association with any NASD entry of findings that he shared in an suant to which he was fined $8,500, member in any capacity for 15 busi- account with a public customer at a suspended from association with any ness days and ordered to requalify by member firm without obtaining prior

NASD Notices to Members—Disciplinary Actions November 1997 708 written authorization from the mem- that his member firm establish, main- Goldstein and Goodman were each ber firm carrying the account. The tain, and enforce supervisory proce- fined $5,000, suspended from associ- findings also stated that Einfalt rec- dures that would have enabled the ation with any NASD member in any ommended to a public customer a firm to deter and detect the above capacity for six months, and ordered series of securities transactions that conduct. to requalify by exam as a general were excessive in size and frequency securities representative. Neu was in light of the customer’s liquid net Nicholas Mark Ellis (Registered fined $20,000 and barred from asso- worth and investment objective of Principal, Irvine, California) sub- ciation with any NASD member in capital appreciation. Furthermore, the mitted a Letter of Acceptance, Waiv- any capacity and Reininger was fined NASD determined that Einfalt rec- er and Consent pursuant to which he $5,000, suspended from association ommended that public customers was fined $20,000 and suspended with any NASD member in any take out a loan collateralized by a from association with any NASD capacity for six months, and ordered certificate of deposit for the purpose member as a general securities prin- to requalify by exam as a limited rep- of opening an account at his member cipal for two years. Without admit- resentative for direct participation firm and purchasing securities, and ting or denying the allegations, Ellis programs. Hannan was fined $1,000 recommended that a customer take consented to the described sanctions and suspended from association with an advance from a margin account to and to the entry of finding that a any NASD member in any capacity fund a loan to a public customer to member firm, acting through Ellis, for six months. The NBCC imposed meet a margin call on the customer’s conducted a general securities busi- the sanctions following appeal of a account. ness but failed to designate a limited Los Angeles DBCC decision. The financial and operations principal. sanctions were based on findings that Amr I. Elgindy (Registered Princi- The findings also stated that a mem- Goldstein, Goodman, Neu, pal, Colleyville, Texas) submitted an ber firm, acting through Ellis, execut- Reininger, and Hannan failed to Offer of Settlement pursuant to ed options and municipal transactions respond timely or fully to NASD which he was fined $30,000, sus- but failed to have and designate a requests for information. pended from association with any registered options principal and NASD member in any principal municipal securities principal. Hannan has appealed this action to capacity for one year, suspended the SEC and his sanctions are not in from association with any NASD Ellis’ suspension began September 5, effect pending consideration of his member in any capacity for 30 days, 1997 and will conclude September 5, appeal. and required to produce a copy of his 1999. member firm’s implemented written Christopher William Griffin (Reg- supervisory procedures specifically Douglas A. Glaser (Registered istered Representative, New York, with respect to overseeing his activi- Representative, Evergreen, Col- New York) was fined $20,000 and ties to deter and detect a recurrence orado) was fined $30,000 and barred barred from association with any of the conduct alleged in the com- from association with any NASD NASD member in any capacity. The plaint. Without admitting or denying member in any capacity. The sanc- sanctions were based on findings that the allegations, Elgindy consented to tions were based on findings that Griffin failed to respond to NASD the described sanctions and to the Glaser failed to disclose a felony requests for information. entry of findings that he caused his charge on a Form U-4 and failed to member firm to execute 108 orders respond to NASD requests for infor- Steven A. Hall (Registered Repre- through SOES for the firm’s account. mation. sentative, Scarborough, Maine) The findings also stated that Elgindy was fined $70,000 and barred from caused his member firm to enter non- Michael Edgar Goldstein (Regis- association with any NASD member bona fide orders through the Select- tered Representative, Los Angeles, in any capacity. The sanctions were NetSM System for the firm’s account California), Jeffrey B. Goodman based on findings that Hall failed to that were either timed out or can- (Registered Representative, Cal- respond to NASD requests for infor- celed by Elgindy before they could abasas, California), Jason Scott mation. Hall also engaged in private be executed. Furthermore, the NASD Neu (Registered Representative, securities transactions and failed to found that Elgindy caused trades Santa Monica, California), William receive authorization from his mem- reported to ACT to be canceled by Reininger (Registered Representa- ber firm to engage in such activities. failing to acknowledge or confirm tive, Agoura, California), and such trades. The NASD also deter- Joseph Patrick Hannan (Associated mined that Elgindy failed to ensure Person, Los Angeles, California).

NASD Notices to Members—Disciplinary Actions November 1997 709 Scott W. Lindquist (Registered NASD member in any capacity. The for the purpose of receiving $6,584 Representative, Carlsbad, Califor- sanctions were based on findings that in commissions. nia) submitted a Letter of Accep- Matagrano failed to respond to tance, Waiver and Consent pursuant NASD requests for information. Stephanie Ann Murray (Regis- to which he was fined $5,000 and tered Representative, Trenton, suspended from association with any Frank Anthony Monreal (Regis- New Jersey) was barred from associ- NASD member in any capacity for tered Representative, Moreno Val- ation with any NASD member in any 30 business days. Without admitting ley, California) submitted a Letter of capacity. The sanction was based on or denying the allegations, Lindquist Acceptance, Waiver and Consent findings that Murray, while taking consented to the described sanctions pursuant to which he was fined the Series 7 exam, had in her posses- and to the entry of findings that he $379,755 and barred from associa- sion notes relating to the subject mat- signed customers’ names on various tion with any NASD member in any ter of the exam. new account applications and transfer capacity. Without admitting or deny- forms to expedite the processing of ing the allegations, Monreal consent- Harvey F. Neustadt (Registered transactions in 10 new customer ed to the described sanctions and to Representative, Easton, Maryland) accounts without the customers’ the entry of findings that he convert- was fined $1,500,000, barred from prior knowledge or authorization. ed $13,436.66 from a public cus- association with any NASD member tomer by instructing the customer to in any capacity, and required to pay Jonathan Matthew Lorenz (Regis- endorse a proceeds liquidation check $306,494.32 plus interest in restitu- tered Representative, Lubbock, intended for deposit in the customer’s tion. The sanctions were based on Texas) submitted a Letter of Accep- account, and effectively converted findings that Neustadt converted tance, Waiver and Consent pursuant those funds to the use of his girl- $326,494.32 from public customers to which he was barred from associa- friend without the customer’s knowl- and failed to respond to NASD tion with any NASD member in any edge or consent. The findings also requests for information. capacity. Without admitting or deny- stated that Monreal converted ing the allegations, Lorenz consented $62,514.38 from a public customer’s Allen B. Olander (Registered Rep- to the described sanction and to the account by opening a joint mutual resentative, Lancaster, California) entry of findings that he signed the fund account with the customer away submitted a Letter of Acceptance, names of public customers on insur- from his member firm without the Waiver and Consent pursuant to ance and insurance-related forms, customer’s knowledge or consent, which he was fined $5,000 and sus- submitted the forms to his member and thereafter transferring funds pended from association with any firm, and represented that the signa- from the account to an account he NASD member in any capacity for tures on the forms were genuine controlled. five business days. Without admitting when, in fact, they were not. or denying the allegations, Olander Mark Lynn Mortensen (Registered consented to the described sanctions Steven Wayne Martin (Registered Representative, Fairfax, Minneso- and to the entry of findings that he Representative, Whitehouse, ta) submitted a Letter of Acceptance, participated in private securities Texas) was fined $22,000, suspended Waiver and Consent pursuant to transactions, but failed to provide from association with any NASD which he was fined $35,000 and prior written notification to his mem- member in any capacity for 18 barred from association with any ber firm. months, and ordered to requalify by NASD member in any capacity. exam. The sanctions were based on Without admitting or denying the Bryan James O’Leary (Registered findings that Martin failed to timely allegations, Mortensen consented to Principal, Dallas, Texas) submitted respond to NASD requests for infor- the described sanctions and to the a Letter of Acceptance, Waiver and mation. Martin also submitted to his entry of findings that he forged cus- Consent pursuant to which he was member firm an annual compliance tomer signatures on insurance prod- fined $8,500 and suspended from checklist form that contained false uct forms without the customers’ association with any NASD member and misleading responses to ques- knowledge or consent. The findings in any capacity for 10 business days. tions. also stated that Mortensen prepared, Without admitting or denying the forged signatures, and submitted life allegations, O’Leary consented to the Theodore Anthony Matagrano insurance applications and exchange described sanctions and to the entry (Registered Representative, Ridge- request forms for two customers of findings that, while serving as a wood, New York) was fined $20,000 without their knowledge or consent general securities principal, he failed and barred from association with any to supervise the activities of an indi-

NASD Notices to Members—Disciplinary Actions November 1997 710 vidual adequately in that he failed to Dean C. Verrigni (Registered Rep- tance, Waiver and Consent pursuant ensure that the individual was prop- resentative, Wappingers Falls, New to which he was fined $20,000 and erly registered with the NASD prior York), and Gary H. Hrycyk (Regis- barred from association with any to conducting a securities business. tered Representative, New York, NASD member in any capacity. New York) submitted Offers of Set- Without admitting or denying the Salvatore Piazza (Associated Per- tlement pursuant to which Russ was allegations, Smith consented to the son, Milburn, New Jersey) was fined $18,000 and barred from asso- described sanctions and to the entry fined $20,000 and barred from asso- ciation with any NASD member in of findings that he failed to respond ciation with any NASD member in any capacity and Verrigni was fined to an NASD request to appear for an any capacity. The sanctions were $29,000 and barred from association on-the-record interview. based on findings that Piazza failed with any NASD member in any to respond to NASD requests to capacity. Hrycyk was fined $13,000 Thomas G. Streich (Registered appear for an on-the-record inter- and barred from association with any Representative, Apple Valley, Min- view. NASD member in any capacity. nesota) submitted a Letter of Accep- Without admitting or denying the tance, Waiver and Consent pursuant James Alfred Pierce (Registered allegations, the respondents consent- to which he was fined $288,714 and Representative, Holbrook, New ed to the described sanctions and to barred from association with any York) submitted an Offer of Settle- the entry of findings that they NASD member in any capacity. ment pursuant to which he was fined engaged in manipulative, deceptive, Without admitting or denying the $20,000 and barred from association or other fraudulent activities in con- allegations, Streich consented to the with any NASD member in any nection with the purchase or sale of described sanctions and to the entry capacity. Without admitting or deny- securities. of findings that he submitted false ing the allegations, Pierce consented address change forms, requested to the described sanctions and to the Marc T. Schaufler (Registered loans against traditional and/or vari- entry of findings that he failed to Representative, New Milford, Con- able life and annuity contracts, respond to NASD requests to appear necticut) was fined $20,000 and received and endorsed loan proceeds for an on-the-record interview. barred from association with any checks made payable to the cus- NASD member in any capacity. The tomers, and converted $57,742.84 in Gene Albert Riedinger (Registered sanctions were based on findings that customer funds to his own use and Representative, Bismarck, North Schaufler failed to respond to NASD benefit. Dakota) submitted a Letter of requests for information. Acceptance, Waiver and Consent Larry Dean Vandervoort (Regis- pursuant to which he was fined Gary Allen Sebbert (Registered tered Representative, Omaha, $20,000 and barred from association Representative, Muscatine, Iowa) Nebraska) submitted a Letter of with any NASD member in any submitted an Offer of Settlement pur- Acceptance, Waiver and Consent capacity. Without admitting or deny- suant to which he was fined $10,000 pursuant to which he was fined ing the allegations, Riedinger con- and suspended from association with $5,000 and suspended from associa- sented to the described sanctions and any NASD member in any capacity tion with any NASD member in any to the entry of findings that he failed for one year. Without admitting or capacity for 10 days. Without admit- to respond to NASD requests for denying the allegations, Sebbert con- ting or denying the allegations, Van- information. sented to the described sanctions and dervoort consented to the described to the entry of findings that he affixed sanctions and to the entry of findings Nancy Roebuck (Associated Per- customer signatures on insurance that he recommended and placed son, New York, New York) was and/or securities product forms with- orders for the purchase and sale of fined $20,000 and barred from asso- out the customers’ knowledge or securities in the individual retirement ciation with any NASD member in consent. accounts of public customers without any capacity. The sanctions were having a reasonable basis for believ- based on findings that Roebuck failed Sebbert’s suspension began January ing the transactions were suitable for to respond to NASD requests to 31, 1996 and concluded January 31, the customers based upon the fre- appear for an on-the-record inter- 1997. quency of these transactions and the view. customers’ investment objectives and Delos G. Smith, III (Registered financial situations. Blake M. Russ (Registered Repre- Representative, Richmond, Vir- sentative, Boca Raton, Florida), ginia) submitted a Letter of Accep-

NASD Notices to Members—Disciplinary Actions November 1997 711 Jerry Jewel Waller (Registered nature stamp was not valid, and Ralph A. Bafo (Registered Repre- Representative, Pasadena, Texas) failed to repay the loan. sentative, Tonawanda, New York) submitted a Letter of Acceptance, was fined $20,000 and barred from Waiver and Consent pursuant to association with any NASD member which he was fined $5,000 and Individuals Fined in any capacity. The sanctions were barred from association with any Anthony C. Nuzzo (Registered based on findings that Bafo failed to NASD member in any capacity. Representative, Venice, California) respond to NASD requests for infor- Without admitting or denying the was fined $25,000 and required to mation. allegations, Waller consented to the requalify by exam as a representa- described sanctions and to the entry tive. The sanctions were based on Bafo has appealed this action to the of findings that he exercised control findings that Nuzzo recommended NBCC and the sanctions are not in over traveler’s checks that were and effected for the account of a pub- effect pending consideration of the owned by an affiliate of his member lic customer purchase and sale trans- appeal. firm and made unauthorized use of actions in shares of investment them. companies without having reason- Daniel C. Boss (Registered Repre- able grounds for believing that such sentative, Mendon, New York) was Richard Wayne Wells, Sr. (Regis- recommendations were suitable for fined $215,000, barred from associa- tered Representative, Rockwall, the customer in light of her financial tion with any NASD member in any Texas) submitted an Offer of Settle- situation and needs, the inappropriate capacity, and required to pay $39,100 ment pursuant to which he was fined nature of investment company shares in restitution to a customer. The sanc- $20,000 and barred from association for use as a short-term trading vehi- tions were based on findings that with any NASD member in any cle, and the frequency and costs of Boss received $40,000 from a public capacity. Without admitting or deny- the transactions. customer for the purchase of unspeci- ing the allegations, Wells consented fied investments he recommended to the described sanctions and to the William Leslie Walters (Registered and, without the customer’s knowl- entry of findings that he failed to Representative, Highlands Ranch, edge or consent, did not use the respond to NASD requests for infor- Colorado) submitted an Offer of Set- funds for the intended purpose, but mation. tlement pursuant to which he was for some purpose other than for the fined $14,409 and required to requal- benefit of the customers. Boss also Russell Leroy Whittaker (Regis- ify by exam. Without admitting or failed to respond to NASD requests tered Representative, Coalville, denying the allegations, Walters con- for information. Utah) was fined $50,000, barred sented to the described sanctions and from association with any NASD to the entry of findings that he effect- Boss has appealed this action to the member in any capacity, and ordered ed transactions in the accounts of NBCC and the sanctions are not in to pay restitution to a customer. The public customers without first obtain- effect pending consideration of the sanctions were based on findings that ing the authorization of the cus- appeal. Whittaker borrowed $10,000 from a tomers. The findings also stated that public customer and, in connection Walters misrepresented the value of with his solicitation of the loan, used securities in a customer’s account. Complaints Filed a signature guarantee stamp from a The following complaints were former employer to create the false issued by the NASD. Issuance of a appearance that his signature on the Decisions Issued disciplinary complaint represents the promissory note was guaranteed by a The following decisions have been initiation of a formal proceeding by corporate entity when in fact he knew issued by the DBCC and have been the NASD in which findings as to the no such guarantee existed. Further- appealed to the NBCC as of October allegations in the complaint have not more, Whittaker was aware of and 31, 1997. The findings and sanctions been made, and does not represent a failed to disclose that he contravened imposed in the decision may be decision as to any of the allegations the written supervisory procedures of increased, decreased, modified, or contained in the complaint. Because his member firm that prohibited reg- reversed by the NBCC. Initial deci- these complaints are unadjudicated, istered representatives from borrow- sions whose time for appeal has not you may wish to contact the respon- ing money from the firm’s clients. yet expired will be reported in the dents before drawing any conclu- Moreover, Whittaker failed to dis- next Notice to Members. sions regarding the allegations in the close his prior defaults on certain complaint. loans, failed to disclose that the sig-

NASD Notices to Members—Disciplinary Actions November 1997 712 Lexington Capital Corporation the fact that an unregistered represen- and made further false representa- (formerly Emme Corp. d/b/a Mar- tative was soliciting and effecting tions to the customers to conceal his lowe & Company) (Hauppauge, trades with the public while not prop- own actions. NY); Alan Michael Berkun (Regis- erly registered with the NASD and tered Principal, East Rockaway, several states. The complaint further NY); and Maurice Dana Wise charged that the firm, Berkun, and Firms Suspended (Registered Principal, Hauppauge, Wise failed to establish, maintain and The following firms were suspended NY) were named as respondents in enforce a system to supervise the from membership in the NASD for an NASD complaint alleging that the activities of the firm’s registered rep- failure to comply with formal written firm, acting through Berkun and resentatives and associated persons requests to submit financial informa- Wise, engaged in a variety of reasonably designed to achieve com- tion to the NASD. The actions were improper practices which both pliance with applicable securities based on the provisions of NASD defrauded the investing public and laws and regulations and the applica- Rule 8210 and Article VII, Section 2 impeded regulatory scrutiny. Specifi- ble NASD rules. of the NASD By-Laws. The date the cally, the complaint alleges, among suspensions commenced is listed other things, that the firm, acting Janice D. Russo (Registered Repre- after the entry. If the firm has com- through Berkun: (i) allowed a statu- sentative, Los Angeles, California) plied with the requests for informa- torily disqualified individual to be an was named as a respondent in an tion, the listing also includes the date associated person of the firm without NASD complaint alleging that she the suspension concluded. receiving the proper regulatory effected unauthorized transactions in approvals; (ii) filed a false Uniform the account of a public customer. The Del Mar Financial Services, Inc., Application for Securities Industry complaint alleges Russo effected four Del Mar, California (October 1, Registration or Transfer (Form U-4) transactions, totaling approximately 1997) and MC-400 application with the $24,439, that were contrary to the NASD; (iii) paid a commission to a public customer’s instructions and Kensington Wells, Inc., Brooklyn, non-member firm and failed to report without the customer’s knowledge or New York (October 1, 1997) to the NASD that it had conducted consent. business with a firm owned by a per- Sabel Management, Inc., Livonia, son subject to a statutory disqualifi- Kenji Saski (Registered Represen- Michigan (October 1, 1997) cation; (iv) effected hundreds of sales tative, Tokyo, Japan) was named as of penny stocks to more than 100 a respondent in an NASD complaint customers while failing to make both alleging that he made fraudulent mis- Firm Suspended Pursuant To the appropriate suitability determina- representations and omissions NASD Rule 9622 For Failure To tions and disclosures required by the regarding execution and compensa- Pay Arbitration Award penny stock rules; (v) violated the tion information. Saski’s actions Dickinson & Co., Des Moines, Iowa firm’s restriction agreement with the resulted in overcharges to two cus- NASD; (vi) improperly sold unregis- tomers and secret profits of approxi- tered securities to the investing pub- mately $267,000. Individuals Whose Registrations lic; (vii) charged its customers Were Revoked For Failure To Pay fraudulently excessive markups in Merrill W. Sywenki (Registered Fines, Costs, And/Or Provide connection with sales of securities Representative, Lehighton, Penn- Proof Of Restitution In which amounted to more than sylvania) was named as a respondent Connection With Violations $100,000 in illicit profits to the firm; in an NASD complaint alleging that Francis W. Gillet, III, Monkton, and (viii) failed to disclose to its cus- he engaged in a continuing fraudu- Maryland tomers that the firm was acting as lent and deceptive scheme whereby principal in connection with the he obtained funds from public cus- Robert A. Grunburg, unregistered securities transactions tomers for the purchase of securities, Marina del Rey, California and the amount of remuneration did not apply those funds to the pur- received by the firm in connection chase of securities for the customers, William N. Herred, Santa Barbara, with these transactions. retained and utilized the funds for his California personal purposes, furnished false Additionally, the complaint charged documents to the customers to Timothy M. Smith, that Berkun and Wise falsified the deceive them into believing securities Arlington Heights, Illinois firm’s books and records to conceal had been purchased on their behalf,

NASD Notices to Members—Disciplinary Actions November 1997 713 NASD Regulation Issues NASD Regulation Fines Mayer & customer limit orders to other market Complaint Against Hampton Schweitzer $200,000 For Failure makers for execution. Capital Management Corp., CEO, To Provide Best Execution As and Employee for Denying Well As Record-Keeping And Previously, on March 20, 1996, Inspection Supervisory Violations Mayer & Schweitzer entered into a NASD Regulation announced that it NASD Regulation announced that separate settlement, without admit- has issued a complaint against Mayer & Schweitzer, Inc., was fined ting or denying allegations of best Hampton Capital Management $200,000 after settling charges that execution and record-keeping viola- Corp.; its Chief Executive Officer the firm failed to get its customers tions. The firm was fined $75,000 as and President, Marquis B. Quetant; the best executions possible on five a result. and a Hampton employee, Rhett separate occasions from December McIntosh, for failing to cooperate 1995 through June 1996. Based in Jersey City, New Jersey, with an NASD Regulation investiga- Mayer & Schweitzer is a brokerage tion and for intentionally providing In the settlement, Mayer & firm that currently employs approxi- false information to NASD Regula- Schweitzer neither admitted nor mately 193 registered representatives tion. denied allegations that it failed to in offices in Jersey City and Piscat- provide the best execution possible away, New Jersey; Dania, Florida; The complaint results from a because it did not transmit member- Chicago, Illinois; and Denver, Col- September 25, 1997, unannounced to-member customer limit orders for orado. on-site inspection of Hampton Capi- securities the firm did not make a tal’s New York City branch office market in to another market maker when NASD Regulation examiners that could have filled the orders. NASD Regulation Brings Sales from the New York District Office While Mayer & Schweitzer intended Practice Charges Against 33 were denied access to Hampton’s to forward the orders, its faulty pro- Former Stratton Oakmont office. Simultaneously, additional cedures prevented the orders from Principals and Brokers NASD Regulation examiners con- being transmitted. NASD Regulation announced that it ducted an on-site inspection at has filed disciplinary charges against Hampton’s main office in Stamford, A customer limit order, whether orig- 33 former principals, brokers, and Connecticut, and were admitted. inating from a public customer or employees of the now defunct Long another market maker on behalf of a Island brokerage firm of Stratton All NASD-registered firms are customer, is an order to buy or sell a Oakmont, Inc. The firm was required to give NASD Regulation stock at a price specified by the cus- expelled from the NASD in Decem- examiners immediate and unim- tomer. NASD Regulation’s best exe- ber 1996 because it posed “an ongo- paired access to the firm’s books and cution rule requires that brokerage ing risk to the investing public.” records. Refusing regulators access firms make every effort possible to is a serious issue. obtain the most favorable price avail- The complaint, which alleges a wide able for every security purchased or range of serious sales practice viola- The filing of an NASD Regulation sold on behalf of a customer. tions by 33 individuals, is one of the complaint represents the initiation of largest complaints of its type ever a formal proceeding. At this time, These violations were investigated by brought by NASD Regulation and the allegations have not been proven NASD Regulation’s Market Regula- results from a continuing investiga- and no decision has been made. tion Department, and were based on tion into Stratton Oakmont’s opera- Under NASD Regulation rules, the the receipt of five separate customer tions. The complaint alleges that 33 firm can file a response to these complaints. individuals, who were based at Strat- charges and request a hearing before ton Oakmont’s headquarters in Lake an NASD Regulation panel. NASD Regulation also found that the Success, New York, engaged in a firm failed to establish, maintain, and number of fraudulent sales practices enforce written supervisory proce- and other misconduct from 1993 dures to prevent these violations. through 1996. NASD Regulation Additionally, NASD Regulation also alleges that, in many instances, found that Mayer & Schweitzer Stratton Oakmont used prepared failed to maintain records of the time scripts (six of which are part of the and manner in which the firm sent complaint) as part of their aggressive

NASD Notices to Members—Disciplinary Actions November 1997 714 telemarketing efforts to sell specula- Howard S. Gelfand numerous NASD Regulation disci- tive securities. Jordan Shamah plinary actions, including fines, cen- sures, suspensions, and bars. In The complaint identifies at least 70 Named brokers include: recent years, the SEC and a number specific customers who were alleged- of state securities regulators around ly victimized through fraudulent Chad J. Beanland the nation have also sanctioned both practices including: unauthorized Eric Blumen Stratton Oakmont and its principals. trading; baseless or improper price Ira A. Boshnack In early 1994, the SEC settled an predictions; inadequate or inaccurate Stephen G. Buxton enforcement action against Stratton risk disclosure; churning and exces- Andrew S. Friedman Oakmont and its President, Daniel sive trading; sale of unsuitable invest- Dean S. Friedman M. Porush, after alleging that the firm ments to risk-averse customers; Kenneth J. Fuina engaged in securities fraud through advising customers to disregard Daniel J. Gallagher its “boiler room” sales operation. By information in prospectuses; falsely James W. Garofalo Jr. late 1994, the SEC had charged Strat- promising to limit losses to a specific Paul J. Greco ton Oakmont with violating the set- amount; claiming access to inside David S. Heredia tlement agreement and obtained a information; making false statements Robert W. Koch II permanent injunction against the firm regarding specific securities and Thomas A. Niemczyk requiring future compliance. At the issuers; making improper compar- George Patsis time of its expulsion in December isons to other stocks; tying the pur- Michael J. Raskin 1996, the firm had been barred by a chase of initial public offerings to a Frank Riccuiti Jr. number of state regulators. commitment to buy stock in the Richard L. Ringel aftermarket; guaranteeing customers Robert J. Rosato Stratton Oakmont is currently being against loss; promising to make up Peter T. Rubenstein liquidated in accordance with the losses with new trades; refusing to Lawrence T. Smith Securities Investors Protection Act execute or aggressively discouraging Robert F. Smith (SIPC) of 1970. orders to sell stocks; use of false and Edward C. Sparacio misleading scripts; supervision fail- Michael A. Taliercio The filing of an NASD Regulation ures; falsifying account documenta- Joseph Teseo complaint represents the initiation of tion; failing to appear for testimony Peter T. Tsadilas a formal proceeding. At this time, before the NASD; and lying during Bonnie C. Vandenberg the allegations have not been proven testimony. April Wiener and no decision has been made. Under NASD Regulation rules, the The complaint names the following The complaint names the following respondents can file a response to principals: research analyst: these charges and request a hearing before an NASD Regulation disci- Daniel M. Porush, President and Clifford B. Olshaker plinary panel. Possible sanctions principal owner include a fine, suspension, or bar Prior to its expulsion by NASD Reg- from the securities industry. Michael J. Albino, Director of ulation, Stratton Oakmont and its Supervision principals were repeatedly fined, cen- © 1997, National Association of Securities sured and, in some cases, barred by Dealers, Inc. (NASD). All rights reserved. Andrew T. Greene, Executive Vice federal and state securities regulators. President and Director of Corporate Since June 1989, the firm and its Finance principals have been the subject of

NASD Notices to Members—Disciplinary Actions November 1997 715