Executive Summary Text Of Amendments NASD On December 30, 1998, the Securi- (Note: New text is underlined; deletions are ties and Exchange Commission br a c k e t e d . ) (SEC) approved rule changes pro- Notice to posed by the National Association of 9120. Definitions Securities Dealers, Inc. (NASD¨) that provide for the Office of Disciplinary (a) - (d) No change Members Affairs (ODA) of NASD Regulation, Inc. (NASD RegulationSM ) to authorize (e) “Department of Enforcement” all disciplinary actions brought by the 99-01 1 NA S D . These amendments will be The term “Department of Enforce- effective on January 1, 1999. ment” means the Department of Enforcement or its delegatee, the Questions regarding this No t i c e Department of Market Regulation[, Of fi ce Of Disciplinary should be directed to Eric Moss, except that the term excludes the Af f airs To Aut h o ri z e All Assistant General Counsel, NASD Department of Market Regulation En f orcement Actions Regulation, at (202) 728-8982. with respect to the actions of: Office Of Disciplinary Affairs (1) authorizing a complaint under As Case Authorizer Rule 9211; As of January 1, 1999, the ODA will Suggested Routing authorize all disciplinary actions (2) determining the terms of a letter Senior Management brought by the NASD. For the past of acceptance, waiver, and consent year, the Case Authorization Unit or the terms of a minor rule violation Ad v e r t i s i n g (CAU), a division of the NASD Regu- plan letter under Rule 9216; Continuing Education lation Department of Enforcement, authorized all disciplinary actions (3) determining whether to contest an Corporate Finance brought by the NASD. The Office of offer of settlement under Rule 9270; Executive Representatives Disciplinary Policy (ODP), which an d Government Securities reported to the Office of the Presi- dent of NASD Regulation, was the (4) authorizing the filing of an appeal In s t i t u t i o n a l primary reviewer of cases developed under Rule 9311]. In s u r a n c e in the Washington, D.C. office and Internal Audit those involving “quality-of-market” (f) - (u) No change issues. The ODP also reviewed and Legal & Compliance commented on all cases involving (v) “Office of Disciplinary Affairs” Mu n i c i p a l policy issues. The term “Office of Disciplinary Mutual Fund To increase overall operating effi- Affairs” means the Office of Disci- Op e r a t i o n s ciency and to maintain the consisten- plinary Affairs for NASD Regulation. Op t i o n s cy and independence of the case authorization function, the NASD is (w ) [v] “Panelist” Registered Representatives placing the functions performed by Re g i s t r a t i o n the ODP and CAU in one office . The term “Panelist,” as used in the Re s e a r c h Under the new rules, all cases will be Rule 9200 Series, means a member authorized by the ODA, which will of a Hearing Panel or Extended Sy n d i c a t e review the legal, policy, and consis- Hearing Panel who is not a Hearing Sy s t e m s tency issues presented by each Of fi cer. As used in the Rule 9300 case. Series, the term means a current Tr a d i n g member of the National Adjudicatory Tr a i n i n g The text of these rules that go into Council, a former Director or a former Variable Contracts effect on January 1, 1999, is set forth Governor who is appointed to serve in the remainder of this No t i c e . on a Subcommittee or an Extended Proceeding Committee.

NASD Notice to Members 99-01 Janu a r y 1999 3 (x ) [w] “Party” the Rule 9200 Series and in an (a) Complaint appeal or review governed by the With respect to a particular proceed- Rule 9300 Series, an NASD member (1) If the Department of Enforcement ing, the term “Party” means: or associated person against whom believes that any NASD member or a complaint is issued. associated person is violating or has (1) in the Rule 9200 Series and the violated any rule, regulation, or statu- Rule 9300 Series, the Department of (a a ) [z] “Review Subcommittee” tory provision, including the federal Enforcement or a Respondent; securities laws and the regulations The term “Review Subcommittee” thereunder, which the Association (2) in the Rule 9410 Series and the means a body appointed by the has jurisdiction to enforce, the Rule 9520 Series, the Department of National Adjudicatory Council pur- Department of Enforcement may Member Regulation or suant to Article V of the NASD Regu- request authorization from the Office lation By-Laws. of Disciplinary Affairs to issue [a u t h o - (A) a member that is the subject rize] a complaint. of a notice under Rule 9412; (b b ) [aa] “Statutory Di s q u a l i fi cation Committee” (2) The NASD Regulation Board and (B) a member that is the subject the NASD Board each shall have the of a notice or files an application The term “Statutory Disqualifica t i o n authority to direct the Of fi ce of Disci- under Rule 9522; Committee” means a Subcommittee plinary Affairs [Department of of the National Adjudicatory Council Enforcement] to authorize and th e (3) in the Rule 9510 Series, the that makes a recommended decision Department of Enforcement to is s u e department or office designated to grant or deny an application for a complaint when, on the basis of under Rule 9514(b) or a member or relief from the eligibility requirements information and belief, either of such person that is the subject of a notice of the Association to the National boards is of the opinion that any under Rule 9512 or Rule 9513; or Adjudicatory Council pursuant to the NASD member or associated person Rule 9520 Series. is violating or has violated any rule, (4) in the Rule 9600 Series, the regulation, or statutory provision, department or office designated (c c ) [bb] “Subcommittee” including the federal securities laws under Rule 9620 to issue the deci- and the regulations thereunder, sion granting or denying an exemp- The term “Subcommittee” means an which the Association has jurisdiction tion or a member that seeks the Adjudicator that is: to enforce. exemption under Rule 9610. (1) constituted under Rule 9331(a) to (b) No change (y ) [x] “Primary District participate in the National Adjudicato- Co m m i t t e e ” ry Council’s consideration of an appeal or a review of a disciplinary Endnote The term “Primary District Commit- proceeding pursuant to the Rule 1Securities Exchange Act Rel. No. tee” means, in a disciplinary pro- 9300 Series; 34-40864 (December 30, 1998) (File No. ceeding under the Rule 9200 Series, SR-NASD-98-90). the District Committee designated by (2) constituted under the Rule 9410 the Chief Hearing Officer pursuant to Series or Rule 9630 to conduct a © 1999, National Association of Securities Dealers, Rule 9232 to provide one or more of review proceeding. Inc. (NASD). All rights reserved. the Panelists to a Hearing Panel or, if applicable, to an Extended Hearing 9200. DISCIPLINARY Panel, for such disciplinary proceed- PROCEEDINGS in g . 9210. Complaint and Answer (z ) [y] “Respondent” 9211. Authorization of The term “Respondent” means, in a Complaint disciplinary proceeding governed by

NASD Notice to Members 99-01 Janu a r y 1999 4 Executive Summary would require all members that sell NASD Regulation, Inc. (NASD both Federal Deposit Insurance Cor- NASD SM Re g u l a t i o n ) is withdrawing the risk poration-insured bank products and disclosure proposal discussed in uninsured securities products to pro- Notice to Notice to Members 97-29. Questions vide disclosures similar to those concerning this No t i c e should be required by NASD Rule 2350, the directed to Mary Revell, Associate Bank Broker/Dealer Rule, which Members General Counsel, Office of General imposes obligations on member Counsel, NASD Regulation, at (202) firms selling securities on the premis- 99-02 72 8 - 8 2 0 3 . es of depository institutions. Discussion NASD Regulation is formally with- Notice to Members 97-29, issued in drawing the proposed Risk Disclo- May 1997, reminded members of sure Rule from consideration. Unlike NASD Regulation their disclosure obligations when the confusion that arises when a Withdraws Risk marketing mutual funds and other customer purchases a securities Disclosure Proposal securities. For example, members product from a broker/dealer operat- must disclose the material differ- ing on bank premises, which may ences between the risks of unin- lead the investor to conclude incor- Suggested Routing sured securities products and rectly that the securities product is Senior Management insured depository products to a cus- insured, we believe there is little like- tomer who is seeking to invest the lihood of customer confusion about Ad v e r t i s i n g proceeds of a guaranteed or insured the insured status of a securities Continuing Education product in an uninsured securities product purchased from a product, such as a mutual fund. broker/dealer that is not operating on Corporate Finance Members also are required to dis- bank premises. Thus, contrary to the Executive Representatives close all material information to cus- situation that gave rise to the Bank Government Securities tomers when recommending Broker/Dealer Rule, there is little transactions in mutual funds. need for a Risk Disclosure Rule In s t i t u t i o n a l applicable to firms that are not locat- In s u r a n c e The Notice also requested public ed on the premises of financial insti- Internal Audit comment on whether NASD Regula- tutions. We also believe that existing tion should adopt a rule requiring disclosure requirements, discussed Legal & Compliance members to disclose investment in Notice to Members 97-29, ade- Mu n i c i p a l risks and the absence of guarantees quately address any concerns raised or insurance related to investing in by customer purchases of uninsured Mutual Fund securities products (Risk Disclosure pr o d u c t s . Op e r a t i o n s Rule). In order to ensure that cus- Op t i o n s tomers are notified of the risks of © 1999, National Association of Securities Dealers, purchasing uninsured securities Inc. (NASD). All rights reserved. Registered Representatives products, the Risk Disclosure Rule Re g i s t r a t i o n Re s e a r c h Sy n d i c a t e Sy s t e m s Tr a d i n g Tr a i n i n g Variable Contracts

NASD Notice to Members 99-02 Janu a r y 1999 5 Executive Summary objected to a provision in Notice to NASD On November 30, 1998, the Securi- Members 98-11, which states that ties and Exchange Commission firms will be required to review all (SEC) approved amendments to incoming correspondence received Notice to National Association of Securities in non-electronic format directed to Dealers, Inc. (NASD¨) Rule 3010, registered representatives and relat- requiring firms to review incoming, ed to a member’s investment bank- Members written correspondence to identify ing or securities business. NASD customer complaints and funds and Regulation added this provision to 99-03 to ensure they are properly handled. Notice to Members 98-11 to address The rule amendments will be effec- two regulatory concerns raised by tive on March 15, 1999. This amend- the SEC: (1) ensuring that firms cap- ment revises rule changes that ture all customer complaints; and (2) became effective on April 7, 1998. safeguarding customer funds. SEC Approves Rule The text of the amended Rule and Amendments Requirin g the Federal Register version of the The commenters stated that it will be Rev i e w Of Incoming, SEC release are attached. This very difficult or impossible for a regis- Wr itten Correspondence; Notice to Members is being issued to tered principal to conduct a pre-distri- provide guidance on how to imple- bution review of all incoming, Ef fe c t i v e March 15, 1999 ment this rule. non-electronic correspondence, par- ticularly correspondence received by Suggested Routing Questions concerning this No t i c e registered representatives in small, Senior Management should be directed to Lawrence one- or two-person offices. In Kosciulek, Assistant Director, Adver- response to these concerns, the Ad v e r t i s i n g tising/Investment Companies Regu- effective date of the requirement to Continuing Education lation, NASD Regulation, Inc. (NASD review all incoming, non-electronic Re g u l a t i o n SM ), at (202) 728-8329; or correspondence was delayed to Corporate Finance Mary N. Revell, Associate General allow NASD Regulation time to Executive Representatives Counsel, Office of General Counsel, develop an alternative, workable pro- Government Securities NASD Regulation at (202) 728-8203. cedure for the review of incoming, non-electronic correspondence that In s t i t u t i o n a l Background addresses the regulatory concerns In s u r a n c e In December 1997, the SEC about preventing misappropriation of Internal Audit approved rule amendments that customer funds and diversion of cus- were designed to allow firms to tomer complaints. The rule amend- Legal & Compliance develop flexible supervisory proce- ments and all other provisions in the Mu n i c i p a l dures for the review of correspon- Notice became effective on dence with the public. The April 7, 1998. Mutual Fund amendments were intended to rec- Op e r a t i o n s ognize the growing use of correspon- Op t i o n s dence sent and received in electronic Amended Rule format (i. e . , e-mail and facsimile) NASD Regulation has received SEC Registered Representatives while still providing for effective approval of amendments to Rule Re g i s t r a t i o n supervision. Notice to Members 98- 3010 (se e Securities Exchange Act Re s e a r c h 11 , issued in January 1998, provided Release No. 40723 (November 30, guidance to firms on how to imple- 1998), 63 FR 67496 (December 7, Sy n d i c a t e ment these rules. Subsequent to 1998), attached). Rule 3010(d)(2) Sy s t e m s SEC approval of the amendments, requires each member to develop but before the amended rules went written policies and procedures for Tr a d i n g into effect, the SEC received 14 com- review of correspondence with the Tr a i n i n g ment letters objecting to certain pro- public relating to its investment bank- Variable Contracts visions in the new rules, primarily ing or securities business tailored to from members in the insurance its structure and the nature and size industry. The commenters primarily of its business and customers. The

NASD Notice to Members 99-03 Janu a r y 1999 7 rule has been amended to state that would have to employ alternative pro- to Rule 3010(d)(2) and the guidance these procedures must also include cedures reasonably designed to provided in this No t i c e . the review of incoming, written corre- assure adequate handling of com- spondence directed to registered plaints and checks. Procedures that representatives and related to the could be adopted include the follow- Text Of Amendments member’s investment banking or ing: (Note: New text is underlined; deletions are securities business to properly identi- br a c k e t e d . ) fy and handle customer complaints ¥ forwarding opened incoming, written and to ensure that customer funds correspondence related to the Rule 3010. Supervision and securities are handled in accor- firm’s investment banking or securi- dance with firm procedures. ties business to an Office of Supervi- (a) - (c) No change sory Jurisdiction or a branch manager The method used for conducting for review on a weekly basis; (d) Review of Transactions and reviews of incoming, written corre- Co r r e s p o n d e n c e spondence to identify customer com- ¥ maintenance of a separate log for plaints and funds may vary all checks received and securities (1) No change depending on the firm’s office struc- products sold, which is forwarded to ture. Where the office structure per- the supervising branch on a weekly (2) Review of correspondence. Each mits review of all correspondence, basis; member shall develop written proce- members should designate a regis- dures that are appropriate to its busi- tered representative or an associated ¥ communication to clients that they ness, size, structure, and customers person to open and review corre- can contact the broker/dealer directly for the review of incoming and outgo- spondence prior to use or distribution for any matter, including the filing of ing written (i.e., non-electronic) an d to identify customer complaints and a complaint, and provides them with electronic correspondence with the funds. The designated person must an address and telephone number of public relating to its investment bank- not be supervised or under the con- a central office of the broker/dealer ing or securities business, in c l u d i n g trol of the registered person whose for this purpose; and procedures to review incoming, writ- correspondence is opened and ten correspondence directed to reg- reviewed. Unregistered persons who ¥ branch examination verification that istered representatives and related to have received sufficient training to the procedures are being followed. the member’s investment banking or enable them to identify complaints securities business to properly identi- and checks would be permitted to Regardless of the method used for fy and handle customer complaints review correspondence. initial review of incoming, written cor- and to ensure that customer funds respondence, as with other types of and securities are handled in accor- It is the understanding and view of correspondence, Rule 3010(d)(1) dance with firm procedures. Wh e r e NASD Regulation that member firm s would still require review by a regis- such procedures for the review of possess the legal capacity to insist tered principal of some of each correspondence do not require [pre- that mail addressed to their office s registered representative’s corre- use] review of all correspondence be deemed to be related to their spondence with the public relating to prior to use or distribution, they must business, even if marked to the the member’s investment banking or include provision for the education attention of a particular associated securities business. and training of associated persons person, if they advise associated as to the firm's procedures governing persons that personal correspon- correspondence; documentation of dence should not be received at the Notice to Members 98-11 such education and training; and firm. Members are reminded that As stated above, Notice to Members surveillance and follow-up to ensure SEC Rule 17a-4(b)(4) requires that 98 - 1 1 stated that firms would be that such procedures are implement- “originals of all communications required to review all incoming corre- ed and adhered to. received . . . by such member, broker spondence received in non-electron- or dealer, relating to its business as ic format directed to registered (3) No change such . . .” must be preserved for not representatives and related to a less than three years. member’s investment banking or (e) - (g) No change securities business. That require- Where the office structure does not ment is no longer applicable and has © 1999, National Association of Securities Dealers, permit the review of correspondence been superseded by the amendment Inc. (NASD). All rights reserved. prior to use or distribution, the firm NASD Notice to Members 99-03 Janu a r y 1999 8 67496 Federal Register / Vol. 63, No. 234 / Monday, December 7, 1998 / Notices

NRC/nucmat.html) approximately 4 Warrants (‘‘Warrants’’) from Amex and correspondence to identify customer weeks after the publication date of this to list the Warrants on Nasdaq. The complaints and funds. On August 26, notice. Warrants, however, did not meet the 1998, the NASDR submitted Dated at Rockville, Maryland, this 30th day Nasdaq’s float requirement and the Amendment No. 1 to the proposed rule 3 of November, 1998. Company elected to keep the Warrants change. For the Nuclear Regulatory Commission. on the Amex. By letter dated September The proposed rule change, as 14, 1998, the Amex consented to this amended, was published for comment Donald A. Cool, procedure. in the Federal Register on September 3, Director, Division of Industrial and Medical Any interested person may, on or 1998.4 Four comment letters were Nuclear Safety, Office of Nuclear Material before December 22, 1998, submit by received on the proposal.5 On Safety and Safeguards. letter to the Secretary of the Securities November 12, 1998, the NASDR filed [FR Doc. 98–32394 Filed 12–4–98; 8:45 am] and Exchange Commission, 450 Fifth Amendment No. 2 to the proposed rule BILLING CODE 7590±01±P Street, N.W., Washington, D.C. 20549, change.6 The Commission solicits facts bearing upon whether the comments on Amendment No. 2 from application has been made in interested persons. This order approves SECURITIES AND EXCHANGE accordance with the rules of the the proposed rule change and COMMISSION Exchange and what terms, if any, should Amendment No. 1 thereto and approves be imposed by the Commission for the Amendment No. 2 to the proposed rule Issuer Delisting; Notice of Application protection of investors. The change on an accelerated basis. To Withdraw From Listing and Commission, based on the information II. Background and Description of the Registration; (Unity Bancorp, Inc., submitted to it, will issue an order Proposal Common Stock, No Par Value) File No. granting the application after the date 1±12431 mentioned above, unless the In December 1997, the SEC approved rule amendments and a Notice to December 1, 1998. Commission determines to order a hearing on the matter. Members that were designed to allow Unity Bancorp, Inc. (‘‘Company’’) has firms to develop flexible supervisory filed an application with the Securities For the Commission, by the Division of Market Regulation, pursuant to delegated procedures for the review of and Exchange Commission 7 authority. correspondence with the public. The (‘‘Commission’’), pursuant to Section amendments were intended to recognize 12(d) of the Securities Exchange Act of Jonathan G. Katz, Secretary. the growing use of electronic 1934 (‘‘Act’’) and Rule 12d2–2(d) communications such as ‘‘e-mail’’ while promulgated thereunder, to withdraw [FR Doc. 98–32380 Filed 12–4–98; 8:45 am] still providing for effective supervision. the above specified security (‘‘Security’’) BILLING CODE 8010±01±M Notice to Members 98–11, issued by the from listing and registration on the American Stock Exchange, Inc. 3 See Letter from Mary N. Revell, Associate (‘‘Amex’’ or ‘‘Exchange’’). SECURITIES AND EXCHANGE General Counsel, NASDR, to Katherine A. England, The reasons cited in the application COMMISSION Assistant Director, Division of Market Regulation (‘‘Division’’), Commission, dated August 24, 1998 for withdrawing the Security from [Release No. 34±40723; File No. SR±NASD± (‘‘Amendment No. 1’’). In Amendment No. 1, listing and registration include the 98±52] NASDR proposes to replace the word ‘‘should’’ in following: the text of the proposed rule with the word ‘‘must.’’ On August 20, 1998, the Board of Self-Regulatory Organizations; 4 See Securities Exchange Act Release No. 40372 Directors of the Company unanimously National Association of Securities (August 27, 1998), 63 FR 47059.. Dealers, Inc.; Order Approving 5 See Letters to Jonathan G. Katz, Secretary, approved a resolution to withdraw the Commission, from Michael L. Kerley, Vice Company’s Security from trading on the Proposed Rule Change and President and Chief Legal Officer, MML Investors Exchange and to list the Security on the Amendment No. 1 Thereto and Notice Services, Inc., dated September 18, 1998 (‘‘MML Nasdaq. In making the decision to of Filing and Order Granting Letter’’); Theodore A. Mathas, President NYLIFE Accelerated Approval to Amendment Securities, dated September 23, 1998 (‘‘NYLSEC withdraw its Security from listing on Letter’’); Janet G. McCallen, Executive Director, the Exchange, the Company considered No. 2 to the Proposed Rule Change International Association for Financial Planing, the direct and indirect costs and Relating to Supervision of dated September 23, 1998 (‘‘IAFP Letter’’); and Correspondence Joseph P. Savage, Assistant Counsel, Investment benefits involved and determined that Company Institute, dated September 24, 1998 (‘‘ICI trading on the Nasdaq better suited its November 30, 1998. Letter’’). needs. Trading in the Company’s 6 See Letter from Mary N. Revell, Associate Security on the Nasdaq commenced at I. Introduction General Counsel, NASDR, to Katherine A. England, the opening of business on September Assistant Director, Division, Commission, dated On July 24, 1998, the National November 12, 1998 (Amendment No. 2’’). In 21, 1998. Association of Securities Dealers, Inc. Amendment No. 2, in addition to making several The Company has complied with Rule (‘‘NASD’’) or ‘‘Association’’), through its technical amendments, the NASDR addresses the 18 of the Amex by notifying Amex of its wholly-owned subsidiary, the NASD issues raised in the comment letters. The NASDR intention to withdraw its Security from proposes to revise its draft Notice to Members to Regulation, Inc. (‘‘NASDR’’), submitted clarify that: (1) registered representatives can listing on the Exchange by letter dated to the Securities and Exchange forward opened mail; (2) maintenance of a log August 24, 1998, and by filing a copy of Commission (‘‘SEC’’ or ‘‘Commission’’), should be only for ‘‘securities’’ products; and (3) the resolution with the Exchange. The pursuant to Section 19(b)(1) of the customers should be informed that they can contact Exchange replied by letter dated August a central office of the member firm for any reason, Securities Exchange Act of 1934 including to file a complaint. The NASDR also 26, 1998, advising that the Exchange (‘‘Act’’),1 and Rule 19b–4 thereunder,2 a proposes to specifically state that member firms would not interpose any objection to proposed rule change to amend NASD have a legal right to review incoming, written such action, nor require the Company to Rule 3010 to state that firms must correspondence. Finally, the NASDR proposes to send common stockholders any change the effective date of the new amendments review incoming, written to 60 days following publication of its Notice to statement with respect thereto. Members. The Company also originally intended 1 15 U.S.C. 78s(b)(1). 7 See Securities Exchange Act Release No. 39510 to delist its Common Stock Purchase 2 17 CFR 240.19b–4. (December 31, 1997) 63 FR 1131 (January 8, 1998). Federal Register / Vol. 63, No. 234 / Monday, December 7, 1998 / Notices 67497

NASD in January 1998, announced rule amendments and all other investment banking or securities approval of the rule amendments, the provisions in the Notice became business to an Office of Supervisory effective date of the new rules, and effective on April 7, 1998.10 Jurisdiction (OSJ) or a branch manager provided guidance to firms on how to NASDR Rule 3010(d)(2) currently for review on a weekly basis; implement these rules. Subsequent to requires each member to develop • Maintenance of a separate log for all Commission approval of the written policies and procedures for checks received and securities products amendments, but before the amended review of correspondence with the sold, which is forwarded to the rules went into effect, the Commission public relating to its investment banking supervising branch on a weekly basis; received 14 comment letters, primarily or securities business tailored to its • Communication to clients that they from members in the insurance structure and the nature and size of its can contact the broker/dealer directly industry, objecting to certain provisions business and customers. The NASDR for any matter, including the filing of a in the new rules.8 The commenters proposes to amend the rule to state that complaint and provides them with an primarily objected to a provision in these procedures must include review of address and phone number of a central Notice to Member 98–11 which states incoming, written correspondence office of the broker/dealer for this directed to registered representatives purpose; and that firms will be required to review all • incoming, written correspondence and related to the member’s investment Branch examination verification directed to registered representatives banking or securities business to that the procedures are being followed. The Notice also states that, regardless and related to a member’s investment properly identify and handle customer of the method used for initial review of banking or securities business. The complaints, funds, and securities. This incoming, written correspondence, as NASDR added this provision to Notice proposed amendment will clarify that with other types of correspondence, to Members 98–11 to address two firms must develop supervisory Rule 3010(d)(1) would still require regulatory concerns raised by the procedures that specifically address the review by a registered principal of some Commission: (1) ensuring that firms regulatory concerns identified by the of each registered representative’s capture all customer complaints; and (2) Commission. correspondence with the public relating preventing registered representatives The accompanying Notice to Members to the member’s investment banking or from taking cash or checks out of will provide guidance on how to securities business. customer letters. implement the proposed rule change.11 The commenters stated that it would In particular, the Notice states that, in III. Summary of Comments be very difficult or impossible for a conducting reviews of incoming, written The Commission received four registered principal to conduct a pre- correspondence to identify customer comment letters on the proposed rule distribution review of all incoming, complaints and funds, where the office change.12 Two of the commenters written correspondence, particularly structure permits review of all generally opposed the proposal; 13 two correspondence received by registered correspondence, members should of the commenters generally supported representatives in small, one- or two- designate a registered or associated the proposal.14 The commenters person offices. In response to these person to open and review opposing the proposal believe that any concerns, the effective date of the correspondence prior to use or possible benefits of the proposal are requirement to review all incoming, distribution to identify customer outweighed by the associated burdens.15 written correspondence was delayed to complaints and funds. The designated Specifically, the proposal’s opponents allow the NASDR and member firms person must not be supervised or under believe that even if a member firm’s time to develop and implement the control of the registered person business structure permits the review of alternative, workable procedures for the whose correspondence is opened and incoming, written correspondence prior review of incoming, written reviewed. Unregistered persons who to use or distribution, NASD Rule 3010 correspondence that addresses the have received sufficient training to should not require such review.16 regulatory concerns about preventing enable them to identify complaints and Instead, member firms should be misappropriation of customer funds and checks would be permitted to review permitted the flexibility to design their diversion of customer complaints.9 The correspondence. own procedures to identify customer Where the office structure does not complaints and funds.17 The NASDR 8 permit the review of correspondence See Letters to Jonathan G. Katz, Secretary, has not modified its proposal in Commission, from Carl B. Wilkerson, American prior to use or distribution, the Notice Council of Life Insurance, dated January 9, 1998 response to these comments. states that the firm would have to One commenter also recommends that and January 29, 1998; Beverly A. Byrne, employ alternative procedures BenefitsCorp Equities, Inc., dated January 26, 1998; NASDR should eliminate the Michael S. Martin, The Equitable Life Assurance reasonably designed to assure adequate ‘‘requirements’’ to forward Society of the United States, dated January 29, handling of complaints and checks. correspondence and logs to a reviewer 1998; Janet G. McCallen, International Association Procedures that could be adopted for Financial Planning, dated February 13, 1998; W. on a weekly basis and instead, to permit include the following: 18 Thomas Boulter, Jefferson Pilot Financial, dated • review on a regular basis. In response, January 28, 1998; Leonard M. Bakal, Metropolitan After opening his or her own mail, the NASDR notes that its proposed Life Insurance Company and MetLife Securities, the registered representative can Notice to Members does not establish Inc., dated January 28, 1998; Michael L. Kerley, forward incoming, written ‘‘requirements’’ for those member firms MML Investors Services, Inc. dated January 26, correspondence related to the firm’s 1998; Mark D. Johnson, The National Association of with office structures that do not permit Life Underwriters, dated February 5, 1998; 1998); and 40178 (July 7, 1998) 63 FR 37911 (July Theodore Mathas, NYLIFE Securities, dated January 12 See note 5, supra. 16, 1998 and January 29, 1998; Beverly A. Byrne, 14, 1998). 13 See NYLSEC Letter and ICI Letter, supra note One Orchard Equities, Inc., dated January 26, 1998; 10 See Securities Exchange Act Release No. 39866, 5. Dodie Kent, Pruco Securities Corporation, dated supra note 9. 14 See MML Letter and IAFP Letter, supra note 5. January 29, 1998; and James T. Bruce, Wiley, Rein 11 The Notice that will be issued when this 15 & Fielding, on behalf of the Electronic Messaging proposed rule is approved will state that the See NYLSEC Letter and ICI Letter, supra note Association, dated January 30, 1998. requirement set forth in Notice to Members 98–11 5. 2 See Securities Exchange Act Release Nos. 39665 is no longer applicable and has been superseded by 16 Id. (February 13, 1998) 63 FR 9032 (February 23, 1998); the amendment to Rule 3010(d)(2) and the guidance 17 Id. 39866 (April 14, 1998) 63 FR 19778 (April 21, provided in the Notice. 18 See NYLSEC Letter, supra note 5. 67498 Federal Register / Vol. 63, No. 234 / Monday, December 7, 1998 / Notices review of all incoming IV. Discussion minimum, some combination of those 19 correspondence. Instead, the proposed After careful review, the Commission alternative procedures provided by the Notice to Members provides several finds that the proposed rule change is NASDR as an example, or similar examples of alternative procedures that consistent with the requirements of the procedures, rather than relying on only member firms might employ to assure Act and the rules and regulations one alternative procedure. The adequate handling of customer thereunder applicable to a national Commission believes that employing complaints and funds. securities association.27 Specifically, the more than one alternative procedure should serve to provide additional One commenter requests that if the Commission believes the proposal is assurances that incoming, written proposal is adopted, the effective date of consistent with the requirements of correspondence is handled the amendments should be postponed Section 15A(b)(6) of the Act 28 in that it appropriately. for six months to provide member firms is designed to prevent fraudulent and manipulative acts and practices and to The Commission notes that the with sufficient time to implement the proposal requires the review by a 20 protect investors and the public interest. additional requirements. The NASDR registered principal of some of each declines to postpone the effective date The Commission believes that the proposal, which clarifies member firms’ registered representative’s of the amendments for six months, correspondence with the public relating noting that member firms have been on responsibilities with respect to the review of incoming, written to the member firm’s investment notice since the issuance of NASD’s banking or securities business, Notice to Members 98–11 in January correspondence, is designed to protect existing and prospective customers by regardless of the method used for the 1998 that some type of review of initial review of incoming, written incoming, written correspondence ensuring that customer complaints and customer funds and securities are correspondence. The Commission would be required. To provide member believes that this requirement should firms with some time to implement the handled properly. The NASDR proposes to amend ensure that appropriate persons within required changes, the NASDR proposes NASD Rule 3010 to require that member the firm will undertake to supervise the to change the effective date of the new firms’ written procedures regarding the activities of the firm’s registered amendments to 60 days following review of correspondence must include representatives. The Commission publication of the Notice to Members a review of incoming, written expects that in the event that the firm announcing Commission approval of the correspondence directed to registered learns of any suspect activities on the proposal.21 representatives to properly identify and part of any of its registered In addition, one commenter suggests handle customer complaints and to representatives, the firm will commence that the rule specify that if a member ensure that customer funds and a more thorough review of that firm doesn’t normally receive written securities are handled in accordance representative’s activities, including correspondence directed to register with firm procedures. In its draft Notice his/her correspondence with the public. The Commissions finds good cause representatives, the member should not to Members, the NASDR explains that for approving proposed Amendment No. have to develop procedures to address the method used in conducting such 2 prior to the thirtieth day after the date such correspondence.22 The NASDR has reviews will depend on the firm’s of publication of notice of filing thereof not modified its proposal in response to particular office structure. Where the in the Federal Register. In Amendment this comment. office structure permits review of all No. 2, the NASDR addresses the One commenter requests that the correspondence, the NASDR will concerns raised in the four comment NASDR specifically state that member require that member firms designate an letters received by the Commission on firms have a legal right to review individual to open and review such this proposal. Amendment No. 2 incoming mail, to parallel a similar correspondence prior to use or modifies the original filing and the statement made by the New York Stock distribution to identify customer accompanying draft Notice to Members Exchange.23 In response, the NASDR complaints and funds. The Commission only slightly, in response to specific proposes to revise its draft Notice to agrees that wherever practicable, prior comments raised by interested parties. Members to include such a statement.24 review of incoming, written Specifically, Amendment No. 2 clarifies correspondence should be mandated, to that member firms have the legal right Another commenter recommends that protect customer interests and possibly, the NASDR clarify in the examples to review incoming written reduce member firms’ potential liability. correspondence and that the rules apply provided in its Notice to Members that: The Commission recognizes, however, to the member firms’ investment (1) Registered representatives can that there may be circumstances in banking and securities business. As the forward opened mail; (2) maintenance which such prior review of incoming, modifications proposed in Amendment of a log should be only for ‘‘securities’’ written correspondence is not practical. No. 2 are reasonable and do not products; and (3) customers should be In such cases, the Commission believes significantly alter the original proposal, informed that they can contact a central that the NASDR’s proposal to require the Commission believes that office of the member firm for any member firms to employ alternative Amendment No. 2 raises no issues of reason, including to file a complaints.25 procedures reasonable designed to regulatory concern. Accordingly, the The NASDR proposes to revise its draft assure adequate handling of customer Commission believes that it is Notice to Members to implement the complaints, funds, and securities is consistent with Section 15A(b)(6) of the commenter’s recommendations.26 reasonable. The Commission believes Act 29 to approve Amendment No. 2 to that member firms that do not require the proposed rule change on an 19 See Amendment No. 2, supra note 6. prior review of all incoming, written accelerated basis. 20 See NYLSEC Letter, supra note 5. correspondence should require, at a 21 See Amendment No. 2, supra note 6. V. Solicitation of Comments 22 See ICI Letter, supra note 5. 27 In approving this rule, the Commission has 23 Interested persons are invited to See MML Letter, supra note 5. considered the proposed rule’s impact on 24 See Amendment No. 2, supra note 6. efficiency, competition, and capital formation. 15 submit written data, views and 25 See IAFP Letter, supra note 5. U.S.C. 78c(f). 26 See Amendment No. 2, supra note 6. 28 15 U.S.C. 78o–3(b)(6). 29 15 U.S.C. 78o–3(b)(6). Federal Register / Vol. 63, No. 234 / Monday, December 7, 1998 / Notices 67499 arguments concerning Amendment No. owned regulatory subsidiary, NASD termination as required by Article [IV] 2, including whether Amendment No. 2 Regulation, Inc. (‘‘NASD Regulation’’), V, Section 3 of the By-Laws. is consistent with the Act. Persons filed with the Securities and Exchange * * * * * making written submissions should file Commission (‘‘Commission’’) the six copies thereof with the Secretary, proposed rule change as described in IM–2110–4. Trading Ahead of Research Securities and Exchange Commission, Items I, II, and III below, which Items Reports 450 Fifth Street, NW, Washington, DC have been prepared by NASD * * * * * 20549. Copies of the submission, all Regulation. The Commission is In accordance with Article VII, subsequent amendments, all written publishing this notice to solicit Section 1(a)[(2)](ii) of the NASD By- statements with respect to the proposed comments on the proposed rule change Laws, the Association’s Board of rule change that are filed with the from interested persons. Governors has approved the following Commission, and all written I. Self Regulatory Organization’s interpretation of Rule 2110. communications relating to the Statement of the Terms of Substance of * * * * * proposed rule change between the the Proposed Rule Change Commission and any person, other than IM–2210–4. Limitations on Use of those that may be withheld from the NASD Regulation is proposing to Association’s Name public in accordance with the correct cross-references in the NASD (a) Use of Association Name provisions of 5 U.S.C. 552, will be Rules to the NASD By-Laws. The text of Members may indicate membership in available for inspection and copying in the proposed rule change is set forth the Association in conformity with the Commission’s Public Reference below. Proposed new language is Article [XVI] XV, Section 2 of the NASD Room, 450 Fifth Street, NW, italicized; proposed deletions are in By-Laws in one or more of the following Washington, DC 20549. Copies of all brackets. ways: such filings will also be available for Rule 0112. Effective Date * * * * * inspection and copying at the principal office of the NASD. All submissions The Rules shall become effective as IM–2420–1. Transactions Between should refer to File No. SR–NASD–98– provided in Section 1 of Article [XII] XI Members and Non-Members 1 of the By-Laws. 52 and should be submitted by (a) Non-members of the Association. December 28, 1998. Rule 0120. Definitions * * * * * VI. Conclusion * * * * * (4) Broker or Dealer Registration Revoked by SEC It is therefore ordered, pursuant to (i) ‘‘Member’’ The term ‘‘member’’ means any Revocation by the Commission of an Section 19(b)(2) of the Act,30 that the individual, partnership, corporation or Association member’s registration as a proposed rule change (SR–NASD–98– other legal entity admitted to broker or dealer automatically 52), as amended, is approved. terminates the membership of such For the Commission, by the Division of membership in the Association under Market Regulation, pursuant to delegated the provisions of Articles [II and] III and broker or dealer in the Association as of authority.31 IV of the By-Laws. the effective date of such order. Under Margaret H. McFarland, * * * * * Article [II] III, Section 4 of the By-Laws of the Corporation, a firm whose Deputy Secretary. Rule 1060. Persons Exempt from registration as a broker or dealer is [FR Doc. 98–32400 Filed 12–4–98; 8:45 am] Registration revoked is thereby disqualified for BILLING CODE 8010±01±M (a) No change. membership in the Association, and (b) No change. from the effective date of such order, the (1) the member firm has assured itself membership of such broker or dealer in SECURITIES AND EXCHANGE that the nonregistered foreign person the Association is discontinued. COMMISSION who will receive the compensation (the Thereafter such broker or dealer is a [Release No. 34±40718; File No. SR±NASD± ‘‘finder’’) is not required to register in non-member of the Association. 98±96] the U.S. as a broker/dealer nor is subject (5) Membership Resigned or Canceled to a disqualification as defined in The membership of a broker or dealer Self-Regulatory Organizations; Notice Article [II] III, Section 4 of the in the Association is automatically of Filing and Immediate Effectiveness Association’s By-Laws, and has further terminated when the Association of Proposed Rule Change by the assured itself that the compensation accepts the resignation of such member National Association of Securities arrangement does not violate applicable or cancels its membership in the Dealers, Inc. Relating to Correcting foreign law; Association under the provisions of Cross-References in Rules to NASD * * * * * Article [II] III, Section 3; Article [III] IV, By-Laws Section 5; or Article [XIV] XIII, Section Rule 1100. Foreign Associates November 30, 1998. 1, of the By-Laws. After the date of Pursuant to Section 19(b)(1) of the (a) No change. acceptance by the Association of the Securities Exchange Act of 1934 (b) No change. resignation of such member or the date (1) Such person is not subject to any (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 of cancellation of membership by the of the prohibitions to registration with notice is hereby given that on November Association, such broker or dealer is a the Association contained in Article [II] 19, 1998, the National Association of non-member of the Association. III, Section 4 of the By-Laws of the Securities Dealers, Inc. (‘‘NASD’’ or * * * * * Association. ‘‘Association’’), through its wholly- * * * * * IM–2420–2. Continuing Commissions Policy 30 15 U.S.C. 78s(b)(2). (c) In the event of the termination of 31 17 CFR 200.30–3(a)(12). the employment of a Foreign Associate, * * * * * 1 15 U.S.C. 78s(b)(1). the member must notify the Association 2 17 CFR 240.19b–4. immediately by filing a notice of 1 Text of note unchanged. Executive Summary when submitting files as an attach- NASD A revised edition of the OA T S ment to e-mail.) Reporting Technical Specifica t i o n s (Technical Specifica t i o n s ) was ¥ The OSO ID field was removed Notice to released November 30, 1998. from the FORE header. It will be Members that are required to submit derived from the User ID and Pass- data to the Order Audit Trail SystemSM word used for FTP logon or con- Members (O A T S SM ), in accordance with tained in the header of a file National Association of Securities submitted via e-mail. 99-04 Dealers, Inc. (NASD¨) Rules 6950 through 6957, must use these ¥ The Reporting Firm MP ID field was sp e c i fi cations for all files and records removed from the New Order, Can- submitted after January 18, 1999. cel/Replace, and Combined Order Execution Reports. Revised OATS Reporting For more information, contact NASD Technical Specifications Business and Technology Support ¥ Any order event reported to OATS Released Services at (800) 321-NASD. that does not link to a New Order Report that exists in OATS will be Discussion rejected. Thus, cancellations, modifi- The Technical Specifica t i o n s wa s cations, executions, or routes of originally published March 9, 1998, orders received before the date when Suggested Routing for member firms and third parties OATS reporting begins should not be Senior Management developing systems to report to transmitted to OATS. OATS. An updated edition was pub- Ad v e r t i s i n g lished June 30, 1998, to provide clari- ¥ Certification is no longer a prerequi- Continuing Education fication regarding the requirements. site for reporting production data to OATS; however, all firms that will be Corporate Finance A revised edition of the Te c h n i c a l transmitting data to OATS should Executive Representatives Sp e c i fic a t i o n s , dated November 30, test their systems thoroughly before Government Securities 1998, contains significant changes submitting data to the production from the previous editions. Member system. In s t i t u t i o n a l firms must ensure that these In s u r a n c e changes are incorporated into any ¥ The definition of OATS Business Internal Audit files submitted to OATS. The Day has changed. For purposes of changes include: OATS reporting, a business day Legal & Compliance begins after the close of The Nasdaq Mu n i c i p a l ¥ The Reporting OSO field was Stock Market¨ on one market day added to the FORE header. This (4:00:01 p.m. Eastern Time [ET]) and Mutual Fund field allows a member firm to give a ends with the close of The Nasdaq Op e r a t i o n s third party, such as a clearing firm , Stock Market on the next market day Op t i o n s access to its data submitted to (4:00:00 p.m. ET). Orders received OATS. The addition of this fiel d during an OATS Business Day are Registered Representatives means that the party transmitting a required to be submitted to OATS by Re g i s t r a t i o n file, the member firm that is subject 4:00:00 a.m. ET the following calen- Re s e a r c h to reporting, and a designated third dar day or they will be considered party can view the status files, statis- la t e . Sy n d i c a t e tics, and record rejections associated Sy s t e m s with a file. This new edition of the Te c h n i c a l Sp e c i fic a t i o n s also includes a revised Tr a d i n g ¥ The User ID and Password fiel d s set of error messages in Appendix B Tr a i n i n g are no longer required in the FORE and updated information about regis- Variable Contracts header for files submitted via file tration, testing, and implementation. transfer protocol (FTP). (The User ID NOTE: Only parties that are regis- and Password are still mandatory tered for OATS will be able to trans-

NASD Notice to Members 99-04 Janu a r y 1999 13 mit data to the NASD. In addition, ning January 19, 1999, all informa- 6950 through 6957 (the OATS only parties that are registered for tion submitted to OATS must comply Rules), which were approved by the OATS can obtain access to their file with these revised specifications. Securities and Exchange Commis- status, statistics, and record rejec- sion in March 1998 and amended in tions via the OATS Web interface. A new edition of the companion July 1998. The effective dates and document to the updated Technical requirements for the OATS Rules Also, the document highlights the Specifications, the OATS Sub- vary according to the following fact that all types of Nasdaq¨ se c u r i - scriber Manual, will be released in sc h e d u l e : ties, including Nasdaq National Mar- January 1999, on the OATS Web ke t ¨ and SmallCapSM equity securities pages. It will also be available from ¥ Phase 1: By March 1, 1999, elec- and convertible bonds, must be NASD Business and Technology tronic orders received at the trading reported to OATS. Any order infor- Support Services. This new edition desk by Market Makers and Elec- mation for non-Nasdaq securities will describes the procedures for send- tronic Communication Networks be rejected by OATS. ing and testing the capability to must be reported. send order data to OATS beginning All changes and clarifications made January 19, 1999, using the OATS ¥ Phase 2: By August 1, 1999, all since the June 30, 1998 edition are Web interface to submit and repair electronic orders must be reported. marked in the document with revised record rejections, obtain feedback lines, except the revisions to the from OATS, and perform self- ¥ Phase 3: By July 31, 2000, all non- error messages in Appendix B. A list administration of user accounts and electronic, or manual, orders must be of the major changes and clarifica - contact information. reported. (See Notice to Members tions appears in the cover letter for 98 - 3 3 for a complete description of the document. There are additional The November 30 edition of the the OATS Rules.) minor formatting and grammar Technical Specifica t i o n s is available changes. (NOTE: The page number- on the OATS Web pages at Contact NASD Business and Tech- ing throughout the November 30 edi- ww w . n a s d r . c o m / 3 3 4 0 . h t m . All nology Support Services via phone tion changed from the June 30 updates to this and other documen- at (800) 321-NASD or via e-mail at edition.) tation regarding OATS will be posted su p p o r t s e r v i c e s @ n a s d . c o m to obtain to the OATS Web pages available a paper copy of this document or to The changes described in this edition via the NASD RegulationSM Web Site obtain additional information about take effect in the test environment as at ww w . n a s d r . c o m . These publica- OATS. Information about OATS is of January 19, 1999, and in the pro- tions will not be distributed via mail, available on the NASD Regulation duction environment on March 1, except upon specific request. Web Site (ww w . n a s d r . c o m ). 1999. Information submitted to OATS before January 19 must com- The Technical Specifica t i o n s re f e r s © 1999, National Association of Securities Dealers, ply with the June 30, 1998 edition of to the requirements for reporting Inc. (NASD). All rights reserved. the Technical Specifica t i o n s . Begin- data, as described in NASD Rules

NASD Notice to Members 99-04 Janu a r y 1999 14 Executive Summary contrary instructions from the cus- NASD On September 9, 1998, the Securi- tomer during the halt. ties and Exchange Commission’s (SEC) Division of Market Regulation 3. During market-wide trading halts Notice to (the Division) issued Staff Legal Bul- with durations that will close the mar- letin No. 8 setting forth the Division's ket for the remainder of the trading views on the appropriate handling of day, pending and new customer Members customer orders when market-wide orders should be treated as follows: circuit breakers halt trading. In addi- 99-05 tion, the SEC again stressed that ¥ Absent customer instructions to broker/dealers must have suffici e n t the contrary, orders that are internal system capacity to operate pending at the time of the halt, properly during periods of market and new orders received after st r e s s . 1 the halt has commenced, should SEC Issues Guidance On be treated as “Good Til Can- Handling Customer Questions regarding this No t i c e celled” orders and be held by the Orders During Market- should be directed to Thomas P. member for execution at the Wide Trading Halts Moran, Senior Attorney, Office of reopening of the next trading General Counsel, The Nasdaq Stock se s s i o n . Market, Inc., at (202) 728-8401. Suggested Routing ¥ “At-the-Close” orders (including Senior Management “Market-at-Close” orders) pend- Background And Summary ing at the time trading is halted Ad v e r t i s i n g As part of its review of October 27- should be treated as cancelled Continuing Education 28, 1997 trading activity, the SEC or d e r s . Members should not determined a need to clarify accept, or forward to a market, Corporate Finance broker/dealers’ execution responsibil- any new orders related to closing Executive Representatives ities for retail market orders pending prices received during a trading 3 Government Securities or received during market-wide trad- ha l t . ing halts.2 In response, the Division In s t i t u t i o n a l issued Staff Legal Bulletin No. 8 out- Members may obtain a complete In s u r a n c e lining a broker/dealer’s obligations copy of Staff Legal Bulletin No. 8 Internal Audit during periods of extreme volatility (MR) from the SEC’s Web site resulting in the imposition of market- (ww w . s e c . g o v ). Legal & Compliance wide trading halts. In summary, the Mu n i c i p a l SEC provided the following guidance concerning order handling: Endnotes Mutual Fund 1See SEC Staff Legal Bulletin No. 8 (MR) Op e r a t i o n s 1. During market-wide trading halts (Division of Market Regulation-September 9, Op t i o n s resulting from the triggering of circuit 1998). breakers, customer orders should be Registered Representatives handled in the same manner as they 2See NASD IM-4120-3 Market Closing Re g i s t r a t i o n would have been handled during Policy (effective April 15, 1998). Re s e a r c h other regulatory trading halts con- cerning only individual stocks. 3This guidance supersedes the instructions Sy n d i c a t e concerning the handling of Market-on-Close Sy s t e m s 2. During market-wide trading halts orders contained in Nasdaq's General News of durations that will allow trading to Bulletin “Information Regarding Circuit Tr a d i n g resume on that same trading day, Breakers and Related Interpretative Issues” Tr a i n i n g pending and new customer orders dated October 29, 1997. Variable Contracts should be forwarded to the appropri- ate market for execution upon the © 1999, National Association of Securities Dealers, resumption of trading. This should be Inc. (NASD). All rights reserved. done unless the member receives

NASD Notice to Members 99-05 Janu a r y 1999 15 Executive Summary 1998 total of NASD, NYSE, Amex, NASD The 1998-1999 renewal cycle for the CBOE, PSE, PHLX and state renew- National Association of Securities al fees exceeded the firm’s payment Dealers, Inc. (NASD¨) broker/dealer submitted in response to the initial Notice to and agent registration begins its renewal invoice, the NASD paid the second phase this month. The NASD jurisdictions the additional renewal is issuing this No t i c e to help fees due at year-end on behalf of the Members members review, reconcile, and firm and will mail an “amount due” respond to the final adjusted invoice invoice to collect that sum from the 99-06 packages that will be mailed to all member firm. member firms in mid-January. Questions regarding this No t i c e ma y If the firm’s invoice reflects an be directed to the CRD/PD Gateway amount due, the NASD requests Call Center at (301) 869-6699. payment by wire transfer or company 1998-1999 Renewal check. Wire transfer instructions will Rosters And Final Final Adjusted Invoice be included in the final invoice packet Adjusted Invoices Packages and may also be obtained by calling On or about January 18, 1999, the the NASD’s Finance Department at NASD will begin to mail final adjusted (301) 590-6088. Firms should make invoices and renewal rosters to all the check payable to NASD Regula- NASD member firms. The fina l tion, Inc., with the firm’s Central Reg- Suggested Routing adjusted invoices will reflect the year- istration Depository (CRDSM ) number Senior Management end 1998 total fees for NASD per- and the word “Renewal” written on sonnel assessments; NASD branch the check, and mail it with the top Ad v e r t i s i n g of fi ce assessments; NASD renewal portion of the invoice. Payments Continuing Education processing fees; New York Stock must be received by the NASD no Exchange (NYSE), American Stock later than March 5, 1999. Corporate Finance ¨ ¨ Ex c h a n g e (A m e x ), Chicago Board Executive Representatives Options Exchange (CBOE), Pacific If the firm’s payment submitted in Government Securities Exchange (PSE), and Philadelphia response to the initial renewal invoice Stock Exchange (PHLX) mainte- exceeds its year-end 1998 total of In s t i t u t i o n a l nance fees; state agent renewal NASD, NYSE, Amex, CBOE, PSE, In s u r a n c e fees; and state broker/dealer renewal PHLX, and state renewal fees, a Internal Audit fees. The invoice will also reflect pay- “credit due” invoice will be issued. If ment submitted by an NASD mem- the firm’s invoice reflects a credit due Legal & Compliance ber in response to the initial renewal and the firm would like a refund Mu n i c i p a l invoice mailed in November 1998. check, it should sign the top portion of the invoice and send it to: Mutual Fund The final adjusted invoice will include Op e r a t i o n s a renewal roster that lists each firm ’ s CRD Accounting - Renewal Refunds Op t i o n s NASD and, if applicable, NYSE-, NASD Regulation, Inc. Amex-, CBOE-, PSE-, and PHLX- 1390 Piccard Drive, 2nd Floor Registered Representatives registered personnel, as of year-end Rockville, MD 20850 Re g i s t r a t i o n 1998. The roster will list all of the Re s e a r c h firm’s personnel alphabetically whose This invoice stub must be signed by registrations were renewed in states. an officer or principal of the firm and Sy n d i c a t e Firms with registered branch office s should include the name and Sy s t e m s that were active as of December 31, address of the firm’s contact person 1998, will also receive a branch to whom the check should be sent. Tr a d i n g of fi ce roster. Refund requests will be processed Tr a i n i n g as soon as possible. The average Variable Contracts A member’s final invoice will reflec t turn-around time for receiving a an “amount due,” a “credit due,” or a refund check last year was approxi- “zero balance.” If a firm’s year-end mately two weeks. Member firm s

NASD Notice to Members 99-06 Janu a r y 1999 17 may also request to transfer the Reviewing The Renewal 6699. Copies of supporting docu- credit due to their CRD account. To Rosters mentation, such as Notices of initiate a transfer of funds, please Member renewal rosters include all Approval/Termination, Forms U-4 or contact the CRD/PD Gateway Call agent registrations renewed for U-5, or Schedule E amendments Center at (301) 869-6699. If the 1999. Registrations that were pend- should be readily available. All other NASD does not receive a request for ing approval or were deficient at discrepancies should be reported a refund check or request to transfer year-end 1998 were not assessed directly to the jurisdictions involved— funds by March 5, 1999, CRD renewal fees; therefore, they will not NYSE, Amex, CBOE, PSE, PHLX, or Accounting will begin to manually be reported on the renewal roster. the applicable state(s). All renewal transfer the remaining credit bal- Members should examine their ros- roster discrepancies must be report- ances to member firms’ CRD ter carefully to ensure that all regis- ed by March 12, 1999. The inside accounts. This process is usually tration approvals and terminations cover of the renewal roster contains completed by April 1, 1999. are properly listed. detailed instructions to help mem- bers complete the renewal process. Final adjusted invoices that reflec t NASD discrepancies should be zero balances require no further reported by calling the CRD/PD © 1999, National Association of Securities Dealers, action by the member firm. Gateway Call Center at (301) 869- Inc. (NASD). All rights reserved.

NASD Notice to Members 99-06 Janu a r y 1999 18 As of November 23, 1998, the following bonds were added to the Fixed NA S D Income Pricing SystemSM (F I P S ¨). Notice to Sy m b o l Na m e Co u p o n Ma t u r i t y AA C . G A Arcadia Financial Ltd. 11 . 5 0 0 03 / 1 5 / 0 7 AB C R . G B ABC Rail Products Corp. 9. 1 2 5 01 / 1 5 / 0 4 Members AC H G . G A Acme Intermediate Holdings Inc. 12 . 0 0 0 09 / 3 0 / 0 5 AD E I . G A Adience Inc. 11 . 0 0 0 06 / 1 5 / 0 2 99 - 0 7 AD O C . G A American Sign & Indicator Corp. 15 . 0 0 0 01 / 1 5 / 0 1 AE N . G D AMC Entertainment Inc. 11 . 8 7 5 08 / 0 1 / 0 0 AE S . G E AES Corp. 10 . 2 5 07 / 1 5 / 0 6 AE W S . G A Andrews Group Inc. 10 . 0 0 0 12 / 3 0 / 9 9 AI L T . G A Atlas Air Inc. 12 . 2 5 0 12 / 0 1 / 0 2 Fi x ed Income Pric i n g AL B K . G A Albank Cap Trust I 9. 2 7 0 06 / 0 6 / 2 7 System Additions, AL C U . G A Allnet Communication Svcs. Inc. 9. 0 0 0 05 / 1 5 / 0 3 Ch a n g e s , And Deletions AL G X . G B Allegiance Telecom Inc. 12 . 8 7 5 05 / 1 5 / 0 8 As Of November 23, 1998 AL L Y . G B Alliance Gaming Corp. 12 . 8 7 5 06 / 3 0 / 0 3 AM M B . G D Amresco Inc. 8. 7 5 0 07 / 0 1 / 9 9 AM T R . G B Amtran Inc. 9. 6 2 5 12 / 1 5 / 0 5 AN C P . G C Anacomp Inc. 10 . 8 7 5 04 / 0 1 / 0 4 AN C P . G D Anacomp Inc. 10 . 8 7 5 04 / 0 1 / 0 4 Su g gested Routing AP V U . G A Apparel Ventures Inc. 12 . 2 5 0 12 / 3 1 / 0 0 Senior Management AS C M . G A Advanstar-Commuks Inc. 9. 2 5 0 05 / 0 1 / 0 8 AS S R . G A Associated Materials Inc. 9. 2 5 0 03 / 0 1 / 0 8 Ad v e r t i s i n g AT E N . G A At Entertainment Inc. 14 . 5 0 0 07 / 1 5 / 0 8 Continuing Education AU M L . G A Autospa Automalls Inc. 15 . 0 0 0 12 / 0 1 / 9 9 AV G H . G A Avatar Holdings Inc. 8. 0 0 0 10 / 0 1 / 0 0 Corporate Finance AW R L . G A America West Airlines 8. 1 6 0 07 / 0 2 / 0 2 Government Securities AW R L . G B America West Airlines 10 . 5 0 0 01 / 0 2 / 0 4 In s t i t u t i o n a l AW R L . G C America West Airlines 8. 1 2 0 07 / 0 2 / 0 1 AX H M . G A Axiohm Transaction Solutions Inc. 9. 7 5 0 10 / 0 1 / 0 7 In s u r a n c e AZ C H . G A Arizona Charlie’s Inc. 12 . 0 0 0 11 / 1 5 / 0 0 Internal Audit BA L O . G A Baltimore Bancorp 10 . 8 7 5 12 / 1 5 / 9 9 Legal & Compliance BA R Y . G A Barry’s Jewelers Inc. 11 . 0 0 0 12 / 2 2 / 0 0 BD I . G A Bayard Drilling Tech 11 . 0 0 0 06 / 3 0 / 0 5 Mu n i c i p a l BD U S . G A Burlington Industries Cap Inc. 16 . 8 7 5 07 / 0 1 / 0 4 Mutual Fund BE S P . G A Bear Island LLC Co. 10 . 0 0 0 12 / 0 1 / 0 7 BE V . G C Beverly Enterprises Inc. 8. 7 5 0 07 / 0 1 / 0 8 Op e r a t i o n s BE V . G D Beverly Enterprises Inc. 8. 6 2 5 10 / 0 1 / 0 8 Op t i o n s BF D G . G A Big 5 Holdings Inc. 13 . 6 2 5 09 / 1 5 / 0 2 Registered Representatives BF S U . G A Big V Supermarkets Inc. 11 . 0 0 0 02 / 1 5 / 0 4 BF U G . G A Blue Bell Funding Inc. 11 . 8 5 0 05 / 0 1 / 9 9 Re g i s t r a t i o n BG L I . G A BGLS Inc. 15 . 7 5 0 01 / 3 1 / 0 1 Re s e a r c h BH W . G A Bell & Howell Co. 11 . 5 0 0 03 / 1 5 / 0 5 Sy n d i c a t e BI Y A . G A Biscayne Holdings Inc. 13 . 0 0 0 12 / 1 5 / 9 9 BL F N . G A Beal Financial Corp. 12 . 7 5 0 08 / 1 5 / 0 0 Sy s t e m s BL Y D . G A Bally’s Grand Inc. 10 . 3 7 5 12 / 1 5 / 0 3 Tr a d i n g BL Y P . G A Bally’s Park Place Funding Inc. 9. 2 5 0 03 / 1 5 / 0 4 BN K F . G A Bankatlantic Financial Corp. 10 . 0 0 0 07 / 0 1 / 0 9 Tr a i n i n g BR P R . G A Brooke Partners L.P. 15 . 5 0 1 06 / 0 1 / 0 8 Variable Contracts BV L F . G B Beaver Valley Funding Corp. 8. 2 5 0 06 / 0 1 / 0 3 BV L F . G C Beaver Valley Funding Corp. 9. 0 0 0 06 / 0 1 / 1 7 BV P S . G A BVPS II Funding Corp. 7. 3 8 0 12 / 0 1 / 9 9 BV P S . G B BVPS II Funding Corp. 8. 3 3 0 12 / 0 1 / 0 7 NASD Notice to Members 99-07 Janu a r y 1999 19 Sy m b o l Na m e Co u p o n Ma t u r i t y

BV P S . G C BVPS II Funding Corp. 8. 8 9 0 06 / 0 1 / 1 7 BV P S . G D BVPS II Funding Corp. 7. 6 7 0 12 / 0 1 / 0 0 BV P S . G E BVPS II Funding Corp. 8. 6 8 0 06 / 0 1 / 1 7 CB N T . G A CenCom Cable Entertainment Inc. 15 . 0 0 0 02 / 2 5 / 0 0 CB S A . G A Coastal Bancorp Inc. 10 . 0 0 0 06 / 3 0 / 0 2 CC I R . G A CCI Corp. 12 . 7 5 0 12 / 1 5 / 9 8 CC I R . G B CCI Corp. 13 . 8 7 5 07 / 1 5 / 0 0 CC S B . G B Chevy Chase Savings Bank 9. 2 5 0 12 / 0 1 / 0 5 CD R A . G A CD Radio Inc. 15 . 0 0 0 12 / 0 1 / 0 7 CF T O . G A Cafeteria Operators L.P. 12 . 0 0 0 12 / 3 1 / 0 1 CH K . G H Chesapeake Energy Corp. 12 . 0 0 0 03 / 0 1 / 0 1 CI R . G C Circus Circus Enterprise Inc. 9. 2 5 0 12 / 0 1 / 0 5 CL D U . G A Colt Industries Inc. 11 . 2 5 0 12 / 0 1 / 1 5 CL F R . G A Cullen/Frost Cap Trust Inc. 8. 4 2 0 02 / 0 1 / 2 7 CL U L . G A Cellular Inc. 11 . 7 5 0 09 / 0 1 / 0 3 CM E Y . G A Continental Medical Systems Inc. 10 . 8 7 5 08 / 1 5 / 0 2 CM L S . G A Cumulus Media Inc. 10 . 3 7 5 07 / 0 1 / 0 8 CN A N . G A Continental Airlines Inc. 11 . 5 0 0 04 / 0 2 / 0 8 CN A N . G B Continental Airlines Inc. 7. 5 2 2 06 / 3 0 / 0 1 CO B V . G A Commemorative Brands Inc. 11 . 0 0 0 01 / 1 5 / 0 7 CO G B . G A Continental Global Group Inc. 11 . 0 0 0 04 / 0 1 / 0 7 CO P . G B Capital One Financial Corp. 7. 2 5 0 12 / 0 1 / 0 3 CO P T . G A Colonial Capital II 8. 9 2 0 01 / 1 5 / 2 7 CO T . G D Coltec Industries Inc. 10 . 2 5 0 04 / 0 1 / 0 2 CO T . G E Coltec Indus Inc. 7. 5 0 0 04 / 1 5 / 0 8 CP R K . G A Cap Rock Communications Corp. 12 . 0 0 0 07 / 1 5 / 0 8 CR H I . G A Carter Holdings Inc. 12 . 0 0 0 10 / 0 1 / 0 8 CS G Y . G A CMS Energy X-tras 7. 0 0 0 01 / 1 5 / 0 5 CU C N . G A Coldwell Banker Inc. 10 . 2 5 0 06 / 3 0 / 0 3 CU F M . G A Cumberland Farms Inc. 10 . 5 0 0 10 / 0 1 / 0 3 CU M H . G A Columbia Healthcare Corp. 10 . 8 7 5 03 / 0 1 / 0 2 CU M H . G B Columbia Healthcare Corp. 11 . 5 0 0 06 / 0 1 / 0 2 CY S S . G B County Seat Stores Inc. 12 . 0 0 0 10 / 0 1 / 0 1 DE H A . G A Degeorge Home Alliance Inc. 12 . 0 0 0 04 / 0 1 / 0 1 DE L L . G A Dell Computer Corp. 11 . 0 0 0 08 / 1 5 / 0 0 DL C A . G B Dial Call Communication Inc. 12 . 2 5 0 04 / 1 5 / 0 4 DO C . G A Decisionone Holdings Corp. 11 . 5 0 0 08 / 0 1 / 0 8 DO M T . G B Dominion Textile Inc. 8. 8 7 5 11 / 0 1 / 0 3 DR S T . G A Dr. Structured Finance Corp. 6. 6 6 0 08 / 1 5 / 1 0 DR S T . G B Dr. Structured Finance Corp. 7. 4 3 0 08 / 1 5 / 1 8 DR S T . G C Dr. Structured Finance Corp. 7. 6 0 0 08 / 1 5 / 0 7 DR S T . G D Dr. Structured Finance Corp. 8. 3 7 5 08 / 1 5 / 1 5 DR S T . G E Dr. Structured Finance Corp. 8. 5 5 0 08 / 1 5 / 1 9 DR S T . G F Dr. Structured Finance Corp. 8. 3 5 0 02 / 1 5 / 0 4 DR S T . G G Dr. Structured Finance Corp. 9. 3 5 0 08 / 1 5 / 1 9 DW C R . G B Dow Corning Corp. 8. 1 5 0 10 / 1 5 / 2 9 ED Y N . G D Envirodyne Industries Inc. 0. 0 0 0 06 / 1 5 / 0 0 EF C W . G A Eagle Finance Corp. 10 . 7 5 0 06 / 0 1 / 0 5 EG D U . G A Eagle Industries Inc. 10 . 5 0 0 07 / 1 5 / 0 3 EI P R . G A EIP Ref Corp. 10 . 2 5 0 10 / 0 1 / 1 2 EL A Y . G A Electro-Audio Dynamics Inc. 12 . 8 7 5 02 / 0 1 / 9 9 EL N D . G A El Comandante 11 . 7 5 0 12 / 1 5 / 0 3 EM E N . G A Empress Entmt Inc. 8. 1 2 5 07 / 0 1 / 0 6 NASD Notice to Members 99-07 Janu a r y 1999 20 Sy m b o l Na m e Co u p o n Ma t u r i t y

EM G P . G A Emcor Group Inc. 11 . 0 0 0 12 / 1 5 / 0 1 ER L Y . G A Erly Industries Inc. 12 . 5 0 0 12 / 0 1 / 0 2 EV G I . G A Evergreen International Aviation Inc. 13 . 5 0 0 08 / 1 5 / 0 2 EY T H . G A Elyria Telephone Co. 8. 1 0 0 12 / 1 5 / 0 3 FB O R . G A FNB Corp. 9. 5 0 0 05 / 1 5 / 0 2 FB W L . G A Fair Lanes Inc. 9. 5 0 0 07 / 1 5 / 0 1 FC S G . G A Forecast Group LP 11 . 3 7 5 12 / 1 5 / 0 0 FD B C . G A Fidelity Federal Bancorp 10 . 0 0 0 06 / 0 1 / 0 5 FF C L . G A First Federal Financial Corp. 11 . 7 5 0 10 / 0 1 / 0 4 FI U M . G A Fresenius Med Cap Trust II 7. 8 7 5 02 / 0 1 / 0 8 FI U M . G B Fresenius Med Cap Trust II 9. 0 0 0 12 / 0 1 / 0 6 FL B M . G A Filene’s Basement Inc. 12 . 7 5 0 07 / 1 5 / 0 0 FL C . G A R&B Falcon Corp. 6. 5 0 0 04 / 1 5 / 0 3 FL C . G B R&B Falcon Corp. 6. 7 5 0 04 / 1 5 / 0 5 FL C . G C R&B Falcon Corp. 6. 9 5 0 04 / 1 5 / 0 8 FL C . G D R&B Falcon Corp. 7. 3 7 5 04 / 1 5 / 1 8 FL E R . G B Big Flower Press Inc. 10 . 7 5 0 08 / 0 1 / 0 3 FL T W . G A Florist Transworld Delivery Inc. 14 . 0 0 0 12 / 1 5 / 0 1 FM A C . G B First Merchants Accept Corp. 11 . 0 0 0 03 / 1 5 / 0 5 FM O . G E Federal-Mogul Co. 8. 8 0 0 04 / 1 5 / 0 7 FO H O . G B Fort Howard Corp. 10 . 0 0 0 03 / 1 5 / 0 3 FO O D . G A Fresh Foods Inc. 10 . 7 5 0 06 / 0 1 / 0 6 FR A G . G B French Fragrance Inc. 10 . 3 7 5 05 / 1 5 / 0 7 FR C . G D First Republic Bancorp Inc. 11 . 0 0 0 09 / 3 0 / 0 3 FR C . G E First Republic Bancorp Inc. 8. 0 0 0 01 / 1 5 / 0 9 FR C E . G A Forest City Enterprises Inc. 8. 5 0 0 03 / 1 5 / 0 8 FR D Q . G A FRD Acquisition Co. 12 . 5 0 0 07 / 1 5 / 0 4 GB C H . G A Global Crossing Hldg Ltd. 9. 6 2 5 05 / 1 5 / 0 8 GC I L . G A GCI Inc. 9. 7 5 0 08 / 0 1 / 0 7 GC R P . G A Graphic Controls Corp. 12 . 0 0 0 09 / 1 5 / 0 5 GD P T . G A Golden State Petro Trans Corp. 8. 0 4 0 02 / 0 1 / 1 9 GH L A . G A Grove Hldgs LLC/Grove Hldgs Capin 11 . 6 2 5 05 / 0 1 / 0 9 GI H G . G A G-I Holdings Inc. 10 . 0 0 0 02 / 1 5 / 0 6 GI T C . G A Glenoit Corp. 11 . 0 0 0 04 / 1 5 / 0 7 GK B C . G A Great Lakes Bancorp 18 . 0 0 0 03 / 0 1 / 0 6 GO B C . G A California Fed Bank 10 . 0 0 0 01 / 0 3 / 0 3 GP A D . G A GPA Delaware Inc. 8. 7 5 0 12 / 1 5 / 9 8 GR L C . G B Great Lakes Carbon Corp. 10 . 2 5 0 05 / 1 5 / 0 8 GR L C . G C Great Lakes Carbon Corp. 13 . 1 2 5 05 / 1 5 / 0 9 GS L N . G A Guardian Saving & Loan Association 12 . 6 2 5 01 / 1 5 / 0 2 GT H C . G A Gothic Production Corp. 11 . 1 2 5 05 / 0 1 / 0 5 GU M B . G A Gulf Mobile & Ohio RR Co. 5. 0 0 0 12 / 0 1 / 5 6 GV R H . G A Goldriver Hotel & Casino Corp. 13 . 3 7 5 08 / 3 1 / 9 9 HA Y . G E Hayes Wheel Intl Inc. 9. 2 5 0 11 / 1 5 / 0 2 HA Y N . G B Haynes International Inc. 13 . 5 0 0 08 / 1 5 / 9 9 HC C I . G B HCC Industries Inc. 7. 2 5 0 04 / 1 5 / 0 1 HE F R . G A Heafner (JH) Inc. 10 . 0 0 0 05 / 1 5 / 0 8 HL S U . G A Healthsouth Corp. 10 . 0 0 0 06 / 1 5 / 0 0 HM C Q . G A HMC Acquisition Properties Inc. 9. 0 0 0 12 / 1 5 / 0 7 HM H P . G E HMH Properties Inc. 8. 4 5 12 / 0 1 / 0 8 HR I S . G A Homeland Stores Inc. 10 . 0 0 0 08 / 0 1 / 0 3 HS Y A . G A Hosiery Corp. of Amer Inc. 13 . 7 5 0 08 / 0 1 / 0 2 HU R S . G A Hudson RCI Inc. 9. 1 2 5 04 / 1 5 / 0 8 NASD Notice to Members 99-07 Janu a r y 1999 21 Sy m b o l Na m e Co u p o n Ma t u r i t y

HW G . G C Hallwood Group Inc. 7. 0 0 0 07 / 3 1 / 0 0 IA D . G A Inland Steel Inc. 12 . 7 5 0 12 / 1 5 / 0 2 IB U I . G A International Business Interiors Corp. 14 . 2 5 0 12 / 1 5 / 9 8 IC A B . G C International Cabletel Inc. 12 . 7 5 0 04 / 1 5 / 0 5 IC I I . G C Imperial Credit Inds Inc. 9. 7 5 0 01 / 1 5 / 0 4 IN R K . G A International Bank (WA) 15 . 7 5 0 08 / 0 1 / 0 0 IP S C . G A Impsat Corp. 12 . 1 2 5 07 / 1 5 / 0 3 IV P R . G A Intervest Corp. 0. 0 0 0 04 / 0 1 / 0 0 JB L T . G A Johnston Cola GP 11 . 3 7 5 09 / 1 5 / 0 1 JC O M . G C Jacor Communications Co. 8. 0 0 0 02 / 1 5 / 1 0 JD T L . G B Jordan Telecom Products Inc. 9. 8 7 5 08 / 0 1 / 0 7 JO S I . G A Josephson Intl Inc. 12 . 5 0 0 05 / 1 5 / 0 3 JR Y M . G A J Ray McDermott SA 9. 3 7 5 07 / 1 5 / 0 6 KC F P . G A Key Communications Inc. 10 . 5 0 0 06 / 0 1 / 0 8 KD E I . G A Kidde Inc. 9. 7 5 0 12 / 0 1 / 0 3 KH K Y . G A Kash N Karry Food Stores Inc. 0. 0 0 0 02 / 0 1 / 0 3 KM . G G K Mart Corp. 6. 0 0 0 01 / 0 1 / 0 8 KM . G H K Mart Corp. 13 . 5 0 0 01 / 0 1 / 0 9 KM C P . G D K Mart Corp. 8. 5 4 0 01 / 0 2 / 1 5 KP L A . G B Key Plastics Inc. 14 . 0 0 0 11 / 1 5 / 9 9 LC L Z . G A Localizer Rent a Car 10 . 2 5 0 10 / 0 1 / 0 5 LE N . G A Concord Camera Corp. 11 . 0 0 0 07 / 1 5 / 0 5 LE X P . G A Lexington Precision Corp. 12 . 7 5 0 02 / 0 1 / 0 0 LI R P . G A Leggett Group Inc. 11 . 5 0 0 02 / 0 1 / 9 9 LN O U . G A Lanesborough Corp. 10 . 0 0 0 04 / 1 5 / 0 0 LR G Y . G A LaSalle Energy Corp. 11 . 7 5 0 07 / 0 1 / 9 9 LU B S . G A Lundgren Bros. Construction Inc. 11 . 0 0 0 10 / 0 1 / 0 4 LW N . G D Loewen Group Intl Inc. 8. 2 5 0 04 / 1 5 / 0 3 LY L U . G A Lyman Lumber Co. 10 . 0 0 0 06 / 3 0 / 0 3 MA L R . G A Malrite Commun Group Inc. 15 . 2 5 0 02 / 1 5 / 9 9 MA U M . G A Mayfair Super Markets Inc. 11 . 7 5 0 03 / 3 0 / 0 3 MB C A . G B Metropolitan Broadcasting Corp. 13 . 2 5 0 09 / 3 0 / 0 6 MC N C . G B MCMS Inc. 0. 0 0 0 03 / 0 1 / 0 8 MD Q C . G A Mediq Inc. 13 . 0 0 0 06 / 0 1 / 0 9 ME D . G B Mediq/Prn Life Support Svcs Inc. 11 . 0 0 0 06 / 0 1 / 0 8 MG L . G B Magellan Health Svs Inc. 9. 0 0 0 02 / 1 5 / 0 8 MH S H . G A MHS Holdings Co. 16 . 8 7 5 09 / 2 2 / 0 4 MI L . G A Millipore Corp. 7. 2 0 0 04 / 0 1 / 0 2 MI L . G B Millipore Corp. 7. 5 0 0 04 / 0 1 / 0 7 MJ D C . G A MJD Communications Inc. 9. 5 0 0 05 / 0 1 / 0 8 MJ D C . G B MJD Communications Inc. 0. 0 0 0 05 / 0 1 / 0 8 ML W L . G A Mail-Well Corp. 10 . 5 0 0 02 / 1 5 / 0 4 MN C . G A MTS Inc. 9. 3 7 5 05 / 0 1 / 0 5 MP B P . G A MPB Corp. 14 . 5 0 0 10 / 1 5 / 9 9 MP K F . G A Mountain Parks Financial Corp. 9. 0 0 0 08 / 1 5 / 0 5 MR B H . G A Merit Behavioral Corp. 11 . 5 0 0 11 / 1 5 / 0 5 MR N Y . G A Mariner Energy Inc. 10 . 5 0 0 08 / 0 1 / 0 6 MS K X . G A Miss Kan Tex RR Co. 5. 5 0 0 01 / 0 1 / 3 3 MU O P . G A Muse Air Corp. 16 . 8 7 5 06 / 1 5 / 9 9 NE V . G A Nuevo Energy Co. 9. 5 0 0 04 / 1 5 / 0 6 NF K C . G A North Fork Cap Trust I 8. 7 0 0 12 / 1 5 / 2 6 NM K . G I Niagara Mohawk Paver Corp. 8. 7 7 0 01 / 0 1 / 1 8 NN S . G A Newport News Shipbuilding Inc. 8. 6 2 5 12 / 0 1 / 0 6 NASD Notice to Members 99-07 Janu a r y 1999 22 Sy m b o l Na m e Co u p o n Ma t u r i t y

NN S . G B Newport News Shipbuilding Inc. 9. 2 5 0 12 / 0 1 / 0 6 NR C W . G A Norcal Waste System Inc. 13 . 5 0 0 11 / 1 5 / 0 5 NR W A . G A Northwest Airlines 10 . 1 5 0 01 / 0 2 / 0 5 NS G P . G A NS Group Inc. 13 . 5 0 0 07 / 1 5 / 0 3 NU . G B Northeast Utilities 8. 3 8 0 03 / 0 1 / 0 5 NW R U . G A NWA Trust 13 . 8 7 5 12 / 2 1 / 0 6 NX L K . G C Nextlink Communications Inc. 9. 4 5 0 04 / 1 5 / 0 8 NX T L . G G Nextel Communications Inc. 11 . 5 0 0 09 / 0 1 / 0 3 OP L I . G A Optel Inc. 13 . 0 0 0 02 / 1 5 / 0 5 OP L I . G B Optel Inc. 11 . 5 0 0 07 / 0 1 / 0 8 OR O C . G A Orion Pictures 10 . 0 0 0 10 / 3 1 / 0 1 OS I . G C Outdoor Systems Inc. 10 . 7 5 0 08 / 1 5 / 0 3 PA U H . G A Paul Harris Stores Inc. 11 . 3 7 5 01 / 3 1 / 0 0 PD S F . G A PDS Financial Corp. 10 . 0 0 0 07 / 0 1 / 0 4 PD V A . G A PDV America Inc. 7. 7 5 0 08 / 0 1 / 0 0 PD V A . G B PDV America Inc. 7. 8 7 5 08 / 0 1 / 0 3 PF I D . G A P&F Industries Inc. 13 . 7 5 0 01 / 0 1 / 1 7 PH G C . G A People’s Heritage Corp. Trust 9. 0 6 0 02 / 0 1 / 2 7 PH P . G D Petroleum Heat & Power Inc. 12 . 2 5 02 / 0 1 / 0 5 PI D M . G A Piedmont Aviation Inc. Series A 9. 7 0 0 01 / 1 5 / 9 9 PI D M . G B Piedmont Aviation Inc. Series B 9. 7 0 0 01 / 1 5 / 9 9 PI D M . G C Piedmont Aviation Inc. Series C 9. 7 0 0 01 / 1 5 / 9 9 PI D M . G D Piedmont Aviation Inc. Series A 9. 8 0 0 01 / 1 5 / 0 0 PI D M . G E Piedmont Aviation Inc. Series B 9. 8 0 0 01 / 1 5 / 0 0 PI D M . G F Piedmont Aviation Inc. Series C 9. 8 0 0 01 / 1 5 / 0 0 PI D M . G G Piedmont Aviation Inc. Series A 9. 9 0 0 01 / 1 5 / 0 1 PI D M . G H Piedmont Aviation Inc. Series B 9. 9 0 0 01 / 1 5 / 0 1 PI D M . G I Piedmont Aviation Inc. Series C 9. 9 0 0 01 / 1 5 / 0 1 PI D M . G J Piedmont Aviation Inc. Series A 10 . 0 0 0 01 / 1 5 / 0 2 PI D M . G K Piedmont Aviation Inc. Series B 10 . 0 0 0 01 / 1 5 / 0 2 PI D M . G L Piedmont Aviation Inc. Series C 10 . 0 0 0 01 / 1 5 / 0 2 PI D M . G M Piedmont Aviation Inc. Series A 10 . 0 5 0 01 / 1 5 / 0 3 PI D M . G N Piedmont Aviation Inc. Series B 10 . 0 5 0 01 / 1 5 / 0 3 PI D M . G O Piedmont Aviation Inc. Series C 10 . 0 5 0 01 / 1 5 / 0 3 PI D M . G P Piedmont Aviation Inc. Series A 10 . 1 5 0 01 / 1 5 / 0 4 PI D M . G Q Piedmont Aviation Inc. Series B 10 . 1 5 0 01 / 1 5 / 0 4 PI D M . G R Piedmont Aviation Inc. Series C 10 . 1 5 0 01 / 1 5 / 0 4 PI D M . G S Piedmont Aviation Inc. Series A 10 . 2 0 0 01 / 1 5 / 0 5 PI D M . G T Piedmont Aviation Inc. Series B 10 . 2 0 0 01 / 1 5 / 0 5 PI D M . G U Piedmont Aviation Inc. Series C 10 . 2 0 0 01 / 1 5 / 0 5 PI D M . G V Piedmont Aviation Inc. Series A 10 . 2 5 0 01 / 1 5 / 0 7 PI D M . G W Piedmont Aviation Inc. Series B 10 . 2 5 0 01 / 1 5 / 0 7 PI D M . G X Piedmont Aviation Inc. Series C 10 . 2 5 0 01 / 1 5 / 0 7 PI D M . G Y Piedmont Aviation Inc. Series A 10 . 3 0 0 01 / 1 5 / 0 8 PI D M . G Z Piedmont Aviation Inc. Series B 10 . 3 0 0 01 / 1 5 / 0 8 PI D M . H A Piedmont Aviation Inc. Series C 10 . 3 0 0 01 / 1 5 / 0 8 PI D M . H B Piedmont Aviation Inc. Series A 10 . 3 0 0 07 / 1 5 / 0 8 PI D M . H C Piedmont Aviation Inc. Series B 10 . 3 0 0 07 / 1 5 / 0 8 PI D M . H D Piedmont Aviation Inc. Series C 10 . 3 0 0 07 / 1 5 / 0 8 PI D M . H E Piedmont Aviation Inc. Series A 10 . 3 0 0 07 / 1 5 / 0 9 PI D M . H F Piedmont Aviation Inc. Series B 10 . 3 0 0 07 / 1 5 / 0 9 PI D M . H G Piedmont Aviation Inc. Series C 10 . 3 0 0 07 / 1 5 / 0 9 PI D M . H H Piedmont Aviation Inc. Series A 10 . 3 0 0 07 / 1 5 / 1 0 NASD Notice to Members 99-07 Janu a r y 1999 23 Sy m b o l Na m e Co u p o n Ma t u r i t y

PI D M . H I Piedmont Aviation Inc. Series B 10 . 3 0 0 07 / 1 5 / 1 0 PI D M . H J Piedmont Aviation Inc. Series C 10 . 3 0 0 07 / 1 5 / 1 0 PI D M . H K Piedmont Aviation Inc. Series D 10 . 0 0 0 03 / 2 8 / 9 9 PI D M . H L Piedmont Aviation Inc. Series E 10 . 0 0 0 03 / 2 8 / 9 9 PI D M . H M Piedmont Aviation Inc. Series F 10 . 0 0 0 03 / 2 8 / 9 9 PI D M . H N Piedmont Aviation Inc. Series G 10 . 0 0 0 03 / 2 8 / 9 9 PI D M . H O Piedmont Aviation Inc. Series D 10 . 1 0 0 03 / 2 8 / 0 0 PI D M . H P Piedmont Aviation Inc. Series E 10 . 1 0 0 03 / 2 8 / 0 0 PI D M . H Q Piedmont Aviation Inc. Series F 10 . 1 0 0 03 / 2 8 / 0 0 PI D M . H R Piedmont Aviation Inc. Series G 10 . 1 0 0 03 / 2 8 / 0 0 PI D M . H S Piedmont Aviation Inc. Series D 10 . 1 5 0 03 / 2 8 / 0 1 PI D M . H T Piedmont Aviation Inc. Series E 10 . 1 5 0 03 / 2 8 / 0 1 PI D M . H U Piedmont Aviation Inc. Series F 10 . 1 5 0 03 / 2 8 / 0 1 PI D M . H V Piedmont Aviation Inc. Series G 10 . 1 5 0 03 / 2 8 / 0 1 PI D M . H W Piedmont Aviation Inc. Series D 10 . 1 5 0 03 / 2 8 / 0 2 PI D M . H X Piedmont Aviation Inc. Series E 10 . 1 5 0 03 / 2 8 / 0 2 PI D M . H Y Piedmont Aviation Inc. Series F 10 . 1 5 0 03 / 2 8 / 0 2 PI D M . H Z Piedmont Aviation Inc. Series G 10 . 1 5 0 03 / 2 8 / 0 2 PI D M . I A Piedmont Aviation Inc. Series D 10 . 1 5 0 03 / 2 8 / 0 3 PI D M . I B Piedmont Aviation Inc. Series E 10 . 1 5 0 03 / 2 8 / 0 3 PI D M . I C Piedmont Aviation Inc. Series F 10 . 1 5 0 03 / 2 8 / 0 3 PI D M . I D Piedmont Aviation Inc. Series G 10 . 1 5 0 03 / 2 8 / 0 3 PI D M . I E Piedmont Aviation Inc. Series D 10 . 2 5 0 03 / 2 8 / 0 4 PI D M . I F Piedmont Aviation Inc. Series E 10 . 2 5 0 03 / 2 8 / 0 4 PI D M . I G Piedmont Aviation Inc. Series F 10 . 2 5 0 03 / 2 8 / 0 4 PI D M . I H Piedmont Aviation Inc. Series G 10 . 2 5 0 03 / 2 8 / 0 4 PI D M . I I Piedmont Aviation Inc. Series E 10 . 2 5 0 03 / 2 8 / 0 5 PI D M . I J Piedmont Aviation Inc. Series F 10 . 2 5 0 03 / 2 8 / 0 5 PI D M . I K Piedmont Aviation Inc. Series G 10 . 2 5 0 03 / 2 8 / 0 5 PI D M . I L Piedmont Aviation Inc. Series D 10 . 3 0 0 03 / 2 8 / 0 6 PI D M . I M Piedmont Aviation Inc. Series E 10 . 3 0 0 03 / 2 8 / 0 6 PI D M . I N Piedmont Aviation Inc. Series F 10 . 3 0 0 03 / 2 8 / 0 6 PI D M . I O Piedmont Aviation Inc. Series G 10 . 3 0 0 03 / 2 8 / 0 6 PI D M . I P Piedmont Aviation Inc. Series D 10 . 3 0 0 03 / 2 8 / 0 7 PI D M . I Q Piedmont Aviation Inc. Series E 10 . 3 0 0 03 / 2 8 / 0 7 PI D M . I R Piedmont Aviation Inc. Series F 10 . 3 0 0 03 / 2 8 / 0 7 PI D M . I S Piedmont Aviation Inc. Series G 10 . 3 0 0 03 / 2 8 / 0 7 PI D M . I T Piedmont Aviation Inc. Series D 10 . 3 5 0 03 / 2 8 / 0 9 PI D M . I U Piedmont Aviation Inc. Series E 10 . 3 5 0 03 / 2 8 / 0 9 PI D M . I V Piedmont Aviation Inc. Series F 10 . 3 5 0 03 / 2 8 / 0 9 PI D M . I W Piedmont Aviation Inc. Series G 10 . 3 5 0 03 / 2 8 / 0 9 PI D M . I X Piedmont Aviation Inc. Series D 10 . 3 5 0 03 / 2 8 / 1 0 PI D M . I Y Piedmont Aviation Inc. Series E 10 . 3 5 0 03 / 2 8 / 1 0 PI D M . I Z Piedmont Aviation Inc. Series F 10 . 3 5 0 03 / 2 8 / 1 0 PI D M . J A Piedmont Aviation Inc. Series G 10 . 3 5 0 03 / 2 8 / 1 0 PI D M . J B Piedmont Aviation Inc. Series D 10 . 3 5 0 03 / 2 8 / 1 1 PI D M . J C Piedmont Aviation Inc. Series E 10 . 3 5 0 03 / 2 8 / 1 1 PI D M . J D Piedmont Aviation Inc. Series F 10 . 3 5 0 03 / 2 8 / 1 1 PI D M . J E Piedmont Aviation Inc. Series G 10 . 3 5 0 03 / 2 8 / 1 1 PI D M . J F Piedmont Aviation Inc. Series D 10 . 3 5 0 03 / 2 8 / 1 2 PI D M . J G Piedmont Aviation Inc. Series E 10 . 3 5 0 03 / 2 8 / 1 2 PI D M . J H Piedmont Aviation Inc. Series F 10 . 3 5 0 03 / 2 8 / 1 2 PI D M . J I Piedmont Aviation Inc. Series G 10 . 3 5 0 03 / 2 8 / 1 2 NASD Notice to Members 99-07 Janu a r y 1999 24 Sy m b o l Na m e Co u p o n Ma t u r i t y

PI D M . J J Piedmont Aviation Inc. Series H 9. 6 5 0 05 / 0 8 / 9 9 PI D M . J K Piedmont Aviation Inc. Series I 9. 6 5 0 05 / 0 8 / 9 9 PI D M . J L Piedmont Aviation Inc. Series H 9. 7 0 0 05 / 0 8 / 0 0 PI D M . J M Piedmont Aviation Inc. Series I 9. 7 0 0 05 / 0 8 / 0 0 PI D M . J N Piedmont Aviation Inc. Series H 9. 7 5 0 05 / 0 8 / 0 1 PI D M . J O Piedmont Aviation Inc. Series I 9. 7 5 0 05 / 0 8 / 0 1 PI D M . J P Piedmont Aviation Inc. Series H 9. 7 5 0 05 / 0 8 / 0 2 PI D M . J Q Piedmont Aviation Inc. Series I 9. 7 5 0 05 / 0 8 / 0 2 PI D M . J R Piedmont Aviation Inc. Series H 9. 7 5 0 05 / 0 8 / 0 3 PI D M . J S Piedmont Aviation Inc. Series I 9. 7 5 0 05 / 0 8 / 0 3 PI D M . J T Piedmont Aviation Inc. Series H 9. 8 0 0 05 / 0 8 / 0 4 PI D M . J U Piedmont Aviation Inc. Series I 9. 8 0 0 05 / 0 8 / 0 4 PI D M . J V Piedmont Aviation Inc. Series H 9. 8 5 0 05 / 0 8 / 0 5 PI D M . J W Piedmont Aviation Inc. Series I 9. 8 5 0 05 / 0 8 / 0 5 PI D M . J X Piedmont Aviation Inc. Series H 9. 9 0 0 11 / 0 8 / 0 6 PI D M . J Y Piedmont Aviation Inc. Series I 9. 9 0 0 11 / 0 8 / 0 6 PI D M . J Z Piedmont Aviation Inc. Series H 9. 9 5 0 11 / 0 8 / 0 8 PI D M . K A Piedmont Aviation Inc. Series I 9. 9 5 0 11 / 0 8 / 0 8 PI D M . K B Piedmont Aviation Inc. Series H 9. 9 5 0 11 / 0 8 / 0 9 PI H G . G A Pi Holdings Inc. 18 . 5 0 0 03 / 0 1 / 0 4 PL C G . G A P&L Coal Holdings Corp. 8. 8 7 5 05 / 1 5 / 0 8 PL C G . G B P&L Coal Holdings Corp. 9. 6 2 5 05 / 1 5 / 0 8 PM O R . G A Phar-Mor Inc. 11 . 7 2 0 09 / 1 1 / 0 2 PP F G . G A PNPP II Funding Corp. 8. 0 7 0 05 / 3 0 / 0 0 PP F G . G B PNPP II Funding Corp. 8. 5 1 0 11 / 3 0 / 0 6 PP F G . G C PNPP II Funding Corp. 9. 1 2 0 05 / 3 0 / 1 6 PP F G . G D PNPP II Funding Corp. 8. 8 3 0 05 / 3 0 / 1 6 PT H N . G A Pathnet Inc. 12 . 2 5 0 04 / 1 5 / 0 8 RE G L . G B Regal Cinemas Inc. 9. 5 0 0 06 / 0 1 / 0 8 RM Y . G A Delco Remy Intl Inc. 8. 6 2 5 12 / 1 5 / 0 7 SC A N . G A Alliance Imaging Inc. 9. 6 2 5 12 / 1 5 / 0 5 SC A N . G B Alliance Imaging Inc. 0. 0 0 0 12 / 1 5 / 0 5 SH D L . G A Steel Heddle Group Inc. 13 . 7 5 0 06 / 0 1 / 0 9 ST E H . G A Steel Heddle Mfg. Co. 10 . 6 2 5 06 / 0 1 / 0 8 ST G C . G A Startec Global Comm Corp. 12 . 0 0 0 05 / 1 5 / 0 8 SV S N . G A Spectra Vision Inc. 11 . 6 5 0 12 / 0 1 / 0 2 TE T C . G A Telecomom Tech Co. 9. 7 5 0 05 / 1 5 / 0 8 TP C S . G A Triton PCS Inc. 11 . 0 0 0 05 / 0 1 / 0 8 UC B R . G A UCBH Trust Co. 9. 3 7 5 05 / 0 1 / 2 8 UR I . G B United Rentals Inc. 9. 5 0 0 06 / 0 1 / 0 8 WP S N . G D WestPoint Stevens Inc. 7. 8 7 5 06 / 1 5 / 0 5 WS C D . G A Wesco Distr Inc. 9. 1 2 5 06 / 0 1 / 0 8

As of November 23, 1998, the following bonds were deleted from FIPS.

Sy m b o l Na m e Co u p o n Ma t u r i t y

AK . G A Ackerly Group Inc. 10 . 7 5 0 10 / 0 1 / 0 3 AL B K . G A Albank Cap Trust I 9. 2 7 0 06 / 0 6 / 2 7 BU B D . G A Busse Broadcasting Corp. 11 . 6 2 5 10 / 1 5 / 0 0

NASD Notice to Members 99-07 Janu a r y 1999 25 Sy m b o l Na m e Co u p o n Ma t u r i t y

CA N C . G A Calmar Inc. 11 . 5 0 0 08 / 1 5 / 0 5 CE . G A California Energy Inc. 10 . 2 5 0 01 / 1 5 / 0 4 CG F G . G A Cobblestone Golf Group Inc. 11 . 5 0 0 06 / 0 1 / 0 3 EY C A . G A Eye Care Centers Amer Inc. 12 . 0 0 0 10 / 0 1 / 0 3 FI U M . G A Fresenius Med Cap Trust II 7. 8 7 5 02 / 0 1 / 0 8 FI U M . G B Fresenius Med Cap Trust II 9. 0 0 0 12 / 0 1 / 0 6 FL H G . G A Falcon Holdings Group LP 11 . 0 0 0 09 / 1 5 / 0 3 FR P . G A Freeport-McMoran Resources LP 8. 7 5 0 02 / 1 5 / 0 4 GC R . G A Gaylord Container Corp. 11 . 5 0 0 05 / 1 5 / 0 1 HC N A . G A Harris Chem North Amer Inc. 10 . 2 5 0 07 / 1 5 / 0 1 HC N A . G B Harris Chem North Amer Inc. 10 . 7 5 0 10 / 1 5 / 0 3 HE I A . G A Heileman Acq Corp. 9. 6 2 5 01 / 3 1 / 0 4 HO R S . G B Horsehead Inds Inc. 14 . 0 0 0 06 / 0 1 / 9 9 IA O . G B Inland Steel Inds Inc. 12 . 0 0 0 12 / 0 1 / 9 8 IC A B . G A International Cabletel Inc. 10 . 8 7 5 10 / 1 5 / 0 3 IC M L . G A Indspec Chemical Corp. 12 . 5 0 7 12 / 0 1 / 0 3 KA T Z . G A Katz Corp. 12 . 7 5 0 11 / 1 5 / 0 2 MP K F . G A Mountain Park Financial Corp. 9. 0 0 0 08 / 1 5 / 0 5 MR V . G A Marvel Parent Holdings Inc. 0. 0 0 0 04 / 1 5 / 9 8 NA C O . G A Nacolah Hldg Corp. 9. 5 0 0 12 / 0 1 / 0 3 NL . G B NL Industries Inc. 13 . 0 0 0 10 / 1 5 / 0 5 PI O N . G A Pioneer Financial Corp. 13 . 5 0 0 12 / 0 1 / 9 8 SC I N . G A SC Intl Services Inc. 13 . 0 0 0 10 / 0 1 / 0 5 SL N C . G A Sabreliner Corp. 12 . 5 0 0 04 / 1 5 / 0 3 SM M C . G A Simmons Co. 10 . 7 5 0 04 / 1 5 / 0 6 SP K L . G A Speckels Inds Inc. 11 . 5 0 0 09 / 0 1 / 0 0 ST O . G C Stone Container Corp. 11 . 8 7 5 12 / 0 1 / 9 8 SV S N . G A Spectravision Inc. 11 . 6 5 0 12 / 0 1 / 0 2 TA L . G A Talley Inds Inc. 12 . 2 5 0 10 / 1 5 / 0 5 TO K . G A Tokheim Corp. 11 . 5 0 0 08 / 0 1 / 0 6 TT R R . G D Tracor Inc. 8. 5 0 0 03 / 0 1 / 0 7 UM M . G A United Merchants & Mfrs Inc. 3. 5 0 0 07 / 0 1 / 0 9 US L T . G A United States Leather Inc. 10 . 2 5 0 07 / 3 1 / 0 3 VI C N . G D Viacom Intl Inc. 7. 0 0 0 07 / 0 1 / 0 3 VI C N . G E Viacom Intl Inc. 7. 0 0 0 07 / 0 1 / 0 3 WR T E . G A WRT Energy Corp. 13 . 8 7 5 03 / 0 1 / 0 2

As of November 23, 1998, changes were made to the symbols of the following FIPS bonds:

New Symbol Old Symbol Na m e Co u p o n Ma t u r i t y

CC A I . G A CA W S . G A CAI Wireless Systems Inc. 12 . 2 5 0 09 / 1 5 / 0 2

All bonds listed above are subject to trade-reporting requirements. Questions pertaining to FIPS trade-reporting rules should be directed to Stephen Simmes, Market Regulation, NASD RegulationSM , at (301) 590-6451.

Any questions regarding the FIPS master file should be directed to Cheryl Glowacki, Nasdaq¨ Market Operations, at (203) 385-6310.

© 1999, National Association of Securities Dealers, Inc. (NASD). All rights reserved.

NASD Notice to Members 99-07 Janu a r y 1999 26 Martin Luther King, Jr., Day: Trade Date-Settlement Date Schedule NA S D The Nasdaq Stock Market¨ and the securities exchanges will be closed on Monday, January 18, 1999, in observance of Martin Luther King, Jr., Day. “Regular way” transactions made on the business days noted below will be Notice to subject to the following schedule: Members Trade Date Settlement Date Reg. T Date* 99 - 0 8 Jan. 12 Jan. 15 Jan. 20 13 19 21

14 20 22

Ma r tin Luther King, Jr. 15 21 25 Da y and Presidents Day: Trade DateÐSettlement 18 Markets Closed — Date Schedule 19 22 26

Su g gested Routing Senior Management Presidents Day: Trade Date-Settlement Date Sche d u l e The Nasdaq Stock Market and the securities exchanges will be closed on Ad v e r t i s i n g Monday, February 15, 1999, in observance of Presidents Day. “Regular way” Continuing Education transactions made on the business days noted below will be subject to the following schedule: Corporate Finance Government Securities Trade Date Settlement Date Reg. T Date* In s t i t u t i o n a l Feb. 9 Feb. 12 Feb. 17 In s u r a n c e Internal Audit 10 16 18 Legal & Compliance 11 17 19 Mu n i c i p a l Mutual Fund 12 18 22 Op e r a t i o n s 15 Markets Closed — Op t i o n s Registered Representatives 16 19 23 Re g i s t r a t i o n Re s e a r c h *Pursuant to Sections 220.8(b)(1) and (4) of Regulation T of the Federal Reserve Board, a bro- Sy n d i c a t e ker/dealer must promptly cancel or otherwise liquidate a customer purchase transaction in a cash account if full payment is not received within five business days of the date of purchase or, Sy s t e m s pursuant to Section 220.8(d)(1), make application to extend the time period specified. The date Tr a d i n g by which members must take such action is shown in the column titled “Reg. T Date.” Tr a i n i n g

Variable Contracts © 1999, National Association of Securities Dealers, Inc. (NASD). All rights reserved.

NASD Notice to Members 99-08 Janu a r y 1999 27 NASD Regulation, Inc. (NASD procedures and failed to carry out a Di s c i p l i n a r y Re g u l a t i o n SM ) has taken disciplinary supervisory system relative to market actions against the following firms and making, order room functions, and individuals for violations of National trade reporting. Actions Association of Securities Dealers, Inc. (N A S D ¨) rules; federal securities laws, Graicap, Inc. (Detroit, Michigan), rules, and regulations; and the rules of Fred L. Prime, III (Registered the Municipal Securities Rulemaking Principal, Southfield, Michigan), Board (MSRB). Unless otherwise indi- and Kern David Smith (Registered Di s c i p l i n a r y Actions cated, suspensions will begin with the Principal, Detroit, Michigan) Re p o r ted For Janu a r y opening of business on Monday, Jan- submitted a Letter of Acceptance, uary 18, 1999. The information relat- Waiver, and Consent pursuant to ing to matters contained in this No t i c e which the firm was censured and is current as of the end of December fined $15,000. Prime was censured, 21, 1998. fined $7,500, and suspended from association with any NASD member in a supervisory and managerial Firms Fined, Individuals capacity for 10 business days, and Sanctioned Smith was censured, fined $10,000, C.A. Atlantic Securities, Inc. and suspended from association with (Boston, Massachusetts) an d any NASD member in the capacity of James Arthur Dixon (Registered a limited principal Ð financial and Principal, Portsmouth, New operations Ð for 30 days. Without Hampshire) submitted a Letter of admitting or denying the allegations, Acceptance, Waiver, and Consent the respondents consented to the pursuant to which they were described sanctions and to the entry censured and fined $50,000, jointly of findings that the firm, acting and severally. In addition, Dixon was through Prime and Smith, conducted suspended from association with any a securities business while failing to NASD member in any principal or maintain adequate net capital. The managerial capacity for 30 days and findings also stated that the firm , required to requalify as a general acting through Smith, failed to securities principal by taking and compute its net capital accurately, successfully passing the general failed to maintain accurate books and securities principal exam (Series 24). records, submitted inaccurate Without admitting or denying the FOCUS Part II reports, and failed to allegations, the respondents file its audited annual fina n c i a l consented to the described sanctions statements in a timely manner. In and to the entry of findings that the addition, the NASD found that the firm failed to report trades within 90 firm failed to submit an accurate seconds of execution and without the quarterly Form G-37/38, and the firm , “.SLD” modifier. The findings also acting through Prime, failed to stated that the firm entered trades maintain a record of the date that the into the Small Order Execution Forms G-37/38 were sent to the Sy s t e m SM (S O E S SM ) for the benefit of MSRB. the firm’s trading account, entered trades into SOES for the benefit of Hattier, Sanford & Reynoir (New registered representatives or Orleans, Louisiana), Gus A. accounts they controlled, and Reynoir (Registered Principal, entered trades into SOES as split New Orleans, Louisiana), an d orders. In addition, C.A. Atlantic, Vance G. Reynoir (Registered acting through Dixon, failed to Principal, New Orleans, Louisiana) prepare, maintain, and/or enforce were censured and fined $60,000, adequate written supervisory jointly and severally. In addition, the

NASD Notices to Members—Disciplinary Actions Janu a r y 1999 29 firm was required to engage an firm, acting through Stoffers, failed to Firms Fined independent auditor within 90 days to report timely and accurately to the American Third Market Corpora- review its books and records and NASD statistical summary tion (New York, New York) su b m i t - supervisory procedures and to information regarding customer ted a Letter of Acceptance, Waiver, implement the auditor’s complaints. The findings also stated and Consent pursuant to which the recommendations in a manner that the firm, acting through Stoffers, firm was censured and fine d satisfactory to the NASD. Gus failed to report timely disciplinary $17,500. Without admitting or deny- Reynoir and Vance Reynoir were information to the NASD and failed to ing the allegations, the firm consent- suspended from association with any implement the Firm Element of its ed to the described sanctions and to NASD member in any capacity for 30 Continuing Education program. the entry of findings that it reported days, suspensions not to run transactions to the Automated Confir- concurrently. Gus Reynoir and Firm And Individual Fined mation Transaction ServiceSM (A C T SM ) Vance Reynoir were required to Capital West Investment Group, in violation of applicable securities requalify as a general securities Inc. (Phoenix, Arizona) an d laws and regulations regarding trade principal and as a municipal Lawrence Lester Kohler (Regis- reporting. The findings also stated securities principal, respectively, tered Principal, Scottsdale, Ari- that the firm failed to establish, main- within 180 days or be suspended zo n a ) submitted a Letter of tain, and enforce adequate written until they requalify. The U.S. Court of Acceptance, Waiver, and Consent supervisory procedures with respect Appeals for the Fifth Circuit affirm e d pursuant to which the firm was cen- to SOES execution, best execution, the sanctions following appeal of a sured and fined $3,500, jointly and limit orders, order handling, anti-com- January 1998 Securities and severally, with Kohler; fined $6,500 petitive practices, and trading and Exchange Commission (SEC) jointly and severally with Kohler and market making functions. decision. The sanctions were based another individual; and fined $5,000, on findings that the firm, acting jointly and severally, with a third indi- Huntington Capital Corp. (Colum- through Gus Reynoir and Vance vidual. Without admitting or denying bus, Ohio) submitted a Letter of Reynoir, issued 453 confirm a t i o n s the allegations, the firm consented to Acceptance, Waiver, and Consent that misrepresented the capacity in the described sanctions and to the pursuant to which the firm was cen- which trades were executed. entry of findings that the firm, acting sured and fined $20,000. Without through an individual, conducted a admitting or denying the allegations, Gus Reynoir’s suspension will securities business while failing to the firm consented to the described commence on the opening of maintain its minimum required net sanctions and to the entry of find i n g s business January 18, 1999, and will capital, failed to prepare and main- that it failed to establish and maintain conclude at the close of business tain the required books, records, and an adequate enforcement system to February 16, 1999. Vance Reynoir’s reports called for as a result of “self- ensure that individuals were properly suspension will commence with the clearing” customer transactions, and registered to perform activities in opening of business February 17, failed to establish a “Special Reserve which they were engaged. According 1999, and will conclude at the close Account for the Exclusive Benefit of to the findings, the firm permitted an of business March 18, 1999. Customers” and perform the required individual to engage in activities customer reserve computation. The requiring registration as a registered LCP Capital Corp. (New York, New findings also stated that the firm, act- options principal without being regis- York) and Charles Steven Stoffers ing through Kohler, failed to desig- tered in that capacity. (Registered Principal, Staten nate a principal responsible for the Island, New York) submitted a Regulatory Element and Firm Ele- Morgan Stanley & Co., Inc. (New Letter of Acceptance, Waiver, and ment of the NASD’s Continuing Edu- York, New York) submitted a Letter Consent pursuant to which they were cation requirements, failed to of Acceptance, Waiver, and Consent censured and fined $37,500, jointly address the Regulatory Element in pursuant to which the firm was cen- and severally, and Stoffers was its procedures, and failed to prepare sured and fined $60,000. Without required to requalify by taking the a needs analysis and develop a writ- admitting or denying the allegations, Series 24 exam prior to acting again ten training program. Furthermore, the firm consented to the described as a general securities principal. the NASD determined that the firm , sanctions and to the entry of find i n g s Without admitting or denying the acting through Kohler and another that the firm failed to execute Select- allegations, the respondents individual, guaranteed a customer Ne t SM orders and thereby, failed to consented to the described sanctions against loss in the customer’s honor its published quotation. The and to the entry of findings that the account. findings also stated that the firm

NASD Notices to Members—Disciplinary Actions Janu a r y 1999 30 failed to establish, maintain, and New York) was censured, fine d from public customers for the purpose enforce written supervisory proce- $25,000, and barred from association of investment, failed to make any dures reasonably designed to with any NASD member in any capac- investments on the customers’ behalf, achieve compliance with applicable ity. The sanctions were based on find - and either misused or converted the securities laws and regulations con- ings that Anzelone failed to respond to funds to his own use and benefit with- cerning SEC and NASD firm quote NASD requests for information. out the customers’ knowledge or con- rules. sent. Shaun Patrick Attwood (Registered Securities America, Inc. (Omaha, Principal, Phoenix, Arizona) an d Gregory James Best (Registered Ne b r a s k a ) submitted a Letter of Scott Dominic Davis (Registered Representative, Mogadore, Ohio) Acceptance, Waiver, and Consent Representative, Phoenix, Arizona). submitted a Letter of Acceptance, pursuant to which the firm was cen- Attwood was censured, fine d Waiver, and Consent pursuant to sured and fined $10,000. In addition, $68,016.90, and barred from associa- which he was censured, fine d the firm must retain an independent tion with any NASD member in any $25,000, and barred from association consultant to complete a review and capacity. Davis was censured, fine d with any NASD member in any capac- needs assessment of the firm’s cur- $11,164.80, suspended from associa- ity. Without admitting or denying the rent supervisory system. Without tion with any NASD member in any allegations, Best consented to the admitting or denying the allegations, capacity for one year, and ordered to described sanctions and to the entry the firm consented to the described requalify by exam before re-associat- of findings that he failed to respond to sanctions and to the entry of find i n g s ing with any member firm. The sanc- NASD requests for information in con- that it failed to supervise the activities tions were based on findings that nection with customer complaints. of an individual and to establish, Attwood and Davis engaged in exces- maintain, and enforce written super- sive trading in a customer account. Deidra J. Blake (Registered Repre- visory procedures to ensure that the Attwood also failed to respond to sentative, Plainfield, Illinois) su b m i t - individual refrained from engaging in NASD requests for information. ted a Letter of Acceptance, Waiver, unsuitable recommendations of dis- and Consent pursuant to which she cretionary purchases and sales in the Troy D. Bachis (Registered Repre- was censured, fined $20,000, and securities account of a public cus- sentative, Albuquerque, New Mexi- barred from association with any tomer, including excessive trading, co) was censured, fined $45,000, and NASD member in any capacity. With- excessive use of margin, and short barred from association with any out admitting or denying the allega- position exposure. The findings also NASD member in any capacity. The tions, Blake consented to the stated that the firm’s supervisory pro- sanctions were based on findings that described sanctions and to the entry cedures failed to include procedures Bachis forged a public customer’s sig- of findings that she participated in pri- for all the types of business in which nature on an application to purchase a vate securities transactions and failed the firm engaged, failed to designate variable annuity contract, without the to provide written notice to, or to the principal responsible for the customer’s authorization and consent, receive written authorization from, her supervision of registered representa- and presented such documents as member firm to participate in such tives and principals in the firm ’ s genuine. Bachis also failed to respond transactions. Of fi ces of Supervisory Jurisdiction, to NASD requests for information. and failed to identify the individual William Hinton Clark (Registered responsible for the updating of the Joseph Randolph Belew (Regis- Principal, Staten Island, New York) written procedures. Moreover, the tered Principal, Jackson, Mississip- submitted an Offer of Settlement pur- procedures failed to outline the pi) submitted a Letter of Acceptance, suant to which he was censured, fine d methodology for supervision of Waiver, and Consent pursuant to $25,000, suspended from association account activity, concentration, and which he was censured, fine d with any NASD member in any capac- use of margin in connection with $4,957,000, barred from association ity for six months, and required to accounts located in single person with any NASD member in any capac- requalify by exam in all capacities Of fi ces of Supervisory Jurisdiction ity, and required to pay $601,625.80 prior to functioning again in any and branch offices. in restitution to the appropriate parties. capacity that requires requalifica t i o n . Without admitting or denying the alle- Without admitting or denying the alle- Individuals Barred Or gations, Belew consented to the gations, Clark consented to the Su s p e n d e d described sanctions and to the entry described allegations and to the entry Salvatore Joseph Anzelone (Regis- of findings that he received funds of findings that he engaged in a secu- tered Representative, Amherst, totaling approximately $971,425.80 rities business as a registered repre-

NASD Notices to Members—Disciplinary Actions Janu a r y 1999 31 sentative and executed transactions the issuance of checks totalling Donald Ray Gates (Registered Rep- on behalf of public customers during a $14,000 to the post office boxes. resentative, Cabot, Arkansas) wa s one month bar imposed by the New Dembinsky facilitated the transfer of censured, fined $53,261.05, suspend- York Stock Exchange. the checks to a third party who negoti- ed from association with any NASD ated the checks and agreed to remit member in any capacity for six John D’Aversa (Registered Repre- to Dembinsky four percent of the pro- months, and required to requalify by sentative, Waterbury, Connecticut) ceeds of the negotiated checks for his exam before acting in any capacity submitted an Offer of Settlement pur- assistance. The remaining proceeds requiring registration. The NAC suant to which he was censured, fine d were alleged to have been returned to imposed the sanctions following $25,000, and barred from association another firm representative. Dembin- appeal of a New Orleans DBCC deci- with any NASD member in any capac- sky also provided a false written state- sion. The sanctions were based on ity. Without admitting or denying the ment to the NASD. findings that Gates engaged in securi- allegations, D’Aversa consented to ties transactions while not registered the described sanctions and to the Steven Laver Edelson (Registered with the NASD or with the state where entry of findings that he failed to Principal, Brooklyn, New York) su b - the customer was domiciled. respond to NASD requests for infor- mitted a Letter of Acceptance, Waiver, ma t i o n . and Consent pursuant to which he Gates has appealed this action to the was censured, fined $7,500, and sus- SEC and the sanctions are not in Herbert Lewis Davis, Jr. (Regis- pended from association with any effect pending consideration of the tered Representative, Milwaukee, NASD member in any capacity for 10 ap p e a l . Wi s c o n s i n ) was censured, fine d days. Without admitting or denying the $20,000, and barred from association allegations, Edelson consented to the Robert Anthony Gatto (Associated with any NASD member in any capac- described sanctions and to the entry Person, Brooklyn, New York) wa s ity. The National Adjudicatory Council of findings that he failed to file in a censured, fined $45,469.20, and (NAC) affirmed the sanctions follow- timely manner quarterly statistical and barred from association with any ing appeal of a Chicago District Busi- summary information reports with the NASD member in any capacity. The ness Conduct Committee (DBCC) NASD regarding customer complaints sanctions were based on findings that decision. The sanctions were based received by his member firm. Gatto forged the signatures of his on findings that Davis signed a cus- member firm’s officers on a $1,093.84 tomer’s name to a $945.58 check Edward Michael Freund (Regis- compensation check and converted without the customer’s authorization, tered Representative, Eastpointe, the proceeds of the check. Gatto also knowledge, or consent and used the Mi c h i g a n ) submitted a Letter of failed to respond to NASD requests proceeds for some purpose other than Acceptance, Waiver, and Consent for information. for the customer’s benefit. Davis also pursuant to which he was censured, failed to respond to NASD requests fined $2,500, and suspended from Jeff Vaughn Gordy (Registered for information. association with any NASD member Representative, Chicago, Illinois) in any capacity for five business days. submitted an Offer of Settlement pur- David Dembinsky (Registered Rep- Without admitting or denying the alle- suant to which he was censured, fine d resentative, Brooklyn, New York) gations, Freund consented to the $25,000, and barred from association submitted an Offer of Settlement pur- described sanctions and to the entry with any NASD member in any capac- suant to which he was censured, fine d of findings that he signed and filed a ity. Without admitting or denying the $8,000, and barred from association Form U-4 that failed to disclose he allegations, Gordy consented to the with any NASD member in any capac- had plead guilty to a misdemeanor in described sanctions and to the entry ity. Without admitting or denying the the state of Michigan involving larceny of findings that he failed to respond to allegations, Dembinsky consented to under $100. NASD requests for documents and the described sanctions and to the information. entry of findings that he changed the Semos Gardner (Registered Repre- addresses of record of policyholders sentative, West Hollywood, Califor- David Lee Griffin (Registered Rep- without the knowledge or authoriza- nia) was censured, fined $25,000, resentative, Chalkhill, Pennsylva- tion of the policyholders to post office and barred from association with any ni a ) was censured, fined $25,000, boxes held in the name of a client and NASD member in any capacity. The and barred from association with any acquaintance of Dembinsky. Loans sanctions were based on findings that NASD member in any capacity. The requested against each of the poli- Gardner failed to respond to NASD sanctions were based on findings that cies, without the knowledge or con- requests for information. Gr i f fi n failed to respond to NASD sent of the policyholders, resulted in requests for information. NASD Notices to Members—Disciplinary Actions Janu a r y 1999 32 Philip David Growick (Registered was censured, suspended from asso- $75,432.45 in restitution to the appro- Representative, West Hartford, ciation with any NASD member in any priate parties. Without admitting or Co n n e c t i c u t ) submitted a Letter of capacity for 30 days which shall have denying the allegations, Knight con- Acceptance, Waiver, and Consent been deemed served concurrent with sented to the described sanctions and pursuant to which he was censured, the suspension imposed by the State to the entry of findings that he fined $10,000, suspended from asso- of Arizona in its proceeding, and engaged in acts, practices, and a ciation with any NASD member in any required to pay restitution to public course of business which operated as capacity for one year, and required to customers in the amount of $10,000. a fraud or deceit upon various per- disgorge $58,071.03 in commissions. Without admitting or denying the alle- sons, in connection with the purchase Without admitting or denying the alle- gations, Hall consented to the and sale of shares of common stock, gations, Growick consented to the described sanctions and to the entry by directly entering into transactions described sanctions and to the entry of findings that he participated in a pri- with stockholders that were executed of findings that he engaged in private vate securities transaction without pro- at excessive and fraudulent prices. securities transactions without provid- viding his member firm prior written The findings also stated that Knight ing prior written notice to, and receiv- notice of such participation. engaged in private securities transac- ing approval from, his member firm. tions without prior written notice to and Hall’s suspension began January 14, approval from his member firm . George W. Guttman (Registered 1998, and concluded February 14, Principal, Brooklyn, New York) su b - 19 9 8 . Timothy James Kopacka (Regis- mitted an Offer of Settlement pursuant tered Representative, Grosse Point to which he was censured, fine d Pamela Ann Hartsock (Registered Shores, Michigan) submitted a Letter $25,000, and barred from association Representative, Montoursville, of Acceptance, Waiver, and Consent with any NASD member in any capac- Pe n n s y l v a n i a ) was censured, sus- pursuant to which he was censured, ity. Without admitting or denying the pended from association with any fined $340,289, and barred from allegations, Guttman consented to the NASD member in any capacity for two association with any NASD member described sanctions and to the entry years, and required to requalify by in any capacity. Without admitting or of findings that he purchased shares exam in any capacity in which she denying the allegations, Kopacka con- of stock for the account of a public seeks to participate in the securities sented to the described sanctions and customer without having obtained industry. The NAC imposed the sanc- to the entry of findings that he partici- prior written authorization from the tions following review of a Philadel- pated in private securities transactions customer and without prior written phia DBCC decision. The sanctions and failed to give written notice of his acceptance of the account as discre- were based on findings that Hartsock intention to engage in such activities tionary by his member firm. Guttman failed to remit customer funds and to his member firms, and failed to also agreed to reimburse the cus- failed to inform her member firm of her receive written approval from the firm s tomer for the unauthorized transaction omission. prior to engaging in such activities. without the prior knowledge, autho- rization, or consent of his firm. The Blake Vincent High (Registered Gerald Patrick Leffel (Registered findings also stated that Guttman Representative, Plano, Texas) wa s Representative, Brook Park, Ohio) promised the customer that if he was censured, fined $25,000, and barred submitted a Letter of Acceptance, unable to reimburse him, his member from association with any NASD Waiver, and Consent pursuant to firm would assume full fina n c i a l member in any capacity. The sanc- which he was censured, fine d responsibility, without the prior knowl- tions were based on findings that $51,500, and barred from association edge or consent of the firm. Guttman High failed to respond to an NASD with any NASD member in any capac- also purchased for, or sold from, pub- request for information and to provide ity. Without admitting or denying the lic customers’ accounts securities testimony. allegations, Leffel consented to the without the customers’ knowledge, described sanctions and to the entry consent, or authorization. The find i n g s Fred Cordery Knight, Jr. (Regis- of findings that he accepted cash pay- also stated that Guttman guaranteed tered Representative, Edmond, ments for traditional life insurance poli- a customer against loss. Ok l a h o m a ) submitted a Letter of cy premiums totaling $299 from a Acceptance, Waiver, and Consent public customer and failed to forward Jerry Michael Hall (Registered Rep- pursuant to which he was censured, the proceeds to the insurance compa- resentative, Mesa, Arizona) su b m i t - fined $175,000, barred from associa- ny in payment of the premiums. ted a Letter of Acceptance, Waiver, tion with any NASD member in any Instead, the NASD found that Leffel and Consent pursuant to which he capacity, and required to pay used the proceeds for his own benefit

NASD Notices to Members—Disciplinary Actions Janu a r y 1999 33 without the prior authorization or con- securities transactions without provid- was censured, fined $1,000, sus- sent of the customer. ing written notice to, and receiving pended from association with any written approval from, his member NASD member in the capacity of reg- Alfred Gertha Leonard (Associated firm . istered options principal for two years, Person, Queens, New York) su b m i t - and required to requalify as a regis- ted an Offer of Settlement pursuant to Kevin William Loomis (Registered tered options principal. Without admit- which he was censured, fine d Principal, East Northport, New ting or denying the allegations, $30,000, and barred from association York) submitted an Offer of Settle- Manning consented to the described with any NASD member in any ment pursuant to which he was cen- sanctions and to the entry of find i n g s capacity. Without admitting or denying sured, fined $20,000, suspended from that a member firm, acting by and the allegations, Leonard consented to association with any NASD member through Manning, failed to properly the described sanctions and to the in any capacity for one year, and establish and maintain an adequate entry of findings that he failed to com- required to requalify by Series 7 exam supervisory system that was reason- plete his Form U-4 accurately. prior to acting in that capacity. Without ably designed to achieve compliance Leonard also failed to respond to admitting or denying the allegations, with applicable securities laws and NASD requests for information. Loomis consented to the described regulations, and with the rules of the sanctions and to the entry of find i n g s NASD. Specifically, the firm failed to John Li (Registered Representa- that he made baseless and improper supervise the activities of each regis- tive, Chicago, Illinois) submitted a price predictions for speculative secu- tered representative with respect to Letter of Acceptance, Waiver, and rities to public customers and made options trading since it failed to estab- Consent pursuant to which he was unauthorized trades in the accounts of lish and maintain adequate written censured, fined $5,500, and suspend- public customers by purchasing more procedures to supervise trading in ed from association with any NASD than he was authorized to purchase. op t i o n s . member in any capacity for 10 busi- The findings also stated that Loomis ness days. Without admitting or deny- required that customers purchase Tony Dale Moore (Registered Rep- ing the allegations, Li consented to aftermarket shares as a condition of resentative, Brandon, Mississippi) the described sanctions and to the purchasing initial public offering units. submitted a Letter of Acceptance, entry of findings that he purchased or Waiver, and Consent pursuant to sold securities for the account of a James R. Mancuso (Registered which he was censured, fine d public customer without the knowl- Principal, Patchogue, New York) $165,000, and barred from associa- edge or consent of the customer and submitted an Offer of Settlement pur- tion with any NASD member in any in the absence of written or oral suant to which he was censured, capacity. Without admitting or denying authorization to exercise discretion in fined $25,000, suspended from asso- the allegations, Moore consented to the customer’s account. ciation with any NASD member in any the described sanctions and to the capacity for 30 days, required to entry of findings that he received a Thomas Dominic Loffredo (Regis- requalify as a general securities repre- check for $2,989.25 from a public cus- tered Principal, New City, New sentative, and required to demon- tomer for the purpose of paying the Yo r k ) submitted a Letter of Accep- strate that prior to associating with a premium on a fixed annuity policy; tance, Waiver, and Consent pursuant member firm, he has made restitution failed and neglected to remit the funds to which he was censured, fine d totalling $55,613 to public customers. to his member firm; and, instead, $5,000, suspended from association Without admitting or denying the alle- endorsed the check and deposited it with any NASD member in any gations, Mancuso consented to the into his personal bank account there- capacity for 10 business days, and described sanctions and to the entry by converting the $2,989.25 to his ordered to requalify as a general of findings that he made material mis- own use and benefit, without the cus- securities representative. If Loffredo representations and omitted material tomer’s knowledge or consent. In fails to requalify within a 90-day man- information in the offer and sale of response to an NASD request for dated period, he will be suspended securities. Mancuso also made fraud- information, Moore provided false and from association with any NASD ulent price predictions in the offer and misleading statements and docu- member in any capacity until such sale of securities. ments, including falsified correspon- examination is successfully complet- dence, bank statements, and ed. Without admitting or denying the David Eugene Manning (Registered cashiers’ checks in an apparent allegations, Loffredo consented to the Principal, Webster, Texas) su b m i t - attempt to mislead the staff during its described sanctions and to the entry ted a Letter of Acceptance, Waiver, in v e s t i g a t i o n . of findings that he engaged in private and Consent pursuant to which he

NASD Notices to Members—Disciplinary Actions Janu a r y 1999 34 Kirk Robert Nehdar (Registered as a general securities principal for six Ralph Rufus Rush (Registered Representative, West Hills, Califor- months, and required to requalify by Representative, El Paso, Texas) nia) was fined $5,000 and suspended taking the Series 24 exam prior to submitted a Letter of Acceptance, from association with any NASD resuming general securities principal Waiver, and Consent pursuant to member in any capacity for 10 busi- duties. Without admitting or denying which he was censured, fine d ness days. The sanctions were based the allegations, Pankey consented to $25,000, and suspended from associ- on findings that Nehdar engaged in the described sanctions and to the ation with any NASD member in any purchase and sale transactions in var- entry of findings that he engaged in capacity for one month. Without ious securities for the joint account of private securities transactions without admitting or denying the allegations, public customers without having rea- giving his member firm prior written Rush consented to the described sonable grounds for believing that the notice of his activities. The find i n g s sanctions and to the entry of find i n g s transactions were suitable for the cus- also stated that Pankey, as president that he received payments of commis- tomers in view of the size, frequency, of a member firm, failed to comply sions in connection with the sale of and nature of the recommended with all of the conditions outlined in variable annuity products, in the form transactions and the facts disclosed the membership agreement for the of checks written by a registered rep- by the customers as to their fina n c i a l firm . resentative associated with another situation, objectives, circumstances, member firm, without prior oral or writ- and needs. Peter Anthony Perez (Registered ten authorization from his member Representative, Parkland, Florida) firm. Furthermore, the NASD deter- Ronald Alvin Okum (Registered submitted a Letter of Acceptance, mined that, at the time of these trans- Representative, San Marino, Cali- Waiver, and Consent pursuant to actions and resultant payments, his fornia) submitted a Letter of Accep- which he was censured, fine d member firm was not authorized to tance, Waiver, and Consent pursuant $25,000, and barred from association sell variable annuity products in the to which he was censured, fine d with any NASD member in any state where the sales took place. $10,000, and suspended from associ- capacity. Without admitting or denying ation with any NASD member in any the allegations, Perez consented to Elie M. Sakaran (Registered Repre- capacity for one year. Without admit- the described sanctions and to the sentative, San Dimas, California) ting or denying the allegations, Okum entry of findings that he recommend- submitted an Offer of Settlement pur- consented to the described sanctions ed and engaged in a course of trading suant to which he was censured, and to the entry of findings that he in the account of a public customer fined $14,400, and barred from asso- participated in private securities trans- that was unsuitable for the customer ciation with any NASD member in any actions without providing prior written based upon her other securities hold- capacity. Without admitting or denying notice to his member firm describing ings, and financial situation and the allegations, Sakaran consented to the proposed transactions and his needs. The findings also stated that the described sanctions and to the proposed role therein. Perez participated in private securities entry of findings that he recommend- transactions without providing prior ed, offered, and sold corporate securi- William Francis Palla (Registered written notice to his member firm. ties to public customers when he was Principal, Haverford, Pennsylvania) not registered to do so by the NASD. was censured, fined $20,000, and John Louis Quaadman (Registered Sakaran used the account executive barred from association with any Representative, Chicago, Illinois) number of a registered representative NASD member in any capacity. The submitted a Letter of Acceptance, who received the commission checks sanctions were based on findings that Waiver, and Consent pursuant to for the trades and signed the commis- Palla failed to respond to NASD which he was censured, fined $5,000, sion checks over to Sakaran. requests for information. and suspended from association with any NASD member in any capacity Robert Scalzi (Registered Repre- Charles Vaughn Pankey (Regis- for six months. Without admitting or sentative, Scottsdale, Arizona) su b - tered Principal, Denver, Colorado) denying the allegations, Quaadman mitted a Letter of Acceptance, Waiver, submitted a Letter of Acceptance, consented to the described sanctions and Consent pursuant to which he Waiver, and Consent pursuant to and to the entry of findings that he was censured, fined $50,000, and which he was censured, fine d af fi xed the signatures of public cus- barred from association with any $20,000, suspended from association tomers on Individual Retirement NASD member in any capacity. With- with any NASD member in any Account transfer and/or risk acknowl- out admitting or denying the allega- capacity for 10 days, suspended from edgment forms without the customers’ tions, Scalzi consented to the association with any NASD member knowledge or consent. described sanctions and to the entry

NASD Notices to Members—Disciplinary Actions Janu a r y 1999 35 of findings that he engaged in private market price for these securities at the balance of $6,585 invested at his firm . securities transactions without giving time of the sales. Moreover, the In addition, Trevor failed to respond his member firm prior written notice of NASD determined that Sharp failed to timely to NASD requests for informa- his activities. The findings also stated disclose to members of the public to ti o n . that Scalzi allowed an advertisement whom he sold the securities that he for an investment program to be had made the purchases at such Dennis Nick VanAuken (Registered placed in a newspaper identifying prices. In addition, Sharp received Representative, Buffalo, Minneso- himself as the sales representative purchase payments from public cus- ta ) submitted a Letter of Acceptance, without having the advertisement tomers, deposited the funds into a Waiver, and Consent pursuant to approved by a principal of his mem- bank account he controlled, and failed which he was censured, fine d ber firm. to request a transfer of the securities $75,000, and barred from association from his name to the customers’ with any member firm in any capacity. Joshua S. Shainberg (Registered name until a later date. Without admitting or denying the alle- Principal, New York, New York) gations, VanAuken consented to the submitted an Offer of Settlement pur- Mark E. Swett (Registered Repre- described sanctions and to the entry suant to which he was censured, sentative, Omaha, Nebraska) su b - of findings that in connection with the fined $35,000, and barred from asso- mitted a Letter of Acceptance, Waiver, solicitation and sale of shares of stock ciation with any NASD member in any and Consent pursuant to which he to public customers, he, intentionally capacity. Without admitting or denying was censured, fined $5,000, and sus- or recklessly, made untrue statements the allegations, Shainberg consented pended from association with any of material facts and/or omitted to to the described sanctions and to the NASD member firm in any capacity state material facts necessary in order entry of findings that he arranged to for three months. Without admitting or to make the statements, in light of the have another individual complete the denying the allegations, Swett con- circumstances under which they were Series 27, Financial and Operations sented to the described sanctions and made, not misleading. The find i n g s Principal Qualification Examination on to the entry of findings that he pur- also stated that VanAuken intentional- his behalf. Shainberg also failed to chased securities in his personal mar- ly or recklessly made projections of respond to NASD requests to provide gin account at his member firm and future prices without a reasonable information and documentation. utilized the proceeds from the sale of basis for predicting such price the same securities to pay for the pur- in c r e a s e s . Louis Elvin Sharp (Registered Rep- chases without otherwise paying for resentative, Lafayette, Colorado) the trades or maintaining suffici e n t Wayne Beckley Vaughan (Regis- submitted a Letter of Acceptance, margin excess in the account. tered Representative, Cumming, Waiver, and Consent pursuant to Georgia) was censured, suspended which he was censured, fine d Gerald M. Trevor (Registered Rep- from association with any NASD $25,000, barred from association with resentative, Metairie, Louisiana) member in any capacity for 30 busi- any NASD member in any capacity, submitted a Letter of Acceptance, ness days, and required to requalify and ordered to pay $1,405 in restitu- Waiver, and Consent pursuant to by exam in any capacity in which he tion to public customers. Without which he was censured, fine d seeks to do business. The NAC admitting or denying the allegations, $15,000, and suspended from associ- imposed the sanctions upon appeal Sharp consented to the described ation with any NASD member in any and review of an Atlanta DBCC deci- sanctions and to the entry of find i n g s capacity for two years. Without admit- sion. The sanctions were based on that he participated in private securi- ting or denying the allegations, Trevor findings that Vaughan engaged in ties transactions without providing consented to the described sanctions unsuitable trading for a public cus- written notification to, and obtaining and to the entry of findings that he tomer’s account. approval from, his member firm received a check for $5,000 from a before participating in such transac- public customer for the purpose of Chris John Votsis (Registered Rep- tions. The findings also stated that investment. Instead, Trevor erro- resentative, Brooklyn, New York) Sharp purchased units in a limited neously deposited the funds into a was censured, fined $25,000, barred partnership and then sold such units bank account he controlled and failed from association with any NASD to members of the public at prices that to return the funds to the customer member in any capacity, and ordered substantially exceeded the prices until a later date. The findings also to disgorge all net commissions Sharp paid contemporaneously for stated that Trevor sent correspon- received from 1995 through 1996 the transactions, and at prices that dence to the customer that incorrectly inclusive. The sanctions were based were not reasonably related to the stated the customer had an account on findings that Votsis arranged to

NASD Notices to Members—Disciplinary Actions Janu a r y 1999 36 have an impostor take the Series 7 Exchange arbitration award of at a member firm and did not provide qu a l i fi cation exam on his behalf. $13,072.16 plus interest. written notice to the firm that she had become registered as an investment Jon Jerard Ward (Registered Rep- company and variable contracts resentative, Verona, Pennsylvania) Individuals Fined representative. In addition, Raskovich was censured, fined $25,000, and Joseph Edward Haick (Registered failed to provide written notice to her barred from association with any Principal, Spring Lake, New employing member firm that she had NASD member in any capacity. The Je r s e y ) submitted a Letter of a beneficial interest in this securities sanctions were based on findings that Acceptance, Waiver, and Consent account at the time she opened the Ward failed to respond to NASD pursuant to which he was censured account. Raskovich also purchased requests for information. and fined $10,000. Without admitting shares or units of public offerings or denying the allegations, Haick which traded at a premium when the Michael David Wooden (Registered consented to the described sanctions secondary market commenced for Representative, Perry, Kansas) and to the entry of findings that he each security. submitted an Offer of Settlement pur- directed a trader to send mixed-lot suant to which he was censured, SelectNet orders to a competing Eric John Wiegandt (Registered fined $25,000, and barred from asso- Market Maker in a security in Principal, Hilliard, Ohio) submitted a ciation with any NASD member in any retaliation for the manner in which the Letter of Acceptance, Waiver, and capacity. Without admitting or denying firm was quoting and trading the Consent pursuant to which he was the allegations, Wooden consented to stock, in violation of the NASD’s Anti- censured and fined $10,000. Without the described sanctions and to the In t i m i d a t i o n / C o o r d i n a t i o n admitting or denying the allegations, entry of findings that he failed to In t e r p r e t a t i o n . Wiegandt consented to the described respond to an NASD request to pro- sanctions and to the entry of find i n g s vide an on-the-record statement and Roger David McClammer that he engaged in activities requiring do c u m e n t a t i o n . (Registered Representative, registration as a registered options Gr e e n fi eld, Indiana) submitted a principal without being registered in Steven David Wyman (Registered Letter of Acceptance, Waiver, and that capacity. Principal, Boynton Beach, Florida) Consent pursuant to which he was submitted a Letter of Acceptance, censured and fined $25,000. Without Decisions Issued Waiver, and Consent pursuant to admitting or denying the allegations, The following decisions have been which he was censured, fine d McClammer consented to the issued by the DBCC or the Office of $10,000, and suspended from associ- described sanctions and to the entry Hearing Officers and have been ation with any NASD member in any of findings that he received a check in appealed to or called for review by principal or supervisory capacity for the amount of $8,030.16 from a public the NAC as of December 21, 1998. 10 business days. Without admitting customer for the purpose of The findings and sanctions imposed or denying the allegations, Wyman establishing a money market mutual in the decision may be increased, consented to the described sanctions fund. The NASD found that contrary decreased, modified, or reversed by and to the entry of findings that he to the customer’s instructions, the NAC. Initial decisions whose time failed to reasonably supervise regis- McClammer failed to open the fund for appeal has not yet expired will be tered representatives’ handling of until a later date at which time he reported in the next Notices to public customers’ accounts in order to signed the customer’s name to the Me m b e r s . prevent and/or detect unsuitable trad- fund account application without the ing in the accounts. customer’s knowledge or consent. Sandy Charles Giglio (Registered Representative, Palm Coast, David Hirsch Zinn (Registered Rep- Beth Kohlnhofer Raskovich Fl o r i d a ) was censured, fine d resentative, Oldbridge, New Jer- (Registered Representative, $20,000, suspended from sey) was censured, fined $5,000, Bloomington, Minnesota) su b m i t t e d association with any NASD member suspended from associating with any a Letter of Acceptance, Waiver, and in any capacity for five days, and NASD member in any capacity until Consent pursuant to which she was required to requalify as a general such time as he fully complies with an censured and fined $12,509. Without securities representative by taking arbitration award, but no less than 30 admitting or denying the allegations, and passing the Series 7 exam. The business days. The sanctions were Raskovich consented to the described sanctions were based on find i n g s based on findings that Zinn failed to sanctions and to the entry of find i n g s that Giglio forged the signatures of pay a Chicago Board Options that she opened a securities account public customers on “change of

NASD Notices to Members—Disciplinary Actions Janu a r y 1999 37 Broker Dealer/Representative” forms judicated, you may wish to contact tomer. The complaint also alleges to move their accounts from other the respondents before drawing any that DeSane failed to execute a sale member firms to his current member conclusions regarding the allegations of securities as ordered by a public firm . in the complaint. cu s t o m e r .

Giglio has appealed this action to the James Hugh Brennan, III (Regis- Edward Michael Gabbert (Regis- NAC and the sanctions are not in tered Representative, Chat- tered Representative, Wilmington, effect pending consideration of the tanooga, Tennessee) was named De l a w a r e ) was named as a respon- appeal. as a respondent in an NASD com- dent in an NASD complaint alleging plaint alleging that he executed that he caused $20,795.71 in funds Ð Ansula Pet Hwa Liu (Registered unauthorized securities transactions to which he was not entitled Ð to be Representative, Brooklyn Park, in the accounts of a public customer transferred from accounts in which Minnesota) was censured, fine d without the customer’s knowledge or he did not have an ownership inter- $100,000, barred from association consent. The complaint alleges that est to an account in which he did with any NASD member in any Brennan recommended and have an ownership interest. The capacity, and ordered to pay $50,000, engaged in such purchase transac- complaint also alleges that Gabbert plus interest, in restitution. The tions and did not have reasonable failed to respond to NASD requests sanctions were based on findings that grounds for believing that these rec- for information. Liu engaged in private securities ommendations and resultant trans- transactions without providing prior actions were suitable for the Kenneth Edward Grant (Regis- written notification to her member customer on the basis of investment tered Representative, Oxford, firm. Liu also failed to respond to objectives and needs. The complaint Michigan) was named as a respon- NASD requests for information. also alleges that in connection with dent in an NASD complaint alleging unauthorized purchase transactions, that he obtained checks totaling Liu has appealed this action to the Brennan verbally misrepresented to $2,622 made payable to public cus- NAC and the sanctions are not in a public customer that the subject tomers which included repayments effect pending consideration of the transactions had been effected in for insurance policies, as well as a appeal. error, and made material misrepre- mistaken overpayment for the insur- sentations to the customer by over- ance policies, and endorsed the Kellie Anne Will (Registered stating the value of the account by checks by writing the customers’ Representative, Derby, New York) approximately $146,000. The com- names on the checks, without the was censured, fined $25,000, and plaint also alleges that Brennan customers’ knowledge or consent. barred from association with any guaranteed a public customer The complaint alleges that Grant NASD member in any capacity. The against loss in that he stated that he then cashed the checks and used sanctions were based on find i n g s would be responsible for making up $2,185 for some purpose other than that Will failed to respond to NASD any shortfall in the value of securities the benefit of the insurance company requests for information. that occurred in a specified time peri- or the customers, then later paid the od . funds to the insurance company. Will has appealed this action to the NAC and the sanctions are not in John Steven DeSane (Registered Michael Lee Eng King (Registered effect pending consideration of the Principal, Mt. Sinai, New York) wa s Principal, Portland, Oregon) wa s ap p e a l . named as a respondent in an NASD named as a respondent in an NASD complaint alleging that he made complaint alleging that he exercised Complaints Filed material misrepresentations and effective control over the account of The following complaints were omissions in connection with his a public customer and recommended issued by the NASD. Issuance of a solicitation of public customers to to such customer the purchase and disciplinary complaint represents the purchase securities. The complaint sale of securities, without having rea- initiation of a formal proceeding by also alleges that DeSane made sonable grounds for believing that the NASD in which findings as to the fraudulent price predictions in con- such recommendations were suit- allegations in the complaint have not nection with his solicitation of public able for the customer, in view of the been made, and does not represent customers. The complaint alleges frequency and nature of the recom- a decision as to any of the allega- that DeSane effected transactions in mended transactions (short sales) tions contained in the complaint. a public customer’s account without and the customer’s financial situa- Because these complaints are unad- the prior authorization of the cus- tion, circumstances, and needs.

NASD Notices to Members—Disciplinary Actions Janu a r y 1999 38 Robert Albert Skulman (Regis- failed to respond to NASD requests Elswick, Banks and Associates, tered Representative, Ft. Smith, for documents. The complaint In c . , Atlanta, Georgia (December 4, Ar k a n s a s ) was named as a respon- alleges that the firm, acting through 19 9 8 ) dent in an NASD complaint alleging Angle and Shea, failed to establish that he recommended and engaged and implement written supervisory Fisher Hill Securities Corporation, in securities transactions in the procedures adequate to detect and San Francisco, California (December accounts of public customers without prevent the violations alleged against 4, 1998) having reasonable grounds for Lui and to otherwise adequately believing that these recommenda- supervise Lui’s activities in connec- Fundamental Service Corporation, tions and resultant transactions were tion with customer accounts. The New York, New York (December 4, suitable for the customers on the complaint also alleges that the firm , 19 9 8 ) basis of their financial situations, acting through Angle, entered into investment objectives, and needs. settlement agreements with public Great American Securities, The complaint also alleges that Skul- customers which contained confide n - Phoenix, Arizona (December 21, man provided an inaccurate annual tiality clauses that prohibited or dis- 19 9 8 ) income figure on a new account form couraged the customers from for one public customer and inflat e d discussing the settlements with or J. Robbins Securities, LLC, New annual income and net worth figu r e s disclosing the underlying facts to York, New York (December 4, 1998) on a new account form for another NASD and other regulators. public customer. The complaint also Kenerson Financial Advisors, alleges that Skulman executed unau- Firms Suspended/Canceled LL C , Boston, Massachusetts thorized securities transactions in the The following firms were suspend- (December 4, 1998) account of a public customer without ed/canceled from membership in the the customer’s knowledge or con- NASD for failure to comply with for- McCormick-O’Mara Securities Co., se n t . mal written requests to submit fina n - New York, New York (December 21, cial information to the NASD. The 19 9 8 ) Thomas F. White & Co., Inc. (San actions were based on the provisions Francisco, California), Raymond of NASD Rule 8210 and Article VII, Northbridge Financial Services, M. C. Lui (Registered Principal, Section 2 of the NASD By-Laws. The Farmington Hills, Michigan (Decem- Alameda, California), Robert date the suspensions/cancellations ber 4, 1998) Thomson Angle (Registered Prin- commenced is listed after the entry. cipal, San Francisco, California) If the firm has complied with the and Peter William Shea (Regis- requests for information, the listing Firms Expelled For Failing To tered Principal, Alameda, Califor- also includes the date the suspen- Pay Fines, Costs, And/Or ni a ) were named as respondents in sion concluded. Provide Proof Of Restitution an NASD complaint alleging that Lui KBC Securities, Inc., Cincinnati, exercised discretion in the accounts Advanta OTC Securities, Philadel- Ohio (December 17, 1998) of public customers without having phia, Pennsylvania (December 10, received written authorization from 19 9 8 ) Paul Morigi & Company, Inc., Old the customers and acceptance of the Greenwich, Connecticut (December accounts as discretionary by his firm . Alden Capital Markets, Inc., New 9, 1998) The complaint alleges that Lui exer- York, New York (December 4, 1998) cised effective control over the Portfolio Management, Inc., Little accounts of public customers and American Freedom Securities, Rock, Arkansas (December 17, recommended purchases and sales In c . , Rochester, New York (Decem- 19 9 8 ) of securities without having reason- ber 4, 1998) able grounds for believing that the Suspensions Lifted recommendations were suitable for Ash Financial Corp., New York, The NASD has lifted the suspension the customers in light of their size New York (December 4, 1998) from membership on the dates and frequency and based upon the shown for the following firm s facts disclosed by the customers as Cassidy & Co., Inc., Blue Bell, because they have complied with for- to their other security holdings and Pennsylvania (December 4, 1998) mal written requests to submit fina n - their financial situations and needs. cial information. The complaint also alleges that Lui Clark Melvin Securities, Hato Rey, Puerto Rico (December 10, 1998) NASD Notices to Members—Disciplinary Actions Janu a r y 1999 39 First International Capital Ltd., Violations Arbitration Awards Hamilton, Bermuda (December 17, Bassin, Ira Warren, Plainview, New Borden, Dianne A., Westfield, New 19 9 8 ) York (November 19, 1998) Jersey (December 2, 1998)

Hampton Securities, Inc., Los Bowman, Samuel L., III, Little Rock, Buchter, Ronald Leonard, New Angeles, California (November 16, Arkansas (December 17, 1998) York, New York (November 27, 1998 19 9 8 ) - December 2, 1998) Elliott, Jeffrey L., Jacksonville, Flori- Firms Suspended Pursuant To da (December 9, 1998) Burrmann, John Edward, Missouri NASD Rule Series 9510 For City, Texas (December 1, 1998) Failure To Pay Arbitration Fischer, Stephen J., Manhattan Award Beach, California (December 17, Clarke, Leauwandeau, Sherman Dunhill Equities, Inc., Garden City, 19 9 8 ) Oaks, California (December 9, 1998) New York (December 11, 1998) Friedland, Adam C., Woodbury, Duffy, Frank Gerard, III, Amityville, Investors Associates, Inc., Hack- New York (November 19, 1998) New York (December 7, 1998) ensack, New Jersey (December 17, 1998) Gray, John R., Kemah, Texas Elgindy, Amr Ibrahim, Colleyville, (December 17, 1998) Texas (December 16, 1998) Island Securities, Inc., Garden City, New York (December 16, 1998) Jann, Christopher E., Middle Island, Forman, Scott Brian, Brooklyn, New York (December 17, 1998) New York (November 30, 1998) J.S. Securities n/k/a First National Equity Corp., Point Pleasant, New Kideys, Ian T., Los Angeles, Califor- Friedland, Adam Craig, Woodbury, Jersey (November 6, 1998) nia (December 17, 1998) New York (November 30, 1998)

L.C. Wegard & Co., New York, New Maier, Donald C., Monte Sereno, Greer, Leonard B., Rye, New York York (December 11, 1998) California (December 17, 1998) (December 11, 1998)

LT Lawrence & Co., Inc., New York, Martin, David R., Thousand Oaks, Hagans, David Lebron, New York, New York (November 27, 1998) California (December 17, 1998) New York (December 10, 1998)

Monitor Investment Group, New McLaurin, David C., Birmingham, Jones, Shelley, La Mesa, California York, New York (December 10, Alabama (December 17, 1998) (December 4, 1998) 19 9 8 ) Pellone, Glenn, Denver, Colorado Jones, William E., Marietta, Georgia Quantum Group, Ltd. a/k/a J.P. (November 19, 1998) (November 23, 1998) Milligan, Inc., Sloatsburg, New York (December 2, 1998) Sauceda, Benito, III, Denver, Col- Kauffman, Brian Charles, Trevose, orado (November 19, 1998) Pennsylvania (December 11, 1998) Sterling Foster & Co., Inc., Union- dale, New York (December 2, 1998) Sclafani, Michael A., Brooklyn, New Kiperman, Neil Lewis, New York, York (December 17, 1998) New York (November 24, 1998) Suppes Securities, Inc., New York, New York (December 3, 1998) Stevens, Robert L., Denver, Col- Lemaich, Christopher D., Boca orado (November 19, 1998) Raton, Florida (December 16, 1998) Waldron & Co., Inc., Irvine, Califor- nia (December 2, 1998) Van der Put, Christiaan P., Pitts- Lieberman, Adam R., Roslyn burgh, Pennsylvania (December 17, Heights, New York (December 7, Individuals Whose 19 9 8 ) 19 9 8 ) Registrations Were Revoked For Failure To Pay Fines, Individuals Suspended Monroe, Lamarde A., Miami, Florida Costs And/Or Provide Proof Of Pursuant To NASD Rule Series (December 11, 1998 - December 21, Restitution In Connection With 9510 For Failure To Pay 19 9 8 )

NASD Notices to Members—Disciplinary Actions Janu a r y 1999 40 Monroig, Frank J., Nissequogue, McCune, owner and former Presi- were actually sold by traders at two New York (December 7, 1998) dent of VTR Capital, $100,000. other firms who, in turn, obtained the Fairchild Financial Group has agreed shares from VTR almost immediately Perle, Cery Bradley, Corona Del to pay $300,000 in restitution and thereafter. This circular trading Mar, California (December 2, 1998) interest to nearly 150 VTR Capital scheme artificially inflated the report- customers in 30 states including Col- ed trading volume by 42 percent and Porush, Daniel Mark, Oyster Bay orado, Florida, Illinois, New York, created the deceptive appearance of Cove, New York (November 30, Ohio, and Pennsylvania. McCune, an active market in the stock. The 19 9 8 ) currently CEO of Fairchild Financial, case is continuing against the two has been suspended from the secu- accommodating traders, Howard R. Rich, Jason Allen, Jericho, New rities industry for eight months. Perles of Fairchild Financial Group York (November 24, 1998) (formerly associated with I. A. Rabi- While neither admitting nor denying nowitz) and Laurence M. Geller of Ruggiero, Salvatore F., Brooklyn, NASD Regulation’s allegations, VTR Wien Securities Corp. New York (December 10, 1998) Capital and McCune settled charges that the firm and McCune had partici- While continuing to make a market in Sperling, Peter, Sugarland, Texas pated in an illegal distribution and the Interiors stock and in the process (December 3, 1998) fraudulent manipulation of Interiors, of selling the shares, the firm paid Inc. Class A common stock. additional compensation to the firm ’ s Trocchio, Michael S., Staten Island, brokers and used high-pressure New York (December 10, 1998) In April 1995, VTR Capital and sales tactics in violation of the federal McCune acquired a block of 300,000 securities laws. In addition, VTR Vink, Lawrence Jack, Poway, Cali- shares of Interiors common stock, Capital and McCune neglected to fornia (December 1, 1998) representing approximately 28 per- disclose to customers that they had cent of the outstanding shares. received unfair and excessive com- Zimmerman, Sheldon G., San Sp e c i fi cally, VTR Capital and pensation from underwriting the dis- Diego, California (December 2, McCune arranged to purchase tribution of these shares. Interiors 19 9 8 ) 300,000 shares of Interiors common was not named in the complaint and stock from five short-term investors, is not alleged to have engaged in including the firm’s attorney, at prices any wrongdoing. NASD Regulation Sanctions ranging from $.95 to $.98 per share. And Fines VTR Capital, Inc. VTR Capital and McCune then arbi- At the time of the violations, VTR, And Former President For trarily increased the market price of based in New York City, was a full- Market Manipulation And the stock to over $2 per share while service brokerage firm and employed Illegal Profits; Additional selling the block to the firm’s cus- about 70 brokers. $300,000 Restitution Ordered tomers. Because of a regulatory NASD Regulation announced that it restriction, the firm was prevented © 1999, National Association of Securities Dealers, has censured and fined VTR Capital, from directly selling the shares to its Inc. (NASD). All rights reserved. Inc., currently known as Fairchild customers from its own account. To Financial Group, Inc., and Edward J. circumvent this limitation, the shares

NASD Notices to Members—Disciplinary Actions Janu a r y 1999 41 Wire Transfer Of Corporate For Financing Fees The Corporate Financing Department of NASD Regulation, Inc. (NASD You r Re g u l a t i o n SM ) will now accept the pay- ment of the Corporate Financing fili n g In f o rm a t i o n fee by wire transfer. (The Department will continue to accept checks or money orders, too.) To obtain the necessary information for wire trans- fers, please contact the Compliance Unit of the Corporate Financing Department at (202) 974-2700.

© 1999, National Association of Securities Dealers, Inc. (NASD). All rights reserved.

NASD Notice to Members—For Your Inform a t i o n Janu a r y 1999 43

Executive Summary Although the agreement governing NASD Regulation, Inc. (NASD the operation of the CRD system NASD SM Re g u l a t i o n ) is imposing a expressly addresses court-ordered moratorium on expungement of expungements, it does not Notice to certain information from the Central sp e c i fi cally address arbitrator- Registration Depository (CRDSM ) that ordered expungements. NASD is ordered by arbitrators. Effective Regulation has taken the position Members January 19, 1999, NASD Regulation that expungement of information will not expunge information from the from the CRD system that is ordered 99-09 CRD system based on a directive by an arbitrator and contained in an contained in an arbitration award award should be afforded the same rendered in a dispute between a treatment as a court-ordered NASD Regulation public customer and a firm or an expungement. NASAA disagrees Imposes Moratorium On associated person, unless the award with this position and has informed has been confirmed by a court of NASD Regulation that it does not Arbitrator-Ordered competent jurisdiction. Therefore, believe that arbitrator-ordered Expungements Of arbitration awards rendered in such expungements should be afforded Information From The disputes that contain expungement the same treatment as court-ordered Central Registration directives that are not final (i. e . , those expungements. NASAA has Depository awards that have not been signed by informed NASD Regulation that, in its a majority of the arbitrators) on or opinion, according to various state before January 19, 1999, must be laws, information submitted to the Suggested Routing co n fi rmed by a court of competent CRD system is deemed to have Senior Management jurisdiction before NASD Regulation been filed with each state in which will execute the expungement that person or entity seeks to be Ad v e r t i s i n g directive. During this moratorium, registered. Therefore, according to Continuing Education NASD Regulation will continue to NASAA, information in the CRD execute court-ordered system that may be the subject of an Corporate Finance expungements, including arbitrator-ordered expungement is in Executive Representatives expungement orders contained in an many cases a state record, and state Government Securities arbitration award that is confirmed by laws do not currently recognize the a court of competent jurisdiction. In authority of an arbitrator to expunge In s t i t u t i o n a l addition, NASD Regulation will a state record or do not otherwise In s u r a n c e continue to expunge information from currently permit such expungements Internal Audit the CRD system based on because of state recordkeeping expungement directives in arbitration requirements. Pending further Legal & Compliance awards rendered in disputes discussions with NASAA and the Mu n i c i p a l between firms and current or former states, NASD Regulation is imposing associated persons, where a moratorium on expunging Mutual Fund arbitrators have awarded such relief information from the CRD system Op e r a t i o n s based on the defamatory nature of based on a directive contained in an Op t i o n s the information. arbitration award rendered in a dispute between a public customer Registered Representatives NASD Regulation is imposing this and a firm or associated person, Re g i s t r a t i o n moratorium after discussions with the unless the award has been Re s e a r c h North American Securities co n fi rmed by a court of competent Administrators Association (NASAA), jurisdiction. The moratorium is Sy n d i c a t e an association whose members effective January 19, 1999. Sy s t e m s include state and other securities regulators in the United States, as Questions concerning this No t i c e Tr a d i n g well as other securities regulators in may be directed to Ann E. Bushey, Tr a i n i n g North America. NASD Regulation Assistant Director, CRD/Public Variable Contracts operates the CRD system pursuant Disclosure, NASD Regulation, at to an agreement with NASAA. (301) 590-6389; Mary M. Dunbar,

NASD Notice to Members 99-09 Feb ru a r y 1999 47 Assistant General Counsel, Office of States, as well as other securities expungements. Therefore, effective General Counsel, NASD Regulation, regulators in North America. NASD January 19, 1999, NASD Regulation at (202) 728-8252; or Richard E. Regulation expunges information will not expunge information from the Pullano, Associate Director and from the CRD system when ordered CRD system based on a directive Counsel, CRD/Public Disclosure, to do so by a court of competent contained in an arbitration award NASD Regulation, at (301) 212- jurisdiction. NASD Regulation, rendered in a dispute involving a 37 8 9 . recognizing arbitrators’ broad public customer and a firm or authority to grant equitable relief and associated person, unless the award Background And Discussion a party’s ability to have an award has been confirmed by a court of The CRD system is an electronic co n fi rmed in court, also has honored competent jurisdiction. Awards registration and licensing system that such expungement directives rendered in such disputes that contains information used by the provided they were contained in an contain expungement directives that Securities and Exchange arbitrator’s award. NASD Regulation are not final (i. e . , those awards that Commission (SEC), National provides NASAA with copies of have not been signed by a majority Association of Securities Dealers, arbitration awards containing of the arbitrators) on or before Inc. (NASD¨), other self-regulatory expungement directives before January 19, 1999, must be organizations (SROs), and state expunging any information from the co n fi rmed by a court of competent securities regulators to make CRD system. jurisdiction before NASD Regulation licensing and registration decisions, will execute the expungement among other things. The information NASAA has informed NASD directive. Notwithstanding this on the CRD system includes criminal Regulation that, in its opinion, under moratorium, NASD Regulation will information (e. g . , indictments and the laws of certain states, information continue to expunge information from convictions for certain criminal filed with the CRD system is deemed the CRD system based on offenses), disciplinary information to have been filed with those states, expungement directives contained in (e. g . , sanctions imposed by and, according to NASAA, is arbitration awards rendered in regulators, customer complaints that therefore a state record subject to all disputes between firms and current meet specified criteria, and certain of the regulations and protocols that or former associated persons, where categories of employment apply to state records. NASAA has arbitrators have awarded such relief terminations), and other information. further informed NASD Regulation based on the defamatory nature of The information on the CRD system that, in its opinion, state laws do not the information. In addition, NASD is submitted by regulatory authorities currently recognize the authority of Regulation will continue to execute (e. g . , state securities regulators and an arbitrator to expunge a state court-ordered expungements, SROs) and by registered record or do not otherwise currently including expungement directives broker/dealers. NASD Regulation is permit such expungements because contained in arbitration awards responsible for processing of state recordkeeping requirements. rendered in disputes between public registration-related filings and NASD Regulation has determined to customers and firms or associated entering information into the CRD impose a moratorium on persons, provided those awards are sy s t e m . expungement of information from the co n fi rmed by a court of competent CRD system that is awarded by ju r i s d i c t i o n . NASD Regulation maintains and arbitrators in disputes involving operates the CRD system pursuant public customers and firms or © 1999, National Association of Securities Dealers, to NASD rules and an agreement associated persons, but not Inc. (NASD). All rights reserved. between NASD Regulation and co n fi rmed by a court of competent NASAA, an association whose jurisdiction, while it discusses with members include state and other NASAA and the states certain legal securities regulators in the United and policy issues implicated by these

NASD Notice to Members 99-09 Feb ru a r y 1999 48 Executive Summary Superior Court, 17 Cal. 4th 119 Effective January 1, 1999, the NASD (1998) (Birbrower), which holds that NASD SM Regulation, Inc. (NASD Regulation ) under certain circumstances, non- Of fi ce of Dispute Resolution (ODR) California attorneys who appear in Notice to adopted the following Guidelines and California arbitration proceedings are Ce r t i fi cation Form to govern the prac- engaged in the unauthorized practice tice of non-California attorneys in all of law in violation of Cal. Bus. & Prof. Members arbitration proceedings in California. Code Section 6125. These Guidelines are in response to 99-10 a change in California state law, ODR has formulated the following effective January 1, 1999, that Guidelines, effective January 1, requires non-California attorneys par- 1999, to comply with Section 1282.4, NASD Guidelines For ticipating in California arbitration pro- as amended. Compliance With New ceedings to associate with California counsel and to file a Certifica t i o n Please note that the statutory amend- Requirements For Non- Form with the arbitration forum and ments address on l y arbitration, no t Ca l i fo r nia Attorney s the State Bar of California in each mediation proceedings. Representing Par ties In case in which they participate. Non- NASD Arbitrations In California attorneys who fail to comply Guidelines Ca l i fo rn i a with the state statute may be engaged in the unauthorized practice Attorneys Who Are Admitted to of law in California. Practice in California Suggested Routing Senior Management Questions concerning this No t i c e ¥ Attorneys who are admitted to prac- may be addressed to Terri L. Reicher, tice in California must include their Ad v e r t i s i n g Assistant General Counsel, Office of California bar number on the initial Continuing Education General Counsel, National Associa- correspondence and the initial plead- tion of Securities Dealers, Inc. ing submitted to ODR. Corporate Finance ¨ (N A S D ) at (202) 728-8967 or Executive Representatives re i c h e r t @ n a s d . c o m . Attorneys Who Are Not Admitted to Government Securities Practice in California Guidelines For Appearance By In s t i t u t i o n a l Attorneys In ODR Arbitration ¥ An attorney who is licensed in a In s u r a n c e Forum In California state other than California may not Internal Audit appear in the ODR arbitration forum Introduction in California in a representative Legal & Compliance capacity unless he or she associates Mu n i c i p a l These Guidelines apply to all parties with a California attorney who will be and their counsel whose arbitration attorney of record, and provides Mutual Fund cases have been or will be heard by ODR with a Non-California Attorney Op e r a t i o n s NASD Regulation’s ODR forum any- Ce r t i fi cation Form, which contains Op t i o n s where in the state of California. On the information required by Section August 31, 1998, the California legis- 1282.4. These obligations are creat- Registered Representatives lature amended the California Civil ed when ODR notifies the parties Re g i s t r a t i o n Procedure Code Section 1282.4 to that an arbitration proceeding will be Re s e a r c h require non-California attorneys to located in California. meet certain obligations before they Sy n d i c a t e may represent parties in private arbi- ¥ The Form (attached to this No t i c e ) Sy s t e m s tration proceedings in California. The requests all of the information amendments, which become effec- required by Section 1282.4. The Tr a d i n g tive on January 1, 1999, were enact- Form must be filed with the San Tr a i n i n g ed in response to the California Francisco or Los Angeles Regional Variable Contracts Supreme Court’s decision in Birbrow- Of fi ce of the ODR (depending on er, Montalbano, Condon & Frank v. which office is administering the pro-

NASD Notice to Members 99-10 Feb ru a r y 1999 49 ceeding), the State Bar of California, Question And Answers: How California attorneys must provide the and served upon all parties and Guidelines Affect ODR ODR with their bar numbers, and counsel whose addresses are known Administration Of Arbitration non-California attorneys must to the non-California attorney at the Proceedings provide the San Francisco or Los time the Form is filed. Upon associat- Angeles Regional Office of ODR ing with a California attorney and Question: When must California (whichever Office is administering providing the information required counsel enter an appearance? the particular proceeding) with a under Section 1282.4, a non-Califor- completed Form, and have an nia attorney may participate fully in An s w e r : Within 45 calendar days of associated California attorney file an the arbitration, provided that the Cali- service of the statement of claim (the appearance in the case. Parties who fornia attorney has entered an same time the answer is due). This fail to have appearances entered by appearance as counsel of record. applies to all parties. California attorneys by February 1, 1999, will be considered to represent ¥ The State Bar of California may Upon receipt of a statement of claim, themselves until a California attorney require a filing fee for registration of ODR will serve the claim (providing enters an appearance on their attorneys who are not admitted to that all other requirements are met) behalf. Non-California attorneys who practice in California. Please contact and notify the parties of the probable fail to associate with California the Office of Certification at State Bar hearing location. When the hearing attorneys by the deadline may not of California (see the address below) location is set in California, parties file any documents with ODR, or regarding any fees that may be choosing to be represented by non- appear in prehearing conferences or required. The Office of Dispute Res- California counsel also must enter hearings. This prohibition applies olution cannot accept filing fees on the appearance of California whether or not the events require the behalf of the State Bar of California. counsel, before or at the time the non-California attorney to be respondent's answer is due, which is physically present in California. Of fi ce of Certification 45 calendar days after service of the State Bar of California statement of claim. The time for These Guidelines also apply to 180 Howard Street parties to obtain California counsel cases that were originally located San Francisco, CA 94105-1639 will not be extended, even if the time outside of California but are Phone: (415) 538-2115 for filing an answer is extended. subsequently transferred to Fax: (415) 538-2180 California. In these cases, non- Qu e s t i o n : What happens if a party California counsel must comply with fails to obtain California counsel? these Guidelines within 30 calendar Determination of Location of NASD days of the date the parties are Regulation Proceedings Answer: If California counsel does no t i fi ed the case is being transferred not enter an appearance within 45 to California, or before the parties’ ¥ These Guidelines apply only to calendar days after service of the first appearance in a prehearing ODR arbitration proceedings taking statement of claim, ODR will advise conference after the case has been place in California. the parties that the non-California transferred to California, whichever is attorney may not appear in a firs t . ¥ The location of arbitration representative capacity in the ODR proceedings is governed by the forum, and that the party without These Guidelines also apply to Uniform Submission Agreement and California counsel is considered to California cases in which a non- the Code of Arbitration Procedure represent him or herself until California attorney is retained to Rule 10315, which provide that the California counsel enters an represent a party after the answer Director of Arbitration shall set the appearance. has been filed. In these cases, the initial hearing location, and that the non-California attorney must submit arbitrators may set the location Qu e s t i o n : How do the Guidelines the Certification Form within fift e e n thereafter. affect open arbitration cases? (15) calendar days of being retained, or before the next scheduled hearing An s w e r : All parties in open (including prehearing conferences), arbitration cases must comply with whichever is sooner. these Guidelines within 30 calendar days of the statute’s January 1, 1999 Question: Do the Guidelines apply effective date. This means that to mediation cases?

NASD Notice to Members 99-10 Feb ru a r y 1999 50 An s w e r : No. The statute and these mediation cases. Counsel or other research and consulting with counsel Guidelines apply only to arbitration representatives participating in and/or the California State Bar. cases in the NASD Regulation mediations should take whatever forum. NASD Regulation takes no actions they deem necessary to © 1999, National Association of Securities Dealers, position on the applicability of the comply with applicable California Inc. (NASD). All rights reserved. statute or Birbrower with respect to law, including but not limited to legal

NASD Notice to Members 99-10 Feb ru a r y 1999 51 NASD REGULATION, INC.’S OFFICE OF DISPUTE RESOLUTION NON-CALIFORNIA ATT ORNEY CERTI F I C A TION FORM PU R S U ANT TO CAL. CIV. PRO. CODE SECTION 1282.4

IN S T R U C T I O N S : This Certification Form must be completed by attorneys not admitted to practice in California who seek to represent a party in an NASD Regulation, Inc. arbitration proceeding in California. This Form shall constitute the certificate required under Cal. Code of Civil Procedure Section 1282.4(c), as amended. The Form must be file d with the NASD Regulation, Inc.’s Office of Dispute Resolution regional office administering your arbitration (check of fi ce and address below):

San Francisco Office Los Angeles Office NASD Regulation, Inc. NASD Regulation, Inc. Of fi ce of Dispute Resolution Of fi ce of Dispute Resolution 525 Market Street, Suite 300 300 S. Grand Avenue, Suite 1620 San Francisco, CA 94105 Los Angeles, CA 90071

The Form also must be filed with the Office of Certification, State Bar of California, 180 Howard Street, San Francisco, California, 94105-1639, and must be served upon all other parties and counsel in the arbitration whose addresses are known to the attorney.

Section I. Case Information

Case Name: ______

Case Number: ______

Section II. Non-California Attorney Information

Name: ______

Of fic e : ______

Address: ______

Ci t y / s t a t e / z i p : ______

Of fi ce Phone : ______

Of fi ce Fax: ______

Home Phone: ______

Home Fax: ______

NASD Notice to Members 99-10 Feb ru a r y 1999 52 Section II continued: Court(s) where attorney is admitted to practice and date(s) of admission (separate sheet may be attached if necessary):

In the two years preceding the date of this form, have you filed an application to appear as counsel pro hac vice in the State of California, or have you filed a Certification Form pursuant to Cal Civ. Proc. Code Section 1282.4? If the answer is “yes,” please identify the title of the court or other forum and the case in which you filed such an application or certificate, and whether or not it was granted.

Section III. California Counsel Information

The following attorney is admitted to practice of law in California, and will serve as the attorney of record in this ar b i t r a t i o n .

Na m e : ______

California Bar #: ______

Ad d r e s s : ______

Ci t y / s t a t e / z i p : ______

Of fi ce Phone : ______

Of fi ce Fax: ______

Home Phone: ______

Home Fax: ______

NASD Notice to Members 99-10 Feb ru a r y 1999 53 Section IV. Certifica t i o n s

I hereby certify that:

(a) I am currently a member in good standing of and eligible to practice law before each of the courts listed in Section II above; and

(b) I am not currently on suspension or disbarred from the practice of law of any court; and

(c) I am not a resident of the State of California; and

(d) I am not regularly employed in the State of California; and

(e) I am not regularly engaged in substantial business, professional or other activities in the State of California; and

(f) I agree to be subject to the jurisdiction of the courts of the State of California with respect to the law of the State of California governing the conduct of attorneys to the same extent as a member of the State Bar of California; and

(g) I am aware that filing a certificate containing false information or otherwise failing to comply with the standards of professional conduct required of members of the State Bar of California will subject me to the disciplinary jurisdiction of the State Bar of California with respect to any of my acts occurring during the course of the arbitration.

(h) The foregoing information is true.

Da t e : ______

Non-California Attorney Signature: ______

Please type or print name here : ______

NASD Notice to Members 99-10 Feb ru a r y 1999 54 Executive Summary executions and executions at prices NASD In recent months, there has been a si g n i fi cantly away from the market sharp increase in price volatility and price quoted at the time the order volume in many stocks, particularly was entered then occurred, which in Notice to of companies that sell products or turn led to market losses caused by services via the Internet (Internet executions at prices higher or lower issuers). NASD Regulation, Inc. than customers expected, especially Members (NASD RegulationSM ) is issuing this with respect to orders placed over Notice to Members to suggest the Internet. 99-11 disclosures that firms can make to retail customers to educate them First and foremost, NASD Regulation about the risks of price and volume reminds member firms of their obliga- volatility. This No t i c e also describes tions under Securities and Exchange steps taken by some on-line brokers Commission (SEC) Staff Legal Bul- NASD Regulation Issues to respond to volatility. A companion letin No. 8 to ensure that they have Guidance Regarding Notice to Members issued today, adequate systems capacity to handle Stock Volatility Notice to Members 99-12, provides high volume or high volatility trading members with guidance concerning da y s . 1 In this connection, we note the operation of their order execution that the SEC staff’s position relates Suggested Routing systems and procedures during to all firms handling orders and is Senior Management extreme market conditions. premised on a legal obligation to treat customers fairly.2 Second, firm s Ad v e r t i s i n g Questions or comments concerning should provide adequate, clear dis- Continuing Education this No t i c e may be directed to Mary closure to customers about the risks Revell, Associate General Counsel, arising out of evolving volatility and Corporate Finance Of fi ce of General Counsel, NASD volume concerns and any related Executive Representatives Regulation, at (202) 728-8203. constraints on firms’ ability to process Government Securities orders in a timely and orderly man- Discussion ner. This No t i c e describes the types In s t i t u t i o n a l Recently, there has been a marked of disclosure we deem appropriate. In s u r a n c e increase in the price volatility of many Internal Audit stocks, particularly those of Internet We also have spoken to several issuers. This volatility has been cou- order entry firms that provide on-line Legal & Compliance pled with record trading volume in trading services about the steps they Mu n i c i p a l many of these stocks. Customers are taking to respond to volatility. eager to trade Internet stocks have This No t i c e provides members with Mutual Fund flooded their brokers with large num- information about these steps.3 Op e r a t i o n s bers of orders, leading to large order Op t i o n s imbalances, systems queues, and backlogs. During these extreme mar- Disclosure Registered Representatives ket conditions, many firms imple- Recent events show that the way Re g i s t r a t i o n mented procedures that are some stocks are traded is changing Re s e a r c h designed to preserve the continuous dramatically, and the change in trad- execution of customers’ orders while ing methods may affect price volatility Sy n d i c a t e also lessening the exposure of the and cause increased trading volume. Sy s t e m s firm to extraordinary market risk. For This price volatility and increased vol- example, some Market Maker firm s ume present new hazards to Tr a d i n g temporarily discontinued normal investors, regardless of whether trad- Tr a i n i n g automatic order executions and han- ing occurs on-line or otherwise. Variable Contracts dled orders manually. Firms also Firms are reminded that their proce- reduced their size guarantees on dures for handling customer orders individual stocks or groups of stocks must be fair, consistent, and reason- (i. e . , stocks of Internet issuers) on a able during volatile market conditions going-forward basis. Delays in order and otherwise. To ensure that cus-

NASD Notice to Members 99-11 Feb ru a r y 1999 55 tomers are knowledgeable about regard to price and that, while a cus- tions may have difficulty reaching these procedures, we suggest that tomer may receive a prompt execu- account representatives on the tele- all firms, both order entry firms (i. e . , tion of a market order, the execution phone during periods of high volume. firms with a retail business that route may be at a price significantly differ- Firms should explain their proce- orders to other firms for execution) ent from the current quoted price of dures for responding to these access and integrated firms (i. e . , firms with a that security. Firms should tell cus- pr o b l e m s . large retail business that also tomers that limit orders will be exe- engage in market making and other cuted only at a specified price or Communications With The Public activities), whether they offer on-line better and that, while the customer trading services or not, consider receives price protection, there is the Firms may use advertisements or making the following types of disclo- possibility that the order will not be sales literature to make claims about sures to educate retail customers executed. the speed and reliability of their trad- about their procedures for handling ing services. These communications the execution of a securities transac- As a related matter, firms should with the public must not exaggerate tion, particularly during volatile mar- consider additional disclosure for the members’ capabilities or omit ket conditions, along with any customers who place market orders material information about the risks additional disclosures they deem for initial public offering (IPO) securi- of trading and the possibilities of appropriate. NASD Regulation notes, ties trading in the secondary market, delayed executions. Moreover, mem- however, that disclosure of proce- particularly those that trade at a bers should have the systems dures that are unfair, inconsistent, or much higher price than their offering capacity to support any claims they unreasonable would not correct defi- price, or in “hot stocks” (those that make about their trading services. ciencies with these procedures. have recently traded for a period of Misrepresentations or omissions of time under what is known as “fast material facts in public communica- De l a y s market conditions,” in which the price tions violate National Association of of the security changes so quickly Securities Dealers, Inc. (NASD¨) Firms should consider disclosing that that quotes for a stock do not keep Rule 2210 as well as Rule 2110, high volumes of trading at the market pace with the trading price of the which requires members to observe opening or intra-day may cause stock). Firms may disclose that in high standards of commercial honor delays in execution and executions such cases customers’ risk of receiv- and just and equitable principles of at prices significantly away from the ing an execution substantially away tr a d e . market price quoted or displayed at from the market price at the time the time the order was entered. they place the order may be signifi- Firms should consider explaining to cantly reduced if they also include a Current Practices customers how order executions are cap (or floor) with the order above (or As stated above, on-line firms have handled by Market Makers, and below) which the order is not to be described to us steps they have explain that Market Makers may exe- executed, by placing a limit order. taken to respond to volatility. These cute orders manually or reduce their procedures are detailed below. While size guarantees during periods of Ac c e s s NASD Regulation believes that these volatility, resulting in possible delays actions, when clearly disclosed to in order execution and losses. This Firms should consider alerting cus- customers, may be appropriate disclosure is particularly important tomers that they may suffer market responses to trading in securities with respect to on-line investors, who losses during periods of volatility in experiencing extraordinary volatility, have come to expect quick execu- the price and volume of a particular they may not be sufficient or tions at prices at or near the quotes stock when systems problems result appropriate responses in all displayed on their computer screens. in inability to place buy or sell orders. circumstances. Each action provides Customers trading on-line may have protection to the firm and obviously Types Of Orders di f fi culty accessing their accounts also impacts a firm’s customers due to high Internet traffic or wishing to trade those securities. Firms should consider explaining in because of systems capacity limita- detail the difference between market tions. Customers trading through Hot IPOs And Hot Stocks and limit orders and the benefits and brokers at full-service or discount risks of each. In particular, firm s brokerage firms or through represen- There recently has been significa n t should consider disclosing that they tatives of on-line firms when on-line volatility during the period of time are required to execute a market trading has been disabled or is not when certain IPOs have opened for order fully and promptly without available because of systems limita- secondary market trading, NASD Notice to Members 99-11 Feb ru a r y 1999 56 particularly the IPOs of Internet goal is to achieve a target price and fluctuations, market capitalization, issuers. When some of these IPOs protect against sudden price moves, and volatility. started trading on an exchange or on and who understand that there is a The Nasdaq Stock Market, Inc., after possibility that the order will not be On-line firms also have responded to going public, they initially have executed, to enter limit orders. When recent volatility by prohibiting the use traded at a much higher price than used, this halt has been of margin to purchase certain their IPO offering price. The prices of implemented only for a short period securities. Some securities have some of these “hot” IPOs have of time, typically one day. been designated as “not doubled or more in initial trading (one marginable,” requiring customers to increased more than tenfold in price), Other firms do not accept market purchase the securities with 100 only to fall sharply in subsequent orders for hot IPOs, requiring percent initial margin, allowing trading. This price volatility has been customers who wish to buy these payment to be made within three accompanied by significant trading stocks to enter a limit order days of settlement. Firms also have volume. Certain non-IPO stocks of specifying the highest price they designated certain securities as Internet issuers also recently have would pay for these issues. Still other “cash on hand,” requiring customers traded for a period of time under fast firms do not accept any orders for to have 100 percent of the purchase market conditions. certain IPOs that are forecast to be price of the security in the account hot until the IPO begins trading in the before the transaction can be The extraordinary volume of orders secondary market. Finally, some ex e c u t e d . and cancellations entered on-line firms call clients back who have and otherwise during those periods placed orders on IPOs that look to be Investor Education caused queues and backlogs for volatile. The firms alert customers to many order entry and Market Maker restrictions they impose by placing a Many firms provide some kind of firms. As a result of the level of notice on their Web sites. investor education on issues related market volatility and volume of to market volatility on their Web sites. orders, a number of Market Makers Ma r g i n This education may be found in a discontinued their normal automatic part of the Web site devoted execution of orders and began All firms, whether on-line or generally to investor education and handling orders manually. Firms also otherwise, may raise margin in firm newsletters. It may include reduced their size guarantees on requirements for volatile stocks. de fi nitions of market and limit orders, individual stocks or groups of stocks. Some firms that permit on-line an explanation of the difference This in turn led to delays in order trading have raised the amount of between the two types of orders, and executions, executions at prices equity that must be maintained in the risks and benefits of each. Some si g n i fi cantly away from the market margin accounts (maintenance firms encourage customers to use quoted at the time the order was margin) for long positions in certain limit orders when they are more entered, and delays in execution volatile stocks to between 40 percent concerned about achieving a desired co n fi rmations and cancellation and 100 percent.4 The rationale for target price for a trade than an re p o r t s . raising maintenance margin is to immediate execution. Investor help ensure that the equity in a education also can be found in some Order entry firms responded to this customer’s margin account is firms’ account-opening documents price volatility and to changes in su f fi cient to cover large changes in and cash- and margin-account Market Maker order handling the price of a stock. Increasing opening documents. Finally, many procedures in several ways. One maintenance margin requirements firms have customer help desks and firm has halted on-line trading of hot protects both the firm and customers support agents, both of which IPOs and stocks, requiring by ensuring that investors have more provide answers to customer customers to purchase these equity in their margin accounts as qu e s t i o n s . securities through a registered protection in case of a large change representative, either in person or via in the value of a stock, which Pop-up Or Splash Screens the telephone. When contacted, reduces the likelihood that the firm representatives can explain, for will have to liquidate assets in the Certain firms have added a page that example, the difference between customer’s account to meet a margin a customer must view when entering market and limit orders and the call. Firms evaluate stocks for more the customer account pages of their be n e fi ts and risks of each, and stringent maintenance margin Web sites indicating, for example, encourage customers whose primary requirements by examining price that maintenance margin has been

NASD Notice to Members 99-11 Feb ru a r y 1999 57 raised for certain listed securities; duplicate orders, if the cancellation operate properly when trading volume is trade reports may be delayed; only order cannot be processed in a high. This Bulletin is available on the SEC’s limit orders will be accepted for timely fashion. Firms advise Web site at: certain securities; and the latest customers instead to place limit http://www.sec.gov/rules/othern/slbmr8.htm “real-time” quotes viewed on the site orders to reduce the risk of placing a may not be reflective of the current duplicate order and ensure that the 2The Legal Bulletin cites an SEC Release in trading price of a stock. price received is within acceptable support of its position. See note 8, citing limits. One firm has created another Securities Exchange Act Release No. 8363 Some firms use these pages to category of order called “cancel and (July 29, 1968), 33 FR 11150 (August 7, discuss what happens when replace”: the firm will execute the 1968). customers attempt to cancel market second or “replace order” only if it orders and enter replacement orders. can confirm that the initial order was 3This Notice addresses possible responses Because of delays in receiving trade in fact canceled. to recent stock price volatility, particularly in reports on volatile trading days, stocks traded through on-line brokerage some customers, fearing that their Member firms are exploring the firms. While it does not address firms’ suit- orders have not been executed, feasibility of creating more of these ability obligations in connection with recom- have attempted to cancel their initial screens on a stock-specific or trade- mended transactions or their market orders and enter new orders. sp e c i fi c basis. This could include, for know-your-customer obligations, firms are Because market orders must be example, a “pop-up” screen reminded that the existence of these obliga- executed as promptly as possible, explaining that a particular stock is tions does not depend upon whether a trade firms explain that it may not be trading in a fast market condition is executed on-line or otherwise. feasible to cancel a market order, when a customer seeks to place an since it may already have been order in the stock. 4This increase is from the 25 percent main- executed, even if a customer has not tenance margin required by NASD and stock yet received a trade report Endnotes exchange rules or the 30 percent to 35 per- co n fi rming the execution. Customers 1Staff Legal Bulletin No. 8 (MR), published cent maintenance margin required by many are told that entering a cancel order on September 8, 1998, states the views of firms. and a separate replacement order the SEC’s Division of Market Regulation may result in the customer being about the need for broker/dealers to main- © 1999, National Association of Securities Dealers, responsible for the execution of tain enough internal systems capacity to Inc. (NASD). All rights reserved.

NASD Notice to Members 99-11 Feb ru a r y 1999 58 Executive Summary dled properly, and requests for guid- NASD In light of the recent dramatic ance on best execution under these intraday volatility and significa n t circumstances. In a companion surges in trading volume with respect Notice to Members issued today, Notice to to certain issues traded on The Notice to Members 99-11, NASD Nasdaq Stock Market, Inc. Regulation is providing guidance to (N a s d a q ¨), particularly Internet-based firms that deal directly with cus- Members issues, NASD Regulation, Inc. tomers with respect to disclosure (NASD RegulationSM ) is issuing this firms should consider making to 99-12 Notice to Members to provide inform investors of the increased members guidance concerning the risks associated with trading during operation of their order execution turbulent market conditions. Notice to NASD Regulation Issues systems and procedures during Members 99-11 also lists some of Guidance Concerning extreme market conditions. In sum, the steps on-line firms have taken to while National Association of respond to volatility. With this No t i c e , The Operation Of Securities Dealers, Inc. (NASD¨) and NASD Regulation is providing guid- Automated Order Securities and Exchange ance as to the factors Market Makers Execution Systems Commission (SEC) rules and should consider in evaluating During Turbulent Market regulations do not specify or whether modifications to their order Conditions mandate a particular order execution execution algorithms or procedures algorithm or procedure for the during turbulent market conditions execution of customer orders (aside are consistent with the best execu- Suggested Routing from requirements imposed by the tion of customer orders. Senior Management NASD’s limit order protection interpretation), NASD Regulation Given the high trade volume and Ad v e r t i s i n g believes that members’ best share volume of the Nasdaq market, Continuing Education execution obligations require that as well as competitive pressures to such algorithms and procedures treat provide swift executions, wholesale Corporate Finance customer orders in a fair, consistent, firms (i. e . , those firms that principally Executive Representatives and reasonable manner. In addition, execute orders routed to them from Government Securities to the extent that members other firms) and integrated firms (i. e . , (particularly wholesale firms) deviate firms with a large retail business that In s t i t u t i o n a l from or alter their execution also engage in market making and In s u r a n c e algorithms or procedures during other activities) have developed their Internal Audit turbulent market conditions, NASD own automated order execution sys- Regulation believes that firms should tems for smaller customer orders, Legal & Compliance consider disclosing such altered generally 3,000 shares or less. During Mu n i c i p a l procedures and the basis for non-turbulent market conditions, these activating such altered procedures to systems, which are by no means uni- Mutual Fund their customers and firms sending form, typically execute orders on a Op e r a t i o n s them order flow . 1 firs t - i n - fi rst-out basis and afford priced Op t i o n s orders priority on a price/time basis, in Questions or comments concerning addition to complying with applicable Registered Representatives this No t i c e may be directed to the SEC and NASD rules, such as the Re g i s t r a t i o n Legal Section of NASD Regulation’s SEC’s limit order display rule and the Re s e a r c h Market Regulation Department, at NASD’s limit order protection rule. As (301) 590-6410. a general matter, these systems Sy n d i c a t e should be designed to process and Sy s t e m s Discussion execute orders during non-turbulent The recent extraordinary volatility market conditions in a fair, consistent, Tr a d i n g and volume in particular stocks, par- and reasonable manner and have a Tr a i n i n g ticularly Internet-based stocks, has capacity that is adequate to handle Variable Contracts led to questions as to whether cus- reasonably anticipated trading volume tomer orders in these stocks are han- in an efficient manner.

NASD Notice to Members 99-12 Feb ru a r y 1999 59 During extreme market conditions, 2. To the extent that a firm’s order handle exceptional loads may where there are large order imbal- execution algorithm or proce- raise best execution concerns. ances and/or significant price volatili- dures are different during turbu- ty, however, many firms implement lent market conditions, the firm 5. To the extent firms execute procedures that are designed to pre- should disclose to its order entry orders manually during extreme serve the continuous execution of firms (and customers if applica- market conditions, NASD Regula- customers’ orders while also lessen- ble) the differences in the proce- tion reminds firms that NASD ing the exposure of the firm to dures from normal market Rule 2320(d) provides that “[f]ail- extraordinary market risk. For exam- conditions and the circumstances ure to maintain or adequately ple, some firms switch from an auto- in which the firm may generally staff an over-the-counter order mated order execution mode to a activate these procedures. In this room or other department manual execution mode in which connection, however, NASD Reg- assigned to execute customers’ orders are generally routed through ulation notes that the disclosure orders cannot be considered jus- Se l e c t N e t SM to execute against anoth- of alternative order handling pro- ti fi cation for executing away from er Market Maker, passing on those cedures that are unfair or other- the best available market . . . .” prices to the customer. Other firm s wise inconsistent with the firm ’ s provide partial executions up to a best execution obligations would Ultimately, it necessarily involves a certain size and, if applicable, place neither correct the defici e n c i e s facts and circumstances analysis to the remainder of the order in a queue with such procedures nor absolve determine whether actions taken by that is then processed on a firs t - i n - the firm of potential best execu- a firm during turbulent market condi- first-out basis.2 These are but two tion violations. tions are consistent with the duty of examples of the procedures firm s best execution. Accordingly, NASD have adopted during extreme market 3. Modifications to order execu- Regulation cannot provide specific conditions and are not intended to tion algorithms or procedures guidance that a particular order exe- re fl ect preferred procedures. designed to respond to turbulent cution algorithm or order handling market conditions may be imple- procedure during turbulent market Some firms have asked NASD Reg- mented only when warranted by conditions is always consistent with ulation whether their procedures dur- market conditions. Excessive best execution. Nevertheless, NASD ing extreme market conditions are activation of modified procedures Regulation believes the guidelines consistent with the best execution of on the grounds of turbulent mar- set forth above provide useful direc- customer orders. Accordingly, NASD ket conditions could raise best tion for firms. Regulation is issuing this No t i c e to execution concerns. Accordingly, provide guidance in this area. Specif- firms should document the basis ically, NASD Regulation believes for activation of their modified Endnotes firms should consider the following procedures. 1Firms that direct order flow likewise have a guidelines when evaluating whether best execution obligation to conduct regular their order execution algorithms or 4. As noted above, and as the and rigorous review of the quality of execu- procedures are appropriate during SEC has stated, “[b]roker-dealers tions of orders sent to correspondent Market turbulent market conditions. Nothing therefore need to take steps to Makers. in the following guidelines is intended prevent their operational systems to suggest that firms are restricted from being overwhelmed by peri- 2Firms also have reduced their size guaran- from revising their execution algo- odic spikes in systems message tee on individual stocks or groups of stocks rithms for business reasons unrelat- tr a f fi c due to high volume. In par- (i.e., Internet stocks) on a going-forward ed to market turbulence. ticular, broker-dealers should not basis, irrespective of market conditions at merely have sufficient systems any given time. 1. The treatment of customer capacity to handle average-to- orders under any order execution heavy loads.”3 Frequent activa- 3See SEC Staff Legal Bulletin No. 8 algorithm or procedure must tion of modified order execution (September 9, 1998). remain fair, consistent, and rea- algorithms or procedures so n a b l e . because a firm has failed to main- © 1999, National Association of Securities Dealers, tain adequate system capacity to Inc. (NASD). All rights reserved.

NASD Notice to Members 99-12 Feb ru a r y 1999 60

Executive Summary Assistant General Counsel, Office of NASD Regulation, Inc. (NASD General Counsel, NASD Regulation, NASD SM Re g u l a t i o n ) recently considered at (202) 728-8985. and granted three requests for Notice to exemptive relief under Municipal Two of the exemption requests Securities Rulemaking Board resulted from circumstances (MSRB) Rule G-37(i). The staff involving political contributions made Members decisions are published on the prior to a merger of member firm s . following pages in redacted form. One exemption request resulted from 99-14 unique circumstances surrounding Questions regarding this No t i c e the application of MSRB Rule G-37 should be directed to Malcolm to member firms that distribute Northam, NASD Regulation, at (202) Internal Revenue Code Section 529 NASD Grants Exemptive 728-8085; or Sharon Zackula, tuition savings plans. Relief Under MSRB Rule G-37(i)

Suggested Routing Senior Management Ad v e r t i s i n g Continuing Education Corporate Finance Executive Representatives Government Securities In s t i t u t i o n a l In s u r a n c e Internal Audit Legal & Compliance Mu n i c i p a l Mutual Fund Op e r a t i o n s Op t i o n s Registered Representatives Re g i s t r a t i o n Re s e a r c h Sy n d i c a t e Sy s t e m s Tr a d i n g Tr a i n i n g Variable Contracts

NASD Notice to Members 99-14 Feb ru a r y 1999 67 Recent Decisions Regarding MSRB Rule G-37(i) Exemptive Relief

Letter 1: Exemptive Relief Granted

Firm A Ad d r e s s

Re: Firm A MSRB Rule G-37 Exemption Request

Dear Mr .

This is in response to your letters dated Da t e , and Da t e and our telephone communication of Da t e requesting an exemption for Firm A from the prohibition of engaging in municipal securities business contained in Municipal Securi- ties Rulemaking Board (MSRB) Rule G-37 (Rule).

Based on your letters, as well as our telephone conversation on Da t e , we understand that this request arises out of Firm A’s Date purchase of certain assets of Firm B, a municipal securities dealer located in Ci t y . You represent that although Firm B was a municipal bond dealer, its retail municipal bond business accounted for less than 2% of its annual revenue, and any such business merely accommodated clients who wished to purchase or sell municipal bonds. Firm B was not involved in municipal negotiated underwriting activities, private placement activities, remarket- ing services, or financial advisory or consultant services. You also represent that Firm B’s municipal business did not play a role in Firm A’s decision to purchase certain of its assets.

Na m e was the President and Chief Executive Officer of Firm B and on its executive committee. By virtue of his posi- tion on the executive committee, Na m e falls within the Rule’s definition of a municipal finance professional (MFP). However, you represent that he was the only individual in Firm B that was an MFP as defined in G-37(g)(iv). Accord- ingly, pursuant to G-37 (g)(iv)(E), any political contributions made by Na m e while employed at Firm B were neither recordable nor reportable and would not have triggered a two-year business ban for Firm B.

In connection with the Date asset purchase, both Firm A and Name envisioned that Name would play an integral role at Firm A. Prior to the closing of the purchase, Name disclosed that within the past two years while employed at Fi r m B, Name had made a political contribution to an issuer official for whom he was not eligible to vote. Specifica l l y , Name made a $1,000 personal contribution to City Mayor Name on Da t e . You represent that Name contribution was not intended to influence, obtain or retain municipal securities business for Firm B or any other firm. Because Na m e was not deemed an MFP under Rule G-37, his contribution did not trigger any business ban for Firm B.

Firm A, as a registered municipal securities dealer, is subject to Rule G-37. You represent that, to date, Name is not deemed an MFP at Firm A. Name has been appointed an Executive Vice President - Capital Markets. He does not operate in any municipal securities representative capacity at Firm A and does not obtain or retain any municipal securities business for Firm A. You represent that Name’s current position as an associated person in charge of a principal business unit classifies him as a “non-municipal finance professional executive officer” under the Rule, and does not subject Firm A to a two-year prohibition due to his 1997 contribution to Mayor Na m e .

If the request for an exemption from the prohibition of engaging in municipal securities is granted, Firm A will appoint Name to its Executive and Management Committee, making him a MFP within the definition of the Rule. You indicate that Name’s extensive and considerable experience in corporate finance and management will provide essential advice and guidance to the direction of Firm A’s overall business as it cultivates clients and develops new products and markets.

You indicate that Firm A’s purchase of Firm B’s assets was not an attempt to circumvent the letter or spirit of MSRB Rule G-37. You assert that if Firm A’s request for an exemption is not granted, Firm A would be penalized based

NASD Notice to Members 99-14 Feb ru a r y 1999 68 solely for a political contribution made by Name prior to Firm A’s acquisition that was not subject to the Rule when it was made. You believe this is inconsistent with the intent of Rule G-37 and interpretive guidance.

As you know, the Rule makes provision for a de minimis political contribution in instances when the political contribu- tion is made to a person for whom the contributor is entitled to vote. However, there is no de minimis exemption when a political contribution is made to a person for whom the contributor is not entitled to vote. The MSRB has published several interpretations to Rule G-37. In a published interpretation dated May 24, 1994 (Q&A number 15), the MSRB indicates, in part, that in the event political contributions were made prior to becoming a MFP, the dealer’s prohibition on business would begin when the MFP becomes associated with the dealer. However, in June, 1998, the MSRB provided interpretive guidance that Rule G-37 was not intended to prevent mergers in the municipal securities indus- try or, once a merger is consummated, to seriously hinder the surviving dealer’s municipal securities business if the merger was not an attempt to circumvent the letter or spirit of Rule G-37.

Based on the representations contained in your letters, including that Firm B was deemed not to have any MFPs, that Name does not currently meet the Rule’s definition of an MFP, and that Name will become an MFP solely by his appointment (if the exemption request is granted) to Firm A’s Executive and Management Committees, we consent to exemption relief to Firm A by removing the ban on the MSRB’s Rule G-37(b) business activities effective as of the date of this letter. Please be aware that our consent is based strictly on our understanding of the material facts as you have represented them and that our decision in this matter could be different if the facts are not as represented or if other material facts have not been disclosed to us.

NASD Notice to Members 99-14 Feb ru a r y 1999 69 Letter 2: Exemptive Relief Granted

Firm A Ad d r e s s

Dear Mr .

This is in response to your letters dated Da t e , and Date and subsequent telephone conversations requesting an exemption for Firm A from the prohibition of engaging in municipal securities business contained in Municipal Securi- ties Rulemaking Board (MSRB) Rule G-37 (Rule).

The request for an exemption is the result of the merger of Firm B into Firm A, and arises because of political contribu- tions to issuer officials made by three employees who were designated as municipal finance professionals at Firm A.1

In support of your request for an exemption, you make a number of representations in your letters, including:

¥ the applicable contributions were made by three associated persons of Firm C [a firm which previously merged into Firm A] and two of these individuals are no longer associated with Firm A;

¥ the designation by Firm C of these three individuals as municipal finance professionals was a conservative mea- sure taken by virtue of their membership on the Firm C Executive Committee and had no bearing on the business of Firm C because the firm did not engage in negotiated underwritings, financial advisory services, or placement or remarketing agent services with issuers of municipal securities;

¥ the contributions were not intended to influence the award of municipal securities business within the meaning of the Rule because Firm C did not engage in municipal securities business, as defined in the Rule, prior to its acqui- sition, and Firm A has not been involved in such business in State since such date;

¥ both Firm C and Firm A had developed and instituted procedures reasonably designed to ensure compliance with MSRB Rule G-37 when the contributions were made and the contributions were duly reported on MSRB Form G-37/G-38 in accordance with Rule G-37; and

¥ the merger of the two member firms was incidental to, and effected subsequent to, the merger of the bank hold- ing companies Na m e and Na m e .

We consent to an exemption of the two year prohibition from municipal securities business with an issuer as define d by Rule G-37. Our consent is based on all of the representations made in your letters; in consideration of the MSRB’s recent published interpretation of Rule G-372; and in consideration of the fact that instead of combining the activities of their affiliated securities firms, the parent holding company could have exercised its ability to simply avoid the prohi- bition contained in the Rule by maintaining separate securities affiliates, and Firm B could have continued to engage in municipal securities business throughout State free from any Rule G-37 prohibition.

Please be aware that our consent is based strictly on our understanding of the material facts as you have represented them and that our decision in this matter could be different if the facts are not as represented or if other material facts have not been disclosed to us.

1Recipient Amount Date Contributor Office: issuer Name $1,000 Date Name Office: issuer Name $1,000 Date Name Name $ 500 Date Name

2In recent interpretive guidance concerning the applicability of Rule G-37 in connection with mergers in the municipal securities business, the MSRB stated: [Rule G-37] was not intended to prevent mergers in the municipal securities industry or, once a merger is consummated, to seriously hinder the surviving dealer’s municipal securities business if the merger was not an attempt to circumvent the [Rule’s] letter or spirit...... (emphasis added). See MSRB Notice of Interpretation, Q&A No. 1, Securities Exchange Act Release No. 34-40167 (July 2, 1998), 63 FR 37434.

NASD Notice to Members 99-14 Feb ru a r y 1999 70 Letter 3: Exemptive Relief Granted

Firm A Ad d r e s s

Dear Mr .

This is in response to your letter dated Date requesting a one-time exemption for Firm A from the prohibition of engaging in municipal securities business contained in Municipal Securities Rulemaking Board (MSRB) Rule G-37 (R u l e ) .

Based on your letter, we understand that this request arises because of Firm A’s desire to act as distribution agent in a tuition savings plan3 being developed by the Is s u e r . As indicated by your letter, you believe that certain Section 529 tuition savings plans might be deemed to be municipal securities. Accordingly, by virtue of being the distribution agent for such securities, Firm A might be responsible for complying with MSRB rules pertaining to the municipal securities underwriting business.2 If so, Firm A would be precluded from performing the functions described in your letter with respect to issuer’s proposed Section 529 tuition savings plan program.

According to your letter, Firm A is not in the municipal securities underwriting or finance business, and has not engaged in, and does not intend to engage in, municipal securities business as defined in Rule G-37 other than in connection with Section 529 tuition savings plans. Name is the President of Firm A and is eligible to vote in the St a t e gubernatorial election. On Da t e , he made two $500 contributions to each of two candidates for Governor of St a t e . Two months after the contributions were made, Firm A was advised by outside counsel that its participation in Sec- tion 529 tuition savings plans might be deemed to involve the underwriting of municipal securities. Name su b s e q u e n t - ly sought and received the return of $250 of each of his contributions, thus bringing the contributions within the “d e mi n i m i s ” exception to Rule G-37(b). In order both to assist Issuer in implementing its Section 529 tuition savings plan and to participate in the distribution of interests in the Section 529 tuition savings plan, Firm A has undertaken to comply with all of the applicable MSRB rules, including Rule G-37.

The following additional representations and arguments are made in support of your request:

¥ In its letter to Alden Adkins dated Da t e , Issuer has represented that unless the exemption request is granted, the citizens of State will be deprived of access to an important state-sponsored college savings program until Da t e , and that this will have a significant negative effect on the ability of the State to offer an effective and secure sav- ings program.

¥ The Section 529 tuition savings plan seemingly has little in common with investments that are classified as municipal securities, and Firm A reasonably did not assume that its role in distributing interests in the tuition sav- ings plan on an agency basis would constitute municipal securities business.

¥ In Da t e , when Firm A discovered that Name might become a municipal finance professional because of the pro- posed Section 529 tuition savings plan business, his contributions already had been identified and reported to the MSRB because of his association with, and designation as a non-MFP executive officer of, a different Firm A broker-dealer, Firm B.

We hereby grant an exemption to Firm A from the prohibition of MSRB Rule G-37(b) effective Da t e . This position is based on all the representations contained in your letter, supporting attachments, and telephone communications. In granting this exemption we note in particular: that the contributions by Name are the only contributions by a person who may deemed a Firm A municipal finance professional that, absent an exemption, would prohibit Firm A fr o m engaging in municipal securities business with St a t e ; that all contributions by Name previously have been properly recorded and reported; that Firm A has not engaged in municipal securities business as defined in Rule G-37 other than in connection with Section 529 tuition savings plans; that Firm A does not intend to engage in municipal securi- ties business as defined in Rule G-37 during the remainder of the two-year period since Name contributions; and the unique characteristics of the tuition savings plans. Please be aware that our consent is based strictly on our under- standing of the material facts as you have represented them and that our decision in this matter could be different if the facts are not as represented or if other material facts have not been disclosed to us. NASD Notice to Members 99-14 Feb ru a r y 1999 71 3In 1996, the Internal Revenue Code was amended through the addition of Section 529 to encourage “qualified state tuition programs” pur- suant to which states can establish and maintain tax-deferred savings programs under which participants may make contributions to accounts established for the purpose of meeting the qualified higher education expenses of designated beneficiaries. To qualify, the program must be “established and maintained” by a state, a state agency, or a state municipality (Section 529 tuition savings plan).

2For purpose of this request we assume that participant interests in Issuer’s Section 529 tuition savings plan constitute “municipal securities,” and that Firm A’s activities in connection with the plan constitute municipal securities business within the meaning of Rule G-37. Any ques- tions concerning the legal interpretation of terms used in the letter should be addressed to the MSRB.

© 1999, National Association of Securities Dealers, Inc. (NASD). All rights reserved.

NASD Notice to Members 99-14 Feb ru a r y 1999 72 Executive Summary limit quotations on the OTCBB to the NASD On January 4, 1999, the Securities securities of issuers that are current and Exchange Commission (SEC) in their reports filed with the SEC or approved amendments to National other regulatory authority, and on a Notice to Association of Securities Dealers, proposed rule that would amend Inc. (NASD¨) Rules 6530 and 6540 to Rule 6540 to prohibit a member from limit quotations on the OTC Bulletin quoting a security on the OTCBB Members Bo a r d ¨ (OTCBB) to the securities of unless the issuer has made current companies that report their current filings. On July 20, 1998, after con- 99-15 financial information to the SEC, sidering the comments received in banking, or insurance regulators. The response to Notice to Members text of the amended rules and the 98 - 1 4 and making changes to Federal Register version of the SEC address these comments, the NASD release are attached. filed a proposed rule change with the SEC Approves Rule SEC to implement these proposals. Amendments Limiting Questions regarding this No t i c e On January 4, 1999, the SEC Quotations On OTC should be directed to Liz Heese, approved the proposed rule change. Bulletin Board To Product Manager, Trading and Mar- ket Services, The Nasdaq Stock Re p o r ting Securit i e s Market, Inc. at (202) 728-8191; Sara Amendments To NASD Rule Nelson Bloom, Associate General 6530: Eligibility Rule Suggested Routing Counsel, Office of General Counsel, Prior to the present amendments, ¨ Senior Management The Nasdaq Stock Market , at (202) there was no requirement for an 728-8478; or Arnold Golub, Senior issuer quoted on the OTCBB to Ad v e r t i s i n g Attorney, Office of General Counsel, make current, publicly available Continuing Education The Nasdaq Stock Market, at (202) reports with the SEC or other 72 8 - 6 9 3 8 . regulator. Over half the companies Corporate Finance currently quoted on the OTCBB do Executive Representatives Background not file any public reports. Government Securities The OTCBB is a quotation service that displays real-time quotes, last- The amendments to Rule 6530 In s t i t u t i o n a l sale prices, and volume information provide that in order for a domestic In s u r a n c e in domestic and certain foreign secu- issuer to continue being quoted on Internal Audit rities. Eligible securities include the OTCBB, the issuer must be national, regional, and foreign equity required to make periodic filings with Legal & Compliance issues; and warrants, units, and the SEC, or with banking or Mu n i c i p a l American Depositary Receipts insurance regulators and be current (ADRs) not listed on any other U.S. with those filings. The NASD will affix Mutual Fund national securities market or a modifier on the security’s symbol if Op e r a t i o n s exchange. Although the OTCBB is the NASD has not received Op t i o n s operated by the NASD, it is unlike information that the report was timely Na s d a q ¨ or other listed markets filed. The addition of the modifier to Registered Representatives where individual companies apply for the symbol, as well as any changes Re g i s t r a t i o n listing and must meet and maintain to the symbol necessary to Re s e a r c h strict listing standards; instead, indi- accommodate the modifier, will be vidual brokerage firms or Market publicly reported on the OTCBB Sy n d i c a t e Makers initiate quotations for specific Daily List, which is available to Sy s t e m s securities on the OTCBB. Currently, Market Makers and investors through approximately 6,500 securities are the OTCBB Web Site at Tr a d i n g quoted on the OTCBB. ww w . o t c b b . c o m . Once an issuer is Tr a i n i n g delinquent in filing a required report, Variable Contracts In Notice to Members 98-14, the a security of the issuer may continue NASD requested comment on a pro- to be quoted on the OTCBB for a 30- posed rule to amend Rule 6530 to or 60-calendar day grace period from

NASD Notice to Members 99-15 Feb ru a r y 1999 73 the due date of the report, depending December 1999 EN - HH (B[2]) [do] do e s not qualify for dis- on the type of issuer. Issuers who file semination of transaction reports via with the SEC will be granted a 30- January 2000 HI - LH the facilities of the Consolidated day grace period before they can no Tape [shall be considered eligible.]; longer be quoted on the OTCBB; February 2000 LI - NR an d issuers who file with other regulators will be granted a 60-day grace March 2000 NS - RE (2) the issuer of the security is period. After the grace period, required to file reports pursuant to quotations in the security of the April 2000 RF - TH Section 13 or 15(d) of the Act or the delinquent issuer will not be security is described in Section permitted on the OTCBB. May 2000 TI - Z 12(g)(2)(B) of the Act, and, subject to a thirty calendar day grace period, Amendment To Rule 6540: June 2000 All Banks & the issuer of the security is current in Impermissible Quotation Insurance Companies its reporting obligations, or Entries The amendments to Rule 6540 A list of all OTCBB securities and (3) the security is described in Sec- prohibit member firms from quoting their eligibility status according to tion 12(g)(2)(G) of the Act and, sub- an issuer’s security if the issuer does Nasdaq’s records will be available on ject to a sixty calendar day grace not comply with the eligibility ww w . o t c b b . c o m . If you believe the period, the issuer of the security is requirements described above. status of a security is incorrect, current in its reporting obligations, or Furthermore, with respect to those please e-mail the correct eligibility issuers that do not file with the SEC’s status, and the CIK code if the issuer (4) the issuer of the security is a Electronic Data Gathering, Analysis, is an EDGAR filer, to bank or savings association that is and Retrieval (EDGAR) system, the ot c b b f e e d b a c k @ n a s d . c o m , using not required to file reports with the amendments require a member to “OTCBB Eligibility status correction” Commission pursuant to Section 13 alert the NASD to the issuer’s as the subject line of the email. or 15(d) of the Act and, subject to a reporting schedule and to provide the sixty calendar day grace period, the periodic reports to the NASD, or to Text Of Amendments issuer of the security is current with ensure that the required information (Note: New text is underlined; deletions are all required filings with its appropriate is provided. br a c k e t e d . ) Federal banking agency or State bank supervisor (as defined in 12 Ef f ective Date Rule 6530. OTCBB Eligible U.S.C. 1813). The new requirements are effective Securities immediately for securities not quoted (b) any foreign equity security or on the OTCBB on January 4, 1999. A member shall be permitted to American Depositary Receipt (ADR) Securities quoted on the OTCBB as quote the [The] following categories that meets all of the following criteria: of that date will be phased in to of securities [shall be eligible for quo- comply with the new Eligibility tation] in the Service: (1) [prior to April 1, 1998, is not listed Requirement based upon the on Nasdaq or a registered national schedule below.1 The delayed (a) any domestic equity security that securities exchange in the U.S., effectiveness of the rule is designed to sa t i s fi es the requirements of sub- except that a foreign equity security enable Market Makers, investors, and paragraph (1) and either subpara- or ADR shall be considered eligible if issuers to take appropriate action. graph (2) or (3) or (4) below: it is:

Sc h e d u l e Issue Symbol (1) the security is not listed on The (A) listed on one or more regional July 1999 A - AD Nasdaq Stock Market (“Nasdaq”) or stock exchanges, and a registered national securities August 1999 AE - AM exchange in the U.S., except that an (B) does not qualify for dissemina- equity se c u r i t y [securities that are] tion of transaction reports via the September 1999 AN - BG shall be considered eligible if it: facilities of the Consolidated Tape.

October 1999 BH - CM (A[1]) is listed on one or more region- (2) after March 31, 1998,] the securi- al stock exchanges, an d ty is registered with the Commission November 1999 CN - EM pursuant to Section 12 of the [Securi-

NASD Notice to Members 99-15 Feb ru a r y 1999 74

Executive Summary vide that the District Business Con- NASD On December 28, 1998, the Securi- duct Committees (DBCC) may ties and Exchange Commission impose pre-use filing requirements (SEC) approved rule changes pro- and may conduct a hearing if a mem- Notice to posed by the National Association of ber opposes a pre-use filing require- Securities Dealers, Inc. (NASD¨ or ment. The rules are amended to vest Association) that amend the Rules of authority to impose a pre-use fili n g Members the Association to permit the Depart- requirement solely with NASD Regu- ment of Enforcement to amend com- lation staff, specifically the Advertis- 99-16 plaints one time prior to the filing of ing/Investment Companies responsive pleadings, without Hear- Regulation Department. Any hearing ing Officer approval; to clarify and requested regarding such require- consolidate default provisions and ment will be conducted by a Hearing SEC Approves Changes shorten the call for review period for Panel, as set forth in the non-sum- To Rules Regarding default decisions to 25 days; to mary proceedings of the Rule 9510 Membership And require the Office of General Counsel Series, rather than by a DBCC. Re g i s t r ation; Inves t i g a t i o n to issue decisions in settled cases; to change the trigger date for which the Testimony: Rule 8210 is being And Sanctions; And timing of motions to introduce new amended to clarify that Association Conduct And Code Of evidence is keyed; to make certain staff may specify the location at Procedure sanctions effective 30 days after the which a member, associated person, service of the decision constituting or other person subject to the Associ- Suggested Routing final disciplinary action; to provide ation’s jurisdiction must testify for the Senior Management that decisions involving bars or purpose of an investigation, com- expulsions be served by overnight plaint, examination, or proceeding. Ad v e r t i s i n g courier, facsimile, or other means Continuing Education likely to obtain prompt service; to per- Requests for Information: Cu r r e n t - Corporate Finance mit the Advertising Department staff ly, the Rule 8220 Series and the Rule to impose advertising pre-use fili n g 9510 Series both set forth proce- Executive Representatives requirements on members; to consol- dures for suspending or canceling a Government Securities idate procedures for cancellation or member or associated person for fail- In s t i t u t i o n a l suspension for failure to provide ure to provide requested information requested information; to simplify to the Association. The rule change In s u r a n c e and expedite certain non-summary consolidates the provisions of the Internal Audit procedures in the Rule 9500 Series; Rule 8220 Series and the Rule 9510 and for other purposes. Series into the Rule 8220 Series. Legal & Compliance Mu n i c i p a l The rule changes become effective Currently, the Rule 8220 Series Mutual Fund on March 26, 1999. Questions authorizes the National Adjudicatory regarding this Notice should be Council (NAC) to initiate a suspen- Op e r a t i o n s directed to Eric Moss, Assistant Gen- sion proceeding for failure to provide Op t i o n s eral Counsel, Office of General requested information, and the Rule Registered Representatives Counsel, NASD Regulation, Inc. 9510 Series authorizes Association (NASD RegulationSM ), (202) 728- staff to initiate a cancellation pro- Re g i s t r a t i o n 8982. ceeding for failure to provide request- Re s e a r c h ed information. Under the rule Discussion change, the Department of Enforce- Sy n d i c a t e Advertisement: Rules 2210(c)(4) ment will be able to initiate a suspen- Sy s t e m s and 2220(c) authorize the NASD to sion or cancellation proceeding if a Tr a d i n g require members to file advertise- member or associated person fails to ments, sales literature, and educa- provide requested information. Tr a i n i n g tional material with the Association Variable Contracts before using them in certain Several hearing procedures are instances. The Rules currently pro- being amended under the rule

NASD Notice to Members 99-16 Feb ru a r y 1999 81 change. First, the member or associ- The revised Rule 8223(b) revises the Enforcement to amend complaints ated person who receives a notice call for review process by placing the one time prior to the filing of respon- initiating a cancellation or suspension authority to conduct a review with a sive pleadings, without Hearing Offi- will file a request for a hearing direct- review panel, rather than the full cer approval. Rule 9212 currently ly with the NASD Regulation Office NASD Board. The ability of any Gov- requires the Department of Enforce- of General Counsel, rather than the ernor to call the proceeding for ment to move to amend any com- NAC. The Office of General Counsel review remains intact. Under the rule plaint, and a Hearing Officer to grant is responsible for arranging such change, a review panel would con- such a motion before the complaint he a r i n g s . duct the review, rather than the full may be amended. Board. Second, the rule change expands Default Provisions: The proposed the pool of persons who could serve The reinstatement provisions set amendments to Rules 9215, 9241, on the subcommittee conducting the forth in proposed Rule 8225 are 9269 and 9312 are designed to clari- hearing to include current and former amended by providing that requests fy and consolidate the NASD Code members of the NAC, the NASD to terminate a suspension should be of Procedure (Code) default provi- Regulation Board of Directors, and filed with the Department of Enforce- sions, and to shorten the call for the NASD Board of Governors. At ment. If the Department denies the review period for default decisions to least one subcommittee member will request, then a further request for 25 days. have to be a current member of the relief may be filed with the review NAC. panel that rendered the decision in These amendments also make non- the underlying proceeding, as long substantive changes that clarify the Third, the rule change expands the as the request for relief is filed within existing rules. The changes clarify period in which a hearing must be 30 days after service of the decision. that the default decisions issued by held from 20 to 30 days. NASD Reg- The review panel would be most Hearing Officers should include the ulation has determined that 20 days familiar with the decision and issues same contents as decisions issued in is not a sufficient period both to find during this period. If the request for litigated cases. The amendments panelists who are available and to relief is filed more than 30 days after also clarify that either the Review coordinate the schedules of all pan- service of the decision, then the NAC Subcommittee or the NAC may set elists, parties, and their attorneys. would act on the request for relief. aside a default judgment. Further- Lengthening this time period does This would ensure that the review more, the changes clarify that not prejudice the member or person panel’s responsibilities conclude defaults need to be appealed within because once a hearing is request- shortly after its decision is rendered 25 days after the service of the deci- ed, a suspension or cancellation can- and do not continue for an indefini t e sion, and that sanctions are effective not take effect until after the pe r i o d . 30 days after service of the decision proceeding is completed. (other than bars and suspensions References throughout the Rule which are effective immediately). Fourth, Rule 8222(b)(3) is being Series to service by commercial couri- These time periods are already set amended to include a provision of er are revised to require service by forth in Rules 9360 and 9311(a), current Rule 9514(e), which allows overnight commercial courier to respectively. the Association to withhold certain ensure that service is effected quickly. documents enumerated in Rule 9251 In addition, the changes to Rule that are privileged or constitute attor- Release of Disciplinary Informa- 9312 shorten to 25 days the period in ney work product or are otherwise tion: Interpretive Material 8310-2 which the General Counsel may call related to an examination, inspec- provides for the release of disci- a default decision for review. The tion, or investigation. Finally, the rule plinary information to the public. The rules currently give the General change adds a new requirement that rule change amends this Interpreta- Counsel 45 days to determine if the subcommittee conducting the tion to permit the NASD to release whether to call a default decision for hearing requires that additional infor- information about suspensions and review, which is the same call period mation be filed, then such informa- cancellations imposed under the for litigated decisions. tion will have to be distributed Rule 8220 Series, unless the NAC promptly to all parties and in all determines otherwise. Decisions in Settled Cases: Ru l e cases not less than one business 9270 is amended to establish that day before the subcommittee ren- Amending Complaints: The rule the issuance of decisions relating to ders its decision. change enables the Department of accepted offers of settlement is to be

NASD Notice to Members 99-16 Feb ru a r y 1999 82 done by the General Counsel. Rule In cases involving bars or expul- The rule change amends Rule 9511, 9270 currently requires that deci- sions, Rules 9269 and 9360 are which sets forth the purpose of the sions in settled cases be issued by amended to provide that service of Rule 9510 Series, to reflect these the Office of Hearing Office r s . decisions should be done by changes and to remove redundant Returning decisions related to offers overnight courier, facsimile, or other provisions that appear in Rules 9512 of settlement to the Hearing Office r s means likely to obtain prompt ser- and 9513. after acceptance by the NAC, the vice. Currently, Rule 9360 provides Review Subcommittee, or the Gener- for personal service for final deci- The rule change also revises the al Counsel, however, serves no use- sions imposing bars or expulsions. hearing and decision provisions of ful purpose and only introduces Rule 9269 does not currently contain Rule 9514. First, the amended Rule additional delay and the possibility of language addressing the means by 9514(a)(1) contains a non-substan- error. which service of default decisions in tive, simplifying amendment that pro- cases involving bars and expulsions vides that a member or person who Motions to Introduce New Evi- should be accomplished. With requests a hearing must set forth the dence: The change to Rule 9346(b) respect to final default decisions sp e c i fi c grounds for setting aside the imposes the requirement that imposing bars or expulsions, reason- notice, rather than listing in the Rule motions to introduce new evidence in able efforts at personal service (hand each type of action that the member cases that are appealed or called for delivery) are generally not success- or person would seek to reverse or review be made within 30 days of ful, and with respect to litigated deci- oppose at the hearing. service of the index to the record sions the most effective type of under Rule 9321. Rule 9346(b) cur- service is a method such as Second, the Rule is amended to pro- rently requires that motions to intro- overnight courier or facsimile. vide that a member that received a duce new evidence in these cases notice of an advertising pre-use fili n g be made within 30 days of service of Summary and Nonsummary Pro- requirement under Rule 2210 or the notice of appeal (or within 35 ce e d i n g s : The Rule 9510 Series will 2220 would have 30 days to request days of service of notice of a call for be simplified by deleting certain non- a hearing. Under the current Rule, review). Because motions to intro- summary proceedings and consoli- which does not address pre-use fili n g duce new evidence generally can dating them with other rules or by requirements, a member or person best be made after the parties have replacing the current procedures has seven days to request a hearing received copies of the official index with simpler procedures in a sepa- in a non-summary proceeding. to the record, it is logical to key the rate rule series. As noted above, the NASD Regulation will provide addi- timing of such motions to the parties’ provisions of the Rule 9510 Series tional time in the case of advertising receipt of the index. and the Rule 8220 Series, which pre-use filing requirements because both relate to failure to provide members may need additional time Effectiveness of Sanctions: Ru l e requested information, will be con- to consider whether to comply with or 9360 is amended to state that unless solidated into the Rule 8220 Series. contest the requirements. otherwise provided in decisions Similarly, the non-summary pro- issued under Rule 9349 or Rule ceedings for statutory disqualifica - Third, the custodian of record provi- 9351, a sanction (other than a bar or tion matters will be deleted from the sion under Rule 9514(f)(5) autho- an expulsion) specified in a decision Rule 9510 Series, and the Rule rizes the Office of Hearing Officers to constituting final disciplinary action of 9520 Series, which governs regular act as custodian for non-summary the Association, shall become effec- statutory disqualification matters, will proceedings for a failure to comply tive 30 days after the date of service be amended by adding new proce- with an arbitration award or settle- of the decision. Under the current dures for expediting the review of a ment agreement related to an NASD Rule 9360, a sanction becomes statutory disqualification proceeding arbitration or mediation. Under Rule effective on a date established by the when necessary to protect investors. 9514(b)(1), Hearing Officers serve as Chief Hearing Officer, which shall not Finally, non-summary proceedings the adjudicators in such proceedings, be earlier than 30 days after the date for failure to pay fees, dues, assess- and as such, the Office of Hearing of service of the decision constituting ments, and other charges will be Of fi cers is a more appropriate custo- final disciplinary action. This change deleted from the Rule 9510 Series, dian than the NASD Regulation was made because the Chief Hear- and new procedures providing for a Of fi ce of General Counsel. ing Officer plays no part in the fina l hearing by a Hearing Officer will be stages of a disciplinary proceeding added as a new Rule 9530 Series. Rule 9516 is amended to provide appealed or called for review. that a request for reinstatement

NASD Notice to Members 99-16 Feb ru a r y 1999 83 could be made after either a summa- pay fees, dues, assessments, or consistent with the By-Laws of ry or a non-summary proceeding other charges. Procedures for such a NASD Regulation, the Rules of the under the Rule 9510 Series. Current- cancellation or suspension are cur- Association, and the Delegation Plan ly, reinstatement is available only rently set forth in the Rule 9510 with respect to (1) an appeal or after a non-summary proceeding. Series. Under the rule change, the review of a disciplinary proceeding; NASD Treasurer would be autho- (2) a statutory disqualification deci- Eligibility Proceedings: The Rule rized to initiate such proceedings by sion; (3) a review of a membership 9520 Series, which concerns statu- sending a notice to the member or proceeding; (4) a review of an offer tory disqualifications, is amended to associated person. The hearing of settlement, a letter of acceptance, clarify certain procedures and to would be conducted by a Hearing waiver, and consent, and a minor expedite statutory disqualification Of fi cer, who would be authorized to rule violation plan letter; (5) the exer- proceedings if necessary to protect suspend or cancel the membership cise of exemptive authority; and (6) investors. Rule 9522(a) is amended of a member or the registration of a such other proceedings or actions to clarify that although a statutory person. The hearing procedures are authorized by the Rules of the Asso- disqualification proceeding may be modeled on the Rule 8220 Series. ciation. initiated by the Association, a mem- ber has an independent obligation The rule change does not include a 2000. BUSINESS CONDUCT to initiate such a proceeding if it call for review because the issues to wishes to continue to associate with be resolved in this type of proceed- 2200. COMMUNICATIONS a statutorily disqualified person. ing are narrow and largely adminis- WITH CUSTOMERS AND THE The Rule is further amended to pro- trative. NASD Regulation has PUBLIC vide that if a member does not determined that it would be more effi- respond to a statutory disqualifica- cient to have one Hearing Office r 2210. Communications With tion notice issued by the Associa- conduct the hearing and render a The Public tion by filing a request for relief final decision. Hearing Officers are within 10 days, the member’s mem- well-suited to resolve the issues pre- (c) Filing Requirements and bership may be canceled and the sented in hearings for failure to pay Review Procedures associated person’s registration fees due to their training and experi- may be revoked, unless the NAC ence in the NASD’s disciplinary pro- (4) (A) Notwithstanding the foregoing grants an extension of time to ceedings under the Rule 9200 Series provisions, [any District Business respond for good cause shown. and in non-summary proceedings for Conduct Committee of the Associa- failure to pay arbitration awards tion] the Department, upon review of NASD Regulation amended Rule under the Rule 9510 Series. a member's advertising and/or sales 9525 to provide for an expedited literature, and after determining that review of statutory disqualifica t i o n the member has departed and there proceedings if the Statutory Disquali- Text Of Amendments is a reasonable likelihood that the fication Committee requests an (Note: New text is underlined; deletions are member will again depart from the expedited review and the NASD br a c k e t e d . ) standards of this Rule, may require Board Executive Committee deter- that such member file all advertising mines that such action is necessary 0100. GENERAL PROVISIONS and/or sales literature, or the portion for the protection of investors. In of such member's material which is such a case, any Governor could call 0120. Definitions related to any specific types or class- the proceeding for review. If such a es of securities or services, with the call were made, a review panel (m) “National Adjudicatory Coun- Department [and/or the District Com- would conduct the review, as in ci l [Business Conduct Commit- mittee], at least ten days prior to use. amended Rule 8223 (b)(2). te e ] ” The member must provide with each filing the actual or anticipated date of Suspension or Cancellation for The term “National Ad j u d i c a t o r y first use. Failure to Pay Dues, Fees, and Co u n c i l [Business Conduct Commit- Other Charges: The new Rule 9530 tee]” means the committee of [the (B) The [Committee] De p a r t m e n t Series sets forth procedures for sus- Board of Directors of] NASD Regula- shall notify the member in writing of pending or canceling the member- tion which may be authorized and the types of material to be filed and ship of a member or the registration directed to act for the Board of Direc- the length of time such requirement of an associated person who fails to tors of NASD Regulation in a manner is to be in effect. The requirement

NASD Notice to Members 99-16 Feb ru a r y 1999 84 shall not exceed one year, however, that is related to any specific types or (2) Pursuant to the Rule 9600 Series, and shall not take effect until 30 days classes of securities or services, with [T ] the staff, for good cause shown after the member receives the written the [Association and/or the District [upon written request,] after taking notice, during which time the mem- Committee] De p a r t m e n t , at least ten into consideration all relevant factors, ber may request a hearing [before days prior to use. may exempt any transaction or the District Business Conduct Com- classes of transactions, either uncon- mittee] under Rule 9514, and any (B) The [Committee] De p a r t m e n t ditionally or on specified terms, from such hearing shall be held in reason- shall notify the member in writing of any or all of the provisions of this able conformity with the hearing and the types of material to be filed and paragraph if it determines that such appeal procedures of the [Code of the length of time such requirement exemption is consistent with the pur- Procedure as contained in the] Rule is to be in effect. The requirement pose of this Rule, the protection of [9000] 95 1 0 Se r i e s . shall not exceed one year, however, investors, and the public interest. and shall not take effect until 30 days [Any decision whether to grant such 2220. Options Communica- after the member receives the written an exemption may be appealed to tions with the Public notice, during which time the mem- the National Business Conduct Com- ber may request a hearing [before mi t t e e . ] (c) Association Approval Require- the District Business Conduct Com- ments and Review Procedures mittee] under Rule 9514, and any 8210. Provision of Information such hearing shall be in conformity and Testimony and Inspection (1) In addition to the approval with the hearing and appeal proce- and Copying of Books required by paragraph (b) of this dures of the [Code of Procedure, as Rule, every advertisement and all set forth in the] Rule [9000] 95 1 0 (a) Authority of Adjudicator and educational material of a member or Series. Association Staff member organization pertaining to options shall be submitted to the 2320. Best Execution and For the purpose of an investigation, Advertising/Investment Companies Interpositioning complaint, examination, or proceed- Regulation Department of the Asso- ing authorized by the NASD By-Laws ciation (" D e p a r t m e n t " ) at least ten (a) In any transaction for or with a or the Rules of the Association, an days prior to use (or such shorter customer, a member and persons Adjudicator or Association staff shall period as the Association may allow associated with a member shall use have the right to: in particular instances) for approval reasonable diligence to ascertain the and, if changed or expressly disap- best inter-dealer market for the sub- (1) require a member, person associ- proved by the Association, shall be ject security and buy or sell in such ated with a member, or person sub- withheld from circulation until any market so that the resultant price to ject to the Association's jurisdiction to changes specified by the Association the customer is as favorable as pos- provide information orally, in writing, have been made or, in the event of sible under prevailing market condi- or electronically (if the requested disapproval, until the advertisement tions. Among the factors th a t [w h i c h ] information is, or is required to be, or educational material has been will be considered [by the Business maintained in electronic form) and to resubmitted for, and has received, Conduct Committees] in de t e r m i n i n g testify at a location specified by Association approval. whether a member has used [a p p l y - Association staff, under oath or affir- ing the standard of] "reasonable dili- mation administered by a court (2) (A) Notwithstanding the foregoing gence" [in this area] are: reporter or a notary public if request- provision, [any District Business ed, with respect to any matter Conduct Committee of the Associa- (g) (1) In any transaction for or with a involved in the investigation, com- tion] the Department, upon review of customer pertaining to the execution plaint, examination, or proceeding; a member's options advertisements, of an order in a non-Nasdaq security and educational material and/or sales lit- (as defined in the Rule 6700 Series), erature, and after determining that a member or person associated with (2) No change. the member will again depart from a member, shall contact and obtain the standards of this Rule, may quotations from three dealers (or all 8220. Suspension or Cancella- require that such member file all dealers if three or less) to determine tion for Failure to Provide options advertisements, educational the best inter-dealer market for the Requested Information material and/or sales literature, or the subject security. portions of such member's material 8221. Notice

NASD Notice to Members 99-16 Feb ru a r y 1999 85 (a) Notice to Member with the [National Adjudicatory Coun- issued the request for the informa- cil] NASD Regulation Office of Gen- tion, report, material, data, or testi- If a member fails to provide any infor- eral Counsel a written request for an mony that the member or associated mation, report, material, data, or tes- expedited hearing before a subcom- person failed to provide, or in the timony requested pursuant to the mittee of the National Adjudicatory case of a member that failed to keep NASD By-Laws or the Rules of the Council. The request shall state with its membership application or sup- Association, or fails to keep its mem- sp e c i fi city why the member or asso- porting documents current, the bership application or supporting ciated person believes that there are Department of Member Regulation.] documents current, the [National in s u f fi cient grounds for suspension Adjudicatory Council] Department of or cancellation or any other reason (3) Transmission of Documents En f o r c e m e n t may provide written for setting aside the notice issued [by notice to such member specifying the the National Adjudicatory Not later than seven days before the nature of the failure and stating that Co u n c i l ] under Rule 8221. hearing, the [subcommittee] De p a r t - the failure to take such action within ment of Enforcement shall serve the 20 days after service of the notice (b) Hearing Procedures member or person associated with a constitutes grounds for suspension member via ov e r n i g h t co m m e r c i a l or cancellation [from] of me m b e r s h i p . (1) Appointment of Subcommittee courier with all documents that were considered in connection with the (b) Notice to Person Associated If a hearing is requested, the Nation- [National Adjudicatory Council’s] with Member al Adjudicatory Council or the decision to issue a notice under Rule Review Subcommittee described in 82 2 1 , unless a document meets the If a person associated with a mem- Rule 9120 shall appoint a subcom- criteria of Rule 9251(b) (1)(A), (B), or ber fails to provide any information, mittee to conduct the hearing and (C). A document that meets such cri- report, material, data, or testimony decide whether the member or per- teria shall not constitute part of the requested pursuant to the NASD By- son associated with a member record, but shall be retained by the Laws or the Rules of the Association, should be suspended or canceled. Association until the date upon which the [National Adjudicatory Council] The subcommittee shall be com- the Association serves a final deci- Department of Enforcement ma y posed of a cu r r e n t member of the sion or, if applicable, upon the con- provide written notice to such person National Adjudicatory Council and clusion of any review by the specifying the nature of the failure one or more current or former mem- Commission or the federal courts. and stating that the failure to take bers of the National Adjudicatory The Department of Enforcement such action within 20 days after ser- Co u n c i l , NASD Regulation Board shall provide a copy of the docu- vice of the notice constitutes grounds [a n d ] , or [the] NASD Board. ments transmitted to the member or for suspending the association of the person associated with a member to person with the member. (2) Time of Hearing the subcommittee.

(c) Service of Notice The hearing shall be held within [20] (4) Counsel 30 days after the date of service of The [National Adjudicatory Council] the notice issued under Rule 8221. The member or person associated Department of Enforcement sh a l l Not later than seven days before the with a member and the [appropriate serve the member or person associ- hearing, the subcommittee shall department or office] Department of ated with a member with such notice serve the member or person associ- En f o r c e m e n t may be represented by via personal service or ov e r n i g h t ated with a member with written counsel at a hearing conducted commercial courier. notice of the date and time of the under this Rule. hearing via ov e r n i g h t co m m e r c i a l 8222. Hearing courier or facsimile and notify the (5) Evidence [appropriate department or office of (a) Request for Hearing NASD Regulation] Department of Formal rules of evidence shall not En f o r c e m e n t of the date and time of apply to a hearing under this Rule. Within five days after the date of ser- the hearing. [The appropriate depart- Not later than four days before the vice of a notice issued under Rule ment or office of NASD Regulation hearing, the member or person asso- 8221, a member or person associat- (hereinafter "appropriate department ciated with a member and the ed with a member served with a or office" in the Rule 8220 Series) [appropriate department or office ] notice under Rule 8221(c) may file shall be the department or office that Department of Enforcement sh a l l

NASD Notice to Members 99-16 Feb ru a r y 1999 86 exchange copies of proposed hear- good cause, the subcommittee may ernors may shorten the call for ing exhibits and witness lists and pro- withdraw a dismissal entered pur- review period to less than ten days. vide copies of the same to the suant to this subparagraph. By an affirmative vote of the majority su b c o m m i t t e e . of the NASD Board of Governors 8223. Decision then in office, the NASD Board of (6) Witnesses Governors may, during the ten day (a) Subcommittee period, vote to extend the period to No change. more than ten days. (1) Proposed Written Decision (7) Additional Information (2) Review and Decision The subcommittee may suspend or At any time during its consideration, ca n c e l the membership of a member If a Governor calls the suspension or the subcommittee may direct the or suspend the association of a per- ca n c e l l a t i o n proceeding for review member or person associated with a son with a member for failure to take within the time prescribed in sub- member or the [appropriate depart- the action required by the notice paragraph (1), [the NASD Board of ment or office] Department of issued under Rule 8221. The sub- Governors] a review panel shall me e t En f o r c e m e n t to submit additional committee shall prepare a proposed an d conduct a review not later than information. Any additional informa- written decision, and if the subcom- [its next meeting] 14 days after the tion submitted shall be provided mittee determines that a suspension call for review. The review panel pr o m p t l y to all parties at least one should be imposed, the proposed shall be composed of the NASD business day before the subcommit- written decision shall state the Board Executive Committee, except tee renders its decision. grounds for the suspension or can- that the Governor who calls the pro- ce l l a t i o n and the conditions for termi- ceeding for review shall serve on the (8) Transcript nating the suspension. The review panel in lieu of a member of subcommittee shall provide its pro- the Executive Committee who has No change. posed written decision to the NASD the same classification (Industry, Board of Governors. Non-Industry, or Public) as such (9) Record Go v e r n o r . The [NASD Board of Gov- (2) Issuance of Decision After ernors] review panel may affirm , The record shall consist of all docu- Expiration of Call for Review Peri- modify, or reverse the decision of the ments that were considered in con- od subcommittee. Not later than seven nection with the [National Adjudicatory days after the [NASD Board of Gov- Council’s] decision to issue a notice If no Governor calls the [suspension] ernors] review panel meeting, the under Rule 8221, the notice issued proceeding for review within the time [NASD Board of Governors] re v i e w under Rule 8221, the request for prescribed in paragraph (b)(1), the pa n e l shall serve a final written deci- hearing filed under Rule 8222, the subcommittee's proposed written sion on the member or person asso- transcript of the hearing, and each decision shall become final, and the ciated with a member via ov e r n i g h t document or other item of evidence subcommittee shall serve the fina l commercial courier or facsimile. The presented to or considered by the written decision on the member or decision shall state the disposition of subcommittee. The Office of the Gen- associated person via ov e r n i g h t the suspension or cancellation pr o - eral Counsel of NASD Regulation commercial courier or facsimile. ceeding, and if a suspension is shall be the custodian of the record. imposed, state the grounds for the (b) NASD Board of Governors suspension and the conditions for (10) Failure to Appear at Hearing terminating the suspension. (1) Call For Review by Governor If a member or person associated (c) Effective Date with a member fails to appear at a A Governor may call the suspension hearing for which it has notice, the or cancellation proceeding for review No change. subcommittee may dismiss the if the call for review is made not later request for a hearing as abandoned, than ten days after the Governor 8224. Notice to Membership and the notice [of the National Adju- receives the subcommittee's pro- dicatory Council] issued under Rule posed written decision. By a unani- The Association shall provide notice 8221 shall become the final action of mous vote of the NASD Board of of a suspension or cancellation the Association. Upon a showing of Governors, the NASD Board of Gov- under the Rule 8220 Series and the

NASD Notice to Members 99-16 Feb ru a r y 1999 87 grounds therefor in the next member- review panel constituted under Rule association of a person with a mem- ship supplement. 82 2 3 shall respond to the request fo r ber, unless the National Adjudicatory re l i e f in writing within ten days after Council determines otherwise. Th e 8225. Termination of receipt of the request. If the member National Adjudicatory Council may, Suspension or person associated with a member in its discretion, determine to waive files the written request for relief the requirement to release informa- (a) Filing of Request more than 30 days after service of tion with respect to a disciplinary the decision under Rule 8223, the decision under those extraordinary A suspended member or person National Adjudicatory Council shall circumstances where the release of associated with a member may file a respond to the request for relief in such information would violate funda- written request for termination of the writing within ten days after receipt of mental notions of fairness or work an suspension on the ground of full the request. The review panel's or in j u s t i c e . compliance with the notice issued National Adjudicatory Council's under Rule 8221 or, if applicable, the response shall be served on the 9000. CODE OF PROCEDURE conditions of a decision under Rule member or person associated with a 8223, with the head of the [appropri- member via ov e r n i g h t co m m e r c i a l 9200. DISCIPLINARY PRO- ate department or office] De p a r t m e n t courier or facsimile. CEEDINGS of Enforcement. 8300. SANCTIONS 9212. Complaint Issuance-- (b) Response by Department of Requirements, Service, En f o r c e m e n t IM-8310-2. Release of Disci- Amendment, Withdrawal, and plinary Information Docketing The head of the [appropriate depart- ment or office] Department of (d) (1) The Association shall release (a) Form, Content, Notice, Docket- En f o r c e m e n t shall respond to the to the public information with respect ing, and Service request in writing within five days to any disciplinary decision issued after receipt of the request. pursuant to the Rule 9000 Series No change. imposing a suspension, cancellation (1) Request Granted or expulsion of a member; or sus- (b) Amendments to Complaint pension or revocation of the registra- If the head of the [appropriate depart- tion of a person associated with a The Department of Enforcement may ment or office] Department of member; or suspension or barring of file and serve an amended complaint En f o r c e m e n t grants the request, he a member or person associated with that includes new matters of fact or or she shall serve the member or a member from association with all law once as a matter of course at person associated with a member members; or imposition of monetary any time before the Respondent with written notice of the termination sanctions of $10,000 or more upon a answers the complaint. Otherwise, of the suspension via ov e r n i g h t co m - member or person associated with a u[U]pon motion by the Department of mercial courier or facsimile. member; or containing an allegation Enforcement, the Hearing Office r of a violation of a Designated Rule; may permit the Department of (2) Request Denied and may also release such informa- Enforcement to amend the complaint tion with respect to any disciplinary to include new matters of fact or law, If the head of the department or decision or group of decisions that [at any time] after considering of fi ce denies the request, the sus- involve a significant policy or whether the Department of Enforce- pended member or person associat- enforcement determination where ment has shown good cause for the ed with a member may file a written the release of information is deemed am e n d m e n t [shown by the Depart- request for relief with the [National by the President of NASD Regula- ment of Enforcement] and wh e t h e r Adjudicatory Council] NASD Regula- tion, Inc. to be in the public interest. any Respondent will suffer any unfair tion Office of General Counsel. If the The Association also may release to prejudice if the amendment is member or person associated with a the public information with respect to al l o w e d [to any Respondent, permit member files the written request for any disciplinary decision issued pur- the Department of Enforcement to relief within 30 days after service of suant to the Rule 8220 Series impos- amend a complaint to include new the decision under Rule 8223, [T h e ing a suspension or cancellation of matters of fact or law]. National Adjudicatory Council] th e the member or a suspension of the

NASD Notice to Members 99-16 Feb ru a r y 1999 88 9215. Answer to Complaint 9241. Pre-hearing Conference that the complaint be dismissed with prejudice. (e) Extension of Time to Answer (a) through (e) Amended Complaint (3) [In addition, t]The Hearing Office r No change. may order a Party that fails to appear If a complaint is amended pursuant at the pre-hearing conference or the to Rule 9212(b), the time for filing an (f) Failure to Appear: Default hearing to [the non-appearing Party] answer or amended answer shall be pay the costs incurred by other Par- the greater of the original time period The Hearing Officer may issue a ties in connection with their appear- within which the Respondent is default decision, pursuant to Rule ance [at the hearing]. required to respond, or [extended to] 9269, against a[A] Party th a t [w h o ] 14 days after service of the amended fails to appear, in person or through (b) Contents of Decision [R e q u e s t complaint. If any Respondent has counsel or a representative, at a pre- to Set Aside Default already filed an answer, such hearing conference of which th e Respondent shall have 14 days after Pa r t y [he or she] has [been duly] du e A party may, for good cause shown, service of the amended complaint, no t i c e [n o t i fi ed, may be deemed in file a motion to set aside a default, unless otherwise ordered by the default pursuant to Rule 9269. A dismissal, and the imposition of Hearing Officer within which to file an Party may, for good cause shown, co s t s . ] The contents of a default deci- amended answer. file a motion to set aside the default]. sion shall conform to the require- ments of Rule 9268(b). (f) Failure to Answer, Default 9269. Default Decisions [Failure to Appear at Hearing; (c) Review of Default Decision If a Respondent does not file an Defaults] answer or make any other filing or Party may, for good cause shown, request related to the complaint with (a) Issuance of Default Decisions file a motion to set aside a default, the Office of Hearing Officers within [Failure to Appear May Result in dismissal, and the imposition of the time required, the Department of Default Decision] costs. Upon a showing of good Enforcement shall send a second cause, either the Review Subcom- notice to such Respondent requiring (1) The Hearing Officer may issue a mittee or the National Adjudicatory an answer within 14 days after ser- default decision against a Respon- Council may enter such an order. vice of the second notice. The sec- dent that fails to answer the com- ond notice shall state that failure of plaint within the time afforded under (d) Final Disciplinary Action of the the Respondent to reply within the Rule 9215, or a Party that fails to Association; Effectiveness of period specified shall allow the Hear- appear at a pre-hearing conference Sa n c t i o n s ing Officer, in the exercise of his or held pursuant to Rule 9241 of which her discretion, pursuant to Rule 9269 the Party has due notice, or a [A ] If a default decision is not appealed to: (1) treat as admitted by the Party th a t [who] fails to appear at [a] pursuant to Rule 9311 or called for Respondent the allegations in the an y hearing that a Party is required review pursuant to Rule 9312 within complaint; and (2) is s u e [enter] a to attend under the Rule 9200 Series 25 days after the date the Office of default decision against the Respon- of which the Party [he or she has Hearing Officers serves it on the Par- dent [pursuant to Rule 9269]. If th e been] has due notice [been duly noti- ties, the default decision shall Respondent fails to file an [n o ] fied may be deemed to be in default]. become the final disciplinary action answer [is filed] with the Office of of the Association for purposes of Hearing Officers within the time (2) If the defaulting Party is the SEC Rule 19d-1(c)(1). Unless other- re q u i r e d , the Hearing Officer may Re s p o n d e n t , [As a consequence of wise provided in the default decision, is s u e [allegations of the complaint the default], the Hearing Officer may the sanctions shall become effective may be considered admitted by such de e m the allegations against [a non- 30 days after the default decision Respondent and] a default decision appearing] th a t Respondent [may be becomes the final disciplinary action against the Respondent pursuant to deemed] admitted [and a default of the Association, except that a bar Rule 9269 [may be issued by the decision entered by the Hearing Offi- or expulsion shall become effective Hearing Officer. A Respondent may, cer]. If the [non-appearing Party] immediately upon the default deci- for good cause shown, move the defaulting Party is the Department of sion becoming the final disciplinary National Adjudicatory Council to set Enforcement, the Hearing Office r action of the Association. The Asso- aside a default]. may issue a default decision or d e r in g ciation shall serve the decision on a

NASD Notice to Members 99-16 Feb ru a r y 1999 89 Respondent by overnight courier, for review by the General Counsel, 9360. Effectiveness of facsimile or other means reasonably on his or her own motion within 25 Sanctions likely to obtain prompt service when [45] days after the date of service of the sanction is a bar or an expulsion. the decision. If called for review, Unless otherwise provided in the such decision shall be reviewed by decision issued under Rule 9349 or 9270. Settlement Procedure the National Adjudicatory Council. Rule 9351, a[A] sanction (other than a bar or an expulsion) specified in a (e) Uncontested Offers of 9346. Evidence in National decision constituting final disciplinary Se t t l e m e n t Adjudicatory Council action of the Association for purpos- Proceedings es of SEC Rule 19d-1(c)(1) shall (1) through (2) become effective [on a date estab- (a) Scope of Review lished by the Chief Hearing Office r , No change. which shall not be earlier than] 30 No change. days after the date of service of the (3) If the offer of settlement and order decision constituting final disciplinary of acceptance are accepted by the (b) Leave to Introduce Additional action. A bar or an expulsion shall National Adjudicatory Council, the Ev i d e n c e become effective upon service of the Review Subcommittee, or the Gener- decision constituting final disciplinary al Counsel, they shall become fina l A Party may apply to the Subcom- action of the Association for purpos- and [the National Adjudicatory Coun- mittee or, if applicable, the Extended es of SEC Rule 19d-1(c)(1), unless cil, the Review Subcommittee or] the Proceeding Committee, or the otherwise specified therein. The General Counsel shall [communicate National Adjudicatory Council for Association shall [take reasonable the acceptance to the Hearing Offi- leave to introduce additional evi- steps to obtain personal service of] cer who shall thereafter] issue the dence by motion filed not later than serve the decision on a Respondent order and notify the Office of Hearing 30 days after the Office of Hearing by overnight courier, facsimile or Of fi ce r s . Of fi cers transmits to the National other means reasonable likely to Adjudicatory Council and serves obtain prompt service when the (f) Contested Offers of Settlement upon all Parties the index to the sanction is a bar or an expulsion. record, pursuant to Rule 9321 [s e r - (3) If the offer of settlement and order vice of such Party’s notice of appeal 9500. [SUSPENSION, CAN- of acceptance are accepted by the or cross-appeal or not later than 35 CELLATION, BAR, DENIAL OF National Adjudicatory Council or the days after service upon the Party by ACCESS, AND ELIGIBILITY,] Review Subcommittee, the Ge n e r a l the National Adjudicatory Council of OTHER [PROCEDURES] Co u n s e l [National Adjudicatory a notice of review]. The motion shall PROCEEDINGS Council or the Review Subcommittee describe each item of proposed new shall communicate the acceptance to evidence, demonstrate that there 9510. [Procedures for] Sum- the Hearing Officer who] shall [there- was good cause for failing to intro- mary and Non-Summary Pro- after] issue the order and notify the duce it below, demonstrate why the ceedings [Suspension, Of fi ce of Hearing Office r s . evidence is material to the proceed- Cancellation, Bar, Limitation, ing, and be filed and served. The or Prohibition] 9312. Review Proceeding by Party may attach the documentary National Adjudicatory Council evidence as an exhibit to the motion. 9511. Purpose and By a motion filed in accordance with Computation of Time (a) Call for Review Rule 9146, a Party may request an extension of the period during which (a) Purpose (1) Rule 9268 Decision a Party may file a motion for leave to introduce additional evidence. A [(1) The purpose of the Rule 9510 No change. Party shall demonstrate that there Series is to set forth procedures for was good cause for failing to file the certain suspensions, cancellations, (2) Rule 9269 Decision motion for leave to introduce addi- bars, and limitations and prohibitions tional evidence during the period pre- on access to the Association's ser- A default decision issued pursuant to sc r i b e d . vices authorized by the Act and the Rule 9269 shall be subject to a call NASD By-Laws. Pursuant to Section

NASD Notice to Members 99-16 Feb ru a r y 1999 90 15A(h)(3) of the Act, the Association report or information related to such respect to access to services offered may summarily:] payment; or failure to comply with an by the Association or a member arbitration award or a settlement thereof, if the Association determines [(A) suspend a member or associat- agreement related to an arbitration or that such member or person does ed person who has been and is mediation under Article VI, Section 3 not meet the qualification require- expelled or suspended from any self- of the NASD By-Laws;] ments or other prerequisites for such regulatory organization or barred or access or such member or person suspended from being associated [(C) cancel the membership of a cannot be permitted to continue to with a member of any self-regulatory member for failure to file or submit have such access with safety to or g a n i z a t i o n ; ] on request any report, document, or investors, creditors, members, or the other information required to be file d Association; or (C) an advertising [(B) suspend a member who is in with or requested by the Association pre-use filing requirement. such financial or operating difficu l t y under Article VII, Section 2 of the that the Association determines and NASD By-Laws; and] (b) Computation of Time so notifies the Commission that the member cannot be permitted to con- [(D) limit or prohibit any member, For purposes of the [9510] Rule tinue to do business as a member associated person, or other person 95 1 0 Series, time shall be computed with safety to investors, creditors, with respect to access to services as set forth in Rule 9138, except that other members, or the Association; offered by the Association or a mem- intermediate Saturdays, Sundays, or ] ber thereof if the Association deter- and holidays shall be included in the mines that such person does not co m p u t a t i o n . [(C) limit or prohibit any person with meet the qualification requirements respect to access to services offered or other prerequisites for such 9512. Initiation of Summary by the Association if subparagraph access or such person cannot be [Proceedings for Summary (A) or (B) applies to such person, or permitted to continue to have such Suspension, Limitation, or in the case of a person who is not a access with safety to investors, credi- Prohibition] Proceeding member, if the Association deter- tors, members, or the Association.] mines that such person does not No change. meet the qualification requirements [(3) Other procedures for suspending or other prerequisites for such the membership of a member, sus- 9513. Initiation of Non-Sum- access and such person cannot be pending the registration of an associ- mary Proceeding[s] [for Non- permitted to continue to have such ated person, or suspending a person Summary Suspension, access with safety to investors, credi- from association with any member Cancellation, Bar, Limitation, tors, members, or the Association.] are found in the Rule 8220 Series or Prohibition] and Rule 8320. Procedures for listing [(2) The Association also may take qu a l i fi cation matters are found in the (a) Notice the following actions, after notice and Rule 9700 Series; the Rule 9510 opportunity for hearing:] Series does not apply to listing quali- Association staff [shall] ma y initiate a fication matters.] proceeding authorized under [Sec- [(A) cancel the membership of a tion 3 of Article III, Section 3 of Article member that becomes ineligible for The Rule 9510 Series sets forth pro- VI, or Section 2 of Article VII of the continuance in membership, or that cedures for: (1) summary proceed- NASD By-Laws, or] Rule continues to be associated with an ings authorized by Section 15A(h)(3) 9511(a)(2)[(D)] (A) or (B), by issuing ineligible person, or suspend or bar a of the Act; and (2) non-summary pro- a written notice to the member, asso- person from continuing to be associ- ceedings to impose (A) a suspension ciated person, or other person. The ated with a member because such or cancellation for failure to comply notice shall specify the grounds for person is or becomes ineligible for with an arbitration award or a settle- and effective date of the cancellation, association under Article III, Section ment agreement related to an arbi- suspension, bar, limitation, or prohi- 3 of the NASD By-Laws;] tration or mediation pursuant to bition and shall state that the mem- Article VI, Section 3 of the NASD By- ber, associated person, or other [(B) suspend or cancel the member- Laws; (B) a suspension or cancella- person may file a written request for ship of a member or the registration tion of a member, or a limitation or a hearing under Rule 9514. The of a person for failure to pay fees, prohibition on any member, associat- notice shall be served by facsimile or dues, assessments, or other ed person, or other person with overnight commercial courier. charges; failure to submit a required NASD Notice to Members 99-16 Feb ru a r y 1999 91 (b) Effective Date The request shall be filed pursuant to agreement related to an NASD arbi- Rules 9135, 9136, and 9137 within tration or mediation, the Chief Hear- [For any cancellation, suspension, or seven days after service of the notice ing Officer shall appoint a Hearing bar under Section 3 of Article III of under Rule 9512 or 9513, or, with Panel composed of a Hearing Offi- the NASD By-Laws, the effective respect to notice of a pre-use fili n g cer. For any other proceedings initiat- date shall be at least seven days requirement under Rule 2210(c)(4) ed under Rule 2210, 2220, 95 1 2 ( a ) , after service of the notice on the and Rule 2220(c)(2), within 30 days of or 9513(a) by the President of NASD member or associated person.] For such notice. The member, associated Regulation or NASD Regulation staff, any cancellation or suspension person, or other person may withdraw the NASD Regulation Board shall [under Section 3 of Article VI or Sec- its request for a hearing at any time by appoint a Hearing Panel composed tion 2 of Article VII of the NASD By- filing a written notice with the Associa- of two or more members; one mem- Laws] pursuant to Rule tion pursuant to Rules 9135, 9136, ber shall be a Director of NASD Reg- 95 1 1 ( a ) ( 2 ) ( A ) , the effective date shall and 9137. ulation, and the remaining member be at least 15 days after service of or members shall be current or for- the notice on the member or associ- (2) Failure to File Request mer Directors of NASD Regulation or ated person. For any action pursuant Governors. The President of NASD to Rule 9511(a)(2)(B), the effective If the member, associated person, or Regulation may not serve on a Hear- date shall be at least seven days other person subject to the notice ing Panel. after service of the notice on the issued under Rule 2210, 2220, member or person, except that the 95 1 2 ( a ) , or 9513(a) does not file a (2) No change. effective date for a notice of a li m i t a - written request for a hearing under tion or prohibition on access to ser- subparagraph (1), the notice shall (c) Stays vices offered by the Association or a constitute final action by the Associa- member thereof [pursuant to Rule ti o n . (1) Summary Pr o c e e d i n g [S u s p e n - 9511(a)(2)(D), the effective date shall sion, Limitation, or Prohibition] be upon receipt of the notice] with (3) Ex Parte Communications respect to services to which the No change. member, associated person, or other No change. person does not have access [and (2) Non-Summary [Cancellation, shall be at least seven days after ser- (b) Designation of Party for the Suspension, Bar, Limitation, or vice of the notice with respect to ser- Association and Appointment of Prohibition] Pr o c e e d i n g vices to which the member, Hearing Panel associated person, or other person Unless the NASD Board orders oth- already has access] shall be upon If a member, associated person, or erwise, a request for a hearing shall receipt of the notice. other person subject to a notice stay the notice issued under Rule under Rule 2210, 2220, 95 1 2 , or 2210, 2220, or 9513, except that a 9514. Hearing and Decision 9513 files a written request for a request for a hearing shall not stay a hearing, an appropriate department notice of a limitation or prohibition on (a) Request or office of the Association shall be services offered by the Association designated as a Party in the pro- or a member thereof with respect to (1) Request by Member, Associat- ceeding, and a Hearing Panel shall services to which a member, associ- ed Person, or Other Person be appointed. ated person, or other person does not have access. A member, associated person, or (1) If the President of NASD Regula- other person who is subject to a tion or NASD Regulation staff issued (d) Time of Hearing notice issued under Rule 2210, 2220, the notice initiating the proceeding 95 1 2 ( a ) , or 9513(a) may file a written under Rule 2210, 2220, 95 1 2 ( a ) , or (1) Summary [Suspension] request for a hearing with the Associ- 9513(a), the President of NASD Pr o c e e d i n g ation. The request shall state [either] Regulation shall designate an appro- the specific grounds for [reversing the priate NASD Regulation department No change. summary suspension, limitation, or or office as a Party. For proceedings prohibition or for opposing the cancel- initiated under Rule 9513(a) concern- (2) Non-Summary [Suspension, lation, suspension, bar, limitation, or ing failure to comply with an arbitra- Cancellation, Bar, Limitation or prohibition] setting aside the notice. tion award or a settlement Prohibition] Pr o c e e d i n g

NASD Notice to Members 99-16 Feb ru a r y 1999 92 If a member, associated person, or submissions by the Parties; (5) any The decision shall include: other person who is subject to a evidence considered at the hearing; notice issued under Rule 22 1 0 , and (6) the transcript of the hearing (A) a statement setting forth the spe- 2220, or 9513(a) files a written and any corrections thereto. ci fi c statute, rule, or NASD by-law request for a hearing, a hearing shall that authorized the proceeding; be held within 21 days after the fili n g (5) Custodian of the Record of the request for hearing. The Hear- (B) a statement describing the inves- ing Panel may, during the initial 21 If the President of NASD Regulation tigative or other origin of the pro- day period, extend the time in which or NASD Regulation staff initiated ce e d i n g ; the hearing shall be held by an addi- the proceeding under Rule 22 1 0 , tional 21 days on its own motion or at 22 2 0 , 95 1 2 , or 9513, the Office of (C) the grounds for issuing the notice the request of a Party. Not less than the General Counsel of NASD Regu- under Rule 2210, 2220, 95 1 2 , or five days before the hearing, the lation shall be the custodian of the 95 1 3 ; Hearing Panel shall provide written re c o r d , except that the Office of notice to the Parties of the location, Hearing Officers shall be the custodi- (D) a statement of findings of fact date, and time of the hearing by fac- an of record for proceedings initiated with respect to any act or practice simile or overnight commercial couri- under Rule 9513(a) concerning fail- that was alleged to have been com- er . ure to comply with an arbitration mitted or omitted by the member, award or a settlement agreement associated person, or other person; (e) Transmission of Documents related to an NASD arbitration or me d i a t i o n . If the President of Nasdaq (E) a statement in support of the dis- (1) Not less than five days before the or Nasdaq staff initiated the proceed- position of the principal issues raised hearing, the Association shall pro- ing under Rule 9512 or 9513, the in the proceedings; and vide to the member, associated per- Of fi ce of the General Counsel of son, or other person who requested Nasdaq shall be the custodian of the (F) if a summary suspension, limita- the hearing, by facsimile or overnight re c o r d . tion, or prohibition continues to be commercial courier, all documents imposed, the specific grounds for that were considered in issuing the (6) Evidence Not Admitted imposing such suspension, limitation, notice under Rule 2210, 2220, 95 1 2 , or prohibition, and the terms of the or 9513, unless a document meets No change. suspension, limitation, or prohibi- the criteria of Rule 9251(b) (1)(A), ti o n [ , ] ; or, if a non-summary suspen- (B), or (C). A document that meets (g) Decision of the Hearing Panel sion, cancellation, bar, limitation, [or] such criteria shall not constitute part prohibition or pre-use filing require- of the record, but shall be retained by (1) Summary [Suspension, Limita- me n t is to be imposed or continue to the Association until the date upon tion, or Prohibition] Pr o c e e d i n g be imposed, [the] it s effective date, which the Association serves a fina l time, and terms [of the suspension, decision or, if applicable, upon the No change. cancellation, bar, limitation, or prohi- conclusion of any review by the bi t i o n ] . Commission or the federal courts. (2) Non-Summary [Suspension, Cancellation, Bar, Limitation, or (4) Issuance of Decision After (2) No change. Prohibition] Pr o c e e d i n g Expiration of Call for Review Peri- od (f) Hearing Panel Consideration Based on its review of the record, the Hearing Panel shall decide whether No change. (1) - (3) No change. a cancellation, suspension, bar, limi- tation, [or] prohibition, or pre-use fil- 9515. Discretionary Review by (4) Record ing requirement shall be imposed or the NASD Board continue to be imposed. The Hearing The record shall consist of: (1) the Panel shall prepare a proposed writ- No change. notice issued under Rule 22 1 0 , ten decision pursuant to subpara- 22 2 0 , 95 1 2 , or 9513; (2) all docu- graph (3). 9516. Reinstatement ments transmitted by the Association under Rule 9514(e)(1); (3) the (3) Contents of Decision A member, associated person, or request for hearing; (4) any other other person who has been suspend-

NASD Notice to Members 99-16 Feb ru a r y 1999 93 ed or limited by a final action of the (2) Notice to Member or otherwise is no longer eligible for Association [after a non-summary me m b e r s h i p ; proceeding] under the Rule 9510 A notice issued to a member that is Series may file a written request for subject to a statutory disqualifica t i o n (2) [determines that] a person asso- reinstatement on the ground of full or is otherwise ineligible for member- ciated with [it] such member is sub- compliance with the conditions of the ship shall state that the member may ject to a statutory disqualification or suspension or limitation. The request apply for relief by filing a written otherwise is no longer eligible for shall be filed with the department or application for relief pursuant to para- association with the member; or of fi ce of the Association that acted as graph (c) with the National Adjudica- a Party in the proceeding. The head tory Council within ten days after (3) the member wishes to sponsor of the department or office shall serve service of the notice. If the member the association of a person who is its response on the member or person fails to file the written application for subject to a statutory disqualifica t i o n via facsimile or overnight commercial relief within the 10-day period, the or otherwise is ineligible for associa- courier within five days after receipt of membership of the member shall be tion with a member. the request. If the head of the depart- canceled, unless the Department of ment or office denies the request, the Member Regulation grants an exten- 9525. Expedited Review member or person may file a written sion for good cause shown. request for relief with the NASD (a) Direction by Executive Committee Board. The NASD Board shall (3) Notice to Associated Person respond to the request in writing with- Notwithstanding Rules 9523 and in 14 days after receipt of the request. A notice issued to an associated per- 9524, the NASD Board Executive The NASD Board shall serve its son who is subject to a statutory dis- Committee, upon request of the response by facsimile or overnight qu a l i fi cation or is otherwise ineligible Statutory Disqualification Committee, commercial courier. for association shall state that a mem- may direct an expedited review of a ber may apply for relief on behalf of recommended written decision of the 9520. Eligibility Proceedings itself and such person by filing a writ- Statutory Disqualification Committee ten application for relief pursuant to if the NASD Board Executive Com- 9521. Purpose paragraph (c) with the National Adju- mittee determines that expedited dicatory Council within ten days after review is necessary for the protection No change. service of the notice. If the member of investors. fails to file the written application for 9522. Initiation of Eligibility relief within the 10-day period, the (b) Call for Review Period Proceeding[s] registration of the associated person shall be revoked, unless the Depart- If a recommended decision is subject (a) [Notice of Disqualification or ment of Member Regulation grants an to expedited review, a Governor may Ineligibility] Initiation by extension for good cause shown. call the eligibility proceeding for As s o c i a t i o n review within seven days after (4) Service receipt of the recommended written (1) Issuance of Notice of de c i s i o n . Di s q u a l i fi cation or Ineligibility No change. (c) No Call for Review If Association staff has reason to (b) [Application by] Obligation of believe that a statutory disqualifica - Member to Initiate Proceeding If no Governor calls the proceeding tion exists or that a member or per- for review within the time prescribed, son associated with a member A member shall file a written applica- the decision shall become final, and otherwise fails to meet the eligibility tion for relief from the eligibility the Statutory Disqualification Com- requirements of the Association, requirements of the Association pu r - mittee shall serve the decision on the Association staff shall issue a written suant to paragraph (c) with the member, the current or prospective notice to the member or associated National Adjudicatory Council if the associated person, and Department person. The notice shall specify the member determines prior to receiv- of Member Regulation pursuant to grounds for such disqualification or ing a notice under paragraph (a) that: Rules 9132 and 9134. The decision in e l i g i b i l i t y . shall be effective upon service and (1) [determines that it] the member is shall constitute final action of the subject to a statutory disqualifica t i o n As s o c i a t i o n .

NASD Notice to Members 99-16 Feb ru a r y 1999 94 (d) Call for Review (c) Effective Date of Notice serve the member or person associ- ated with a member via overnight If a Governor calls the eligibility pro- A notice issued and served under commercial courier with all docu- ceeding for review within the pre- this Rule shall become effective 15 ments that were considered in con- scribed time, a review panel shall days after the date of service of the nection with the decision to issue a meet and conduct a review not later no t i c e . notice under Rule 9531 and provide than 14 days after the call for review. copies of the same to the Hearing The review panel shall be composed 9532. Hearing Of fi ce r . of the NASD Board Executive Com- mittee, except that the Governor who (a) Request for Hearing (5) Counsel calls the proceeding for review shall serve on the review panel in lieu of a Within five days after the date of ser- The Parties may be represented by member of the Executive Committee vice of a notice issued under Rule counsel at a hearing conducted who has the same classifica t i o n 9531, the member or person served under this Rule. (Industry, Non-Industry, or Public) as with such notice may file with the such Governor. The review panel Of fi ce of Hearing Officers a written (6) Evidence may affirm, modify, or reverse the request for a hearing. The request recommended written decision of the shall state with specificity why the Formal rules of evidence shall not Statutory Disqualification Committee member or person believes that the apply to a hearing under this Rule. or remand the eligibility proceeding notice should be set aside. The Not later than four days before the with instructions. The review panel request for the hearing shall stay the hearing, the Parties shall exchange shall prepare, issue, and serve its effective date of the notice. copies of proposed hearing exhibits decision pursuant to Rule 9524(d) and witness lists and provide copies and (e). (b) Hearing Procedures of the same to the Hearing Office r .

9526. Application to Commis- (1) Appointment of Hearing Officer (7) Witnesses sion for Review If a hearing is requested, the Chief A person who is subject to the juris- No change. Hearing Officer shall appoint a Hear- diction of the Association shall testify ing Officer to conduct the hearing under oath or affirmation. The oath 9530. Suspension or Cancella- and decide whether the member or or affirmation shall be administered tion for Failure to Pay Dues, the person's registration should be by a court reporter or a notary public. Fees and Other Charges suspended or canceled. (8) Additional Information 9531. Notice (2) Parties At any time during its consideration, the Hearing Officer may direct the (a) Notice The Parties shall be the member or Parties to submit additional informa- person to whom the notice was tion. Any additional information sub- Association staff may issue a written issued and the NASD Treasurer. mitted shall be provided promptly to notice suspending or canceling the all Parties at least one business day membership of a member or the reg- (3) Time of Hearing before the Hearing Officer renders istration of a person who has failed to his or her decision. pay a fee, due, assessment, other The hearing shall be held within 45 charge, or submit a required report days after the date of service of the (9) Transcript or information related to such pay- notice under Rule 9531. Not later me n t . than seven days before the hearing, The hearing shall be recorded and a the Hearing Officer shall serve the transcript prepared by a court (b) Service of Notice Parties with written notice of the date reporter. A Party may purchase a and time of the hearing. copy of the transcript from the court Association staff shall serve the reporter at prescribed rates. A wit- notice by facsimile or overnight com- (4) Transmission of Documents ness may purchase a copy of the mercial courier and shall file a copy transcript of his or her own testimony of the notice with the Office of Hear- Not later than seven days before the from the court reporter at prescribed ing Office r s . hearing, the NASD Treasurer shall rates. Proposed corrections to the

NASD Notice to Members 99-16 Feb ru a r y 1999 95 transcript may be submitted by affi- other charge, or for failure to submit 9536. Copies of Notices and davit to the Hearing Officer within a a required report or information relat- Decisions to Member reasonable time determined by the ed to such payment. The Hearing Hearing Officer. Upon notice to the Of fi cer shall prepare a proposed writ- A copy of a notice or decision under participants in the hearing, the Hear- ten decision, and if the Hearing Offi- the Rule 9530 Series that is served ing Officer may order corrections to cer determines that a suspension or on a person associated with a mem- the transcript as requested or sua cancellation should be imposed, the ber shall be served on such member. sp o n t e . proposed written decision shall state the grounds for the suspension or 9537. Other Action Not Fore- (10) Record cancellation, and in the case of a closed suspension, the conditions for termi- The record shall consist of all docu- nating the suspension. The written Action by the Association under the ments that were considered in con- decision served under this Rule shall Rule 9530 Series shall not foreclose nection with the decision to issue a become effective upon service and action by the Association under any notice under Rule 9531, the notice shall constitute final action of the other Rule. issued under Rule 9531, the request As s o c i a t i o n . for hearing filed under Rule 9532, the 9600. Procedures for transcript of the hearing, and each 9534. Notice to Membership Exemptions document or other item of evidence presented to or considered by the The Association shall provide notice 9610. Application Hearing Officer. The Office of Hear- of a suspension or cancellation ing Officers shall be the custodian of under this Rule Series and the (a) Where to File the record. grounds therefor in the next member- ship supplement. A member seeking an exemption (11) Failure to Appear at Hearing from Rule 1021, 1022, 1070, 2210, 9535. Termination of 23 2 0 , 2340, 2520, 2710, 2720, 2810, If a member or person fails to appear Suspension 2850, 2851, 2860, Interpretive Mate- at a hearing for which he has notice, rial 2860-1, 3010, 3210, 3350, 8211, the Hearing Officer may dismiss the A suspended member or person may 8212, 8213, 11870, or 11900, Inter- request for a hearing as abandoned, file a written request for termination pretive Material 2110-1, or Municipal and the notice issued under Rule of the suspension on the ground of Securities Rulemaking Board Rule 9531 shall become final. Upon a full compliance with the notice issued G-37 shall file a written application showing of good cause, the Hearing under Rule 9531 or, if applicable, the with the appropriate department or Of fi cer may withdraw a dismissal conditions of a decision under Rule staff of the Association and provide a entered pursuant to this subpara- 9533, with the Office of Hearing Offi- copy of the application to the Office gr a p h . cers. The Office of Hearing Office r s of General Counsel of NASD Regu- shall respond to the request in writing la t i o n . 9533. Decision within five days after receipt of the request. The Office of Hearing Offi- © 1999, National Association of Securities Dealers, The Hearing Officer may suspend or cers shall send the written response Inc. (NASD). All rights reserved. cancel the membership of a member via overnight commercial courier or or the registration of a person for fail- fa c s i m i l e . ure to pay a due, fee, assessment,

NASD Notice to Members 99-16 Feb ru a r y 1999 96 Executive Summary Rule to exempt public offerings by a NASD On December 21, 1998, the church or other charitable institution Securities and Exchange from the filing requirements, but not Commission (SEC) approved the substantive requirements, of the Notice to amendments submitted by NASD Corporate Financing Rule. In order Regulation, Inc. (NASD RegulationSM ) for the new exemption to apply to an to exempt certain offerings by offering, the offering must qualify for Members charitable organizations from the the exemption from SEC registration filing requirements of National provided by Section 3(a)(4) of the Association of Securities Dealers, Securities Act, which requires that 99-17 ¨ Inc. (NASD ) Rule 2710 (the the securities offered by a person Corporate Financing Rule). The new organized and operated exclusively SEC Approves exemption was effective on for religious, educational, benevolent, Amendments Regarding December 21, 1998. fraternal, charitable, or reformatory purposes, not be for pecuniary profit, Application Of The Questions regarding this No t i c e ma y and that no part of the net earnings Co rp o r ate Financing Rule be directed to Suzanne E. Rothwell, inure to the benefit of any person, To Certain Offer ings By Chief Counsel, Corporate Financing private stockholder, or individual. The Ch a ri t a b le Organizations Department, NASD Regulation, at registration exemption provided by (202) 974-2747. Section 3(a)(4) is also available to any security of a fund that is Suggested Routing Discussion excluded from the definition of an Senior Management The Corporate Financing Rule investment company under Section requires that public offerings of 3(c)(10)(B) of the Investment Ad v e r t i s i n g securities be filed with the Corporate Company Act of 1940. Continuing Education Financing Department of NASD Regulation (Department) so that the Text Of Amendments Corporate Finance Department has an opportunity to (Note: New text is underlined; deletions are Executive Representatives determine whether compensation br a c k e t e d . ) Government Securities terms and arrangements are fair and reasonable for purposes of the rule. 2710. Corporate Financing In s t i t u t i o n a l Offerings of securities by a church or Rule - Underwriting Terms and In s u r a n c e other charitable institution that is Arrangements Internal Audit exempt from SEC registration pursuant to Section 3(a)(4) of the (a) No change. Legal & Compliance Securities Act of 1933 (Securities Mu n i c i p a l Act) have been subject to the fili n g (b) Filing Requirements requirements of the Corporate Mutual Fund Financing Rule. (1) - (6) No change. Op e r a t i o n s Op t i o n s The Department has found that such (7) Offerings Exempt from Filing public offerings by charitable Registered Representatives organizations no longer present Notwithstanding the provisions of Re g i s t r a t i o n regulatory issues requiring pre- subparagraph (1) above, documents Re s e a r c h offering review. In particular, the and information related to the follow- aggregate underwriting ing public offerings need not be file d Sy n d i c a t e compensation received by church with the Association for review, Sy s t e m s bond broker/dealers has been unless subject to the provisions of si g n i fi cantly below the maximum Rule 2720. However, it shall be Tr a d i n g amount of underwriting deemed a violation of this Rule or Tr a i n i n g compensation that is permitted under Rule 2810, for a member to partici- Variable Contracts the Corporate Financing Rule. pate in any way in such public offer- ings if the underwriting or other NASD Regulation has, therefore, arrangements in connection with the amended the Corporate Financing offering are not in compliance with NASD Notice to Members 99-17 Feb ru a r y 1999 97 this Rule or Rule 2810, as applica- (F) offerings of securities by a church (A) - (E) No change. bl e : or other charitable institution that is exempt from SEC registration pur- (F) securities offered by a bank, sav- (A) - (C) No change. suant to Section 3(a)(4) of the Secu- ings and loan association, [church or rities Act. other charitable institution,] or com- (D) securities offered pursuant to a mon carrier even though such offer- redemption standby “firm commit- (8) No change. ing may be exempt from registration ment” underwriting arrangement reg- with the Commission; istered with the Commission on (9) Offerings Required to be Filed Forms S-3, F-3 or F-10 (only with (G) - (H) No change. respect to Canadian issuers); [and] Documents and information relating to all other public offerings including, © 1999, National Association of Securities Dealers, (E) financing instrument-backed but not limited to, the following must Inc. (NASD). All rights reserved. securities which are rated by a be filed with the Association for nationally recognized statistical rating re v i e w : organization in one of its four (4) highest generic rating categories; an d

NASD Notice to Members 99-17 Feb ru a r y 1999 98 The National Association of Securities Dealers, Inc. (NASD¨) published the NA S D following Notices to Members during 1998. Duplicate copies are available for $25 per monthly or special issue. A two-volume, bound and indexed edition of the entire year’s No t i c e s is also available for $100. Requests, accompa- Notice to nied by a self-addressed mailing label and a check payable to the National Association of Securities Dealers, Inc., or credit card information, should be sent to NASD MediaSourceSM , P.O. Box 9403, Gaithersburg, MD 20898- Members 9403. Credit card telephone orders can be made by calling (301) 590-6142, 99 - 1 8 Monday through Friday, 9 a.m. to 5 p.m., Eastern Time. January Page 98 - 1 Arbitration Process Fees...... 3

An n ual Checklist Of 98 - 2 SEC Approves Amendments To Rule 1010, NASD Notices to 8000, And 9000 Series To Reflect Changes In NASD Me m b e r s Corporate Organization...... 7

98 - 3 Electronic Delivery Of Information Between Members And Their Customers...... 13

Su g gested Routing 98 - 4 Reminder Of Members’ Obligations To Senior Management Comply With Rule 15c2-4 ...... 19 Ad v e r t i s i n g 98 - 5 SEC Approves Changes To Third Market Continuing Education Trading Rules ...... 29 Corporate Finance 98 - 6 SEC Approves Changes To Rules On Government Securities Market Maker Withdrawals And Reinstatements ...... 35 In s t i t u t i o n a l 98 - 7 Unregistered Foreign Equities And ADRs In s u r a n c e No Longer Eligible For Quotation In OTC Bulletin Internal Audit Board; Effective April 1, 1998 ...... 41 Legal & Compliance 98 - 8 Treasury Requires Reporting Of Claims Mu n i c i p a l Against Government Of North Korea...... 45 Mutual Fund 98 - 9 1997-98 Renewal Rosters And Final Op e r a t i o n s Adjusted Invoices...... 51 Op t i o n s Registered Representatives 98 - 1 0 Transaction Reporting And Quotation Obligations Under The Fixed Income Pricing Re g i s t r a t i o n System (FIPS) ...... 53 Re s e a r c h Sy n d i c a t e 98 - 1 1 SEC Approves Rules Regarding Supervision, Review, And Record Retention Of Correspondence; Sy s t e m s Effective February 15, 1998...... 59 Tr a d i n g 98 - 1 2 Presidents’ Day: Trade DateÐSettlement Tr a i n i n g Date Schedule...... 67 Variable Contracts 98 - 1 3 Fixed Income Pricing System Additions, Changes, And Deletions As Of December 30, 1997.. . 69

NASD Notice to Members 99-18 Feb ru a r y 1999 99 Sp e c i a l January 1998 March 98 - 1 4 NASD Requests Comment On Limiting Quotations On Over-The-Counter Bulletin Board Sp e c i a l March 1998 (OTCBB) To Securities Of Reporting Issuers; 98 - 2 7 Interim Forms U-4 and U-5 Go Into Comment Period Expires February 16, 1998 ...... 85 Effect; Interim Form BD Also Approved...... 16 3

Sp e c i a l January 1998 98 - 2 8 Industry/Regulatory Council On 98 - 1 5 NASD Regulation Requests Comment Continuing Education Issues Firm Element On Proposal To Adopt Recommendation And Disclosure Ad v i s o r y...... 17 3 Rules For Over-The-Counter (OTC) Equity Securities; Comment Period Expires 98 - 2 9 SOES Tier-Size Levels Set To Change February 16, 1998...... 93 April 1, 1998...... 18 3

98 - 3 0 NASD Office Of The Ombudsman February Cl a r i fi es Its Role...... 19 1 98 - 1 6 SEC Approves New Qualification Examination For Government Securities 98 - 3 1 Fixed Income Pricing System Additions, Representatives (Series 72) And New Changes, And Deletions As Of February Registration Requirements For Registered 23, 1998...... 19 3 Options Representatives (Series 42)...... 10 1 98 - 3 2 Good Friday: Trade DateÐSettlement 98 - 1 7 SEC Approves New NASD Qualifica t i o n Date Schedule...... 19 5 Requirements And Examination For Equity Traders (Series 55) ...... 10 7 Sp e c i a l March 1998 98 - 3 3 SEC Approves New Order Audit Trail 98 - 1 8 NASD Regulation Permits Electronic System (OATS)...... 21 9 Methods For Holding Annual Interviews Or Meetings With Registered Representatives...... 11 1 Sp e c i a l March 1998 98 - 3 4 SEC Requests Comment On Amendments 98 - 1 9 SEC Requests Comment On Proposed To Rule 17a-5 Requiring Reports On Year 2000 Amendments To Net Capital Rule...... 11 3 Pr e p a r e d n e s s...... 23 1

98 - 2 0 Treasury Updates List Of Specially Designated Persons And Entities...... 11 5 April 98 - 3 5 SEC Approves Changes To Continuing 98 - 2 1 SEC Approves Amendments To Rule Education Rules ...... 24 5 On Clearly Erroneous Transactions...... 12 3 98 - 3 6 Fixed Income Pricing System Additions, 98 - 2 2 Year 2000 Frequently Asked Questions ...... 12 9 Changes, And Deletions As Of March 25, 1998 ...... 24 9

98 - 2 3 SEC Requests Comment On Proposed 98 - 3 7 Memorial Day: Trade DateÐSettlement Amendments To Continuing Education Rules ...... 13 3 Date Schedule...... 25 3

98 - 2 4 Annual Checklist Of NASD Notices to Me m b e r s ...... 13 9 May 98 - 2 5 Fixed Income Pricing System Additions, 98 - 3 8 NASD Reminds Members Of Supervisory Changes, And Deletions As Of January 23, 1998 .. . . . 14 3 And Inspection Obligations ...... 27 3

98 - 2 6 SEC Approves Temporary Changes To 98 - 3 9 NASD Revises Sanction Guidelines ...... 27 7 NYSE Circuit Breaker/Trading Halt Rules ...... 14 5 98 - 4 0 Nasdaq To Incorporate Trade Acceptance And Reconciliation Service Into Automated Co n fi rmation Transaction Service...... 28 1

NASD Notice to Members 99-18 Feb ru a r y 1999 100 98 - 4 1 Fixed Income Pricing System Additions, 98 - 5 6 SEC Approves Rule Change Regarding Changes, And Deletions As Of April 24, 1998 ...... 28 5 Arbitration Of Statutory Employment Disputes; Effective January 1, 1999...... 41 9 June 98 - 5 7 Fixed Income Pricing System Additions, 98 - 4 2 NASD Regulation Requests Comment On Changes, And Deletions As Of June 24, 1998...... 42 3 Proposed Rules Regarding Cease-And-Desist Proceedings; Comment Period Expires 98 - 5 8 NASD Manual Now On-Line...... 42 5 July 31, 1998...... 30 9 98 - 5 9 SEC Approves Amendments To 98 - 4 3 Federal Reserve System Amends NASD Rule 1120 (Continuing Education Regulations T, U, And X...... 31 5 Re q u i r e m e n t s )...... 42 7

98 - 4 4 SOES Tier-Size Levels Set To Change 98 - 6 0 NASD Extends Filing Period For New July 1, 1998 ...... 31 9 Equity Trader Examination And Responds To Questions Regarding New Equity Trader 98 - 4 5 Fixed Income Pricing System Additions, Qu a l i fi cation Rule ...... 43 1 Changes, And Deletions As Of May 22, 1998...... 32 7 Sp e c i a l July 1998 98 - 4 6 Independence Day: Trade DateÐ 98 - 6 1 NASD Members Face CRD Account Settlement Date Schedule ...... 32 9 Deduction Or Membership Cancellation For Non-payment Of Arbitration Fees...... 45 1

July Sp e c i a l July 27, 1998 98 - 4 7 SEC Approves Changes To Books And 98 - 6 2 District Committee And District Records Requirements ...... 35 3 Nominating Committee Election Procedures And National Adjudicatory Council Nomination 98-48 SEC Approves Amendments To Pr o c e d u r e s...... 45 3 Free-Riding And Withholding Interpretation; Effective August 17, 1998 ...... 357 Sp e c i a l July 1998 98 - 6 3 NASD Alerts Members About SEC Rule 98 - 4 9 SEC Approves Amendments To Rule Amendment Requiring Broker/Dealers To File Regarding Options Position Limits; Effective Year 2000 Reports And Releases Year 2000 June 12, 1998...... 37 7 Survey Results...... 46 5

98 - 5 0 Treasury Updates List Of Specially Designated Persons And Entities ...... 38 7 August Special August 10, 1998 98 - 5 1 Exemptive Relief Under MSRB 98 - 6 4 Mail VoteÐNASD Solicits Member Vote On Rule G-37(i) ...... 38 9 Amendments To NASD By-Laws To Reconfigure NASD Board; Last Voting Date: 98 - 5 2 SEC Approves Taping Rule; Effective September 9, 1998 ...... 48 5 August 17, 1998 ...... 39 3 98 - 6 5 NASD Reminds Members Of Obligations 98 - 5 3 Members Reminded To Report Executive Relating To The Short-Sale Rule ...... 49 5 Representative And Address Changes ...... 40 3 98 - 6 6 NASD Clarifies Acceptable Customer 98 - 5 4 SEC Approves Rule Change Regarding Access To SelectNet And SOES ...... 49 7 Approval Of Research Reports...... 40 5 98 - 6 7 SEC Approves Amendment To Rule On 98 - 5 5 Transaction Reporting And Quotation Fidelity Bonding Requirements; Effective Obligations Under The Fixed Income Pricing September 15, 1998 ...... 50 3 System (FIPS) ...... 40 7

NASD Notice to Members 99-18 Feb ru a r y 1999 101 98 - 6 8 Update On The Securities Industry October Continuing Education Program ...... 50 5 98 - 8 1 NASD Regulation Requests Comment On 98 - 6 9 Labor Day: Trade DateÐSettlement Date Whether Some Rules Should Be Repealed As Sc h e d u l e ...... 52 5 Obsolete Or Amended To Provide Institutional Customer Exception; Comment Period Expires 98 - 7 0 Fixed Income Pricing System Additions, November 30, 1998...... 63 1 Changes, And Deletions As Of June 24, 1998...... 52 7 98 - 8 2 SEC Approves Amendments To Automated Special August 1998 Co n fi rmation Transaction Service And Transaction 98 - 7 1 NASD Regulation Requests Comment Reporting Rules ...... 63 5 On Whether To Modify The Public Disclosure Program To Limit The Period For Disclosure Of 98 - 8 3 SEC Approves Rule Change Relating To Certain Criminal Information; Comment Period Standards For Individual Correspondence; Expires September 30, 1998 ...... 5 5 3 Effective November 16, 1998 ...... 63 7

98 - 8 4 Broker/Dealer And Agent Renewals For 1999...... 64 5 September Special September 8, 1998 98 - 8 5 SEC Approves Rule Changes Regarding 98 - 7 2 Regional Nominating Committee Electronic Communication Networks, Locked And Nominees For The National Adjudicatory Crossed Markets, And Members’ Obligation To Co u n c i l ...... 56 1 Provide Nasdaq With Certain Information ...... 64 9

98 - 7 3 Firms Required To Register For Order 98 - 8 6 Columbus Day, Veterans Day, And Audit Trail System; Amendments To Thanksgiving Day: Trade DateÐSettlement Date OATS Rules ...... 56 7 Sc h e d u l e ...... 65 5

98 - 7 4 SEC Approves Rule Amendment 98 - 8 7 Fixed Income Pricing System Additions, Relating To Hearings On Suspensions And Changes, And Deletions As Of August Cancellations For Failure To Comply With 24 , 1998 ...... 65 7 Arbitration Awards...... 57 5 98 - 8 8 Underwriting Compensation In Public 98 - 7 5 SEC Approves Rule Change Relating Offerings ...... 66 1 To Non-Cash Compensation For Mutual Funds And Variable Products ...... 57 7 Special October 1998 98 - 8 9 NASD Announces Changes In CRD 98 - 7 6 Maximum SOES Order Sizes Set To Filing Fees...... 68 3 Change October 1, 1998 ...... 58 7

98 - 7 7 Executive Representatives Must Maintain November Internet Electronic Mail Account By January 1, 1999; 98 - 9 0 New Arbitrator List Selection Rules And Complimentary Hard Copy Distribution Of Key Monetary Thresholds For Simplified And Single Publications To End January 1, 1999 ...... 59 5 Arbitration Cases Take Effect ...... 68 7

98 - 7 8 NASD Clarifies Operation Of The Limit 98 - 9 1 NASD Alerts Members To Their Obliga- Order Protection Rule During Unusual Market tions Concerning Cold Calling And Advertising Conditions ...... 59 7 To Persons In The United Kingdom...... 69 5

98 - 7 9 Fixed Income Pricing System Additions, 98 - 9 2 NASD Regulation Articulates Position Changes, And Deletions As Of July 23, 1998 ...... 59 9 On The Application Of NASD Rule 2680 To U.S. Broker/Dealers That Intermediate Transactions Special September 29, 1998 Pursuant To Exchange Act Rule 15a-6(a)(3) ...... 69 7 98-80 Nominees For NASD Board Of Governors .. . . 62 1

NASD Notice to Members 99-18 Feb ru a r y 1999 102 98 - 9 3 NASD Informs Members Of District 98 - 1 0 1 NASD Requests Comment On Proposed Committee Members And District Nominating Amendments To Disclosure Questions On Committee Members...... 69 9 Forms U-4 And U-5; Comment Period Expires January 15, 1999...... 75 3 98 - 9 4 Christmas Day And New Year’s Day: Trade DateÐSettlement Date Schedule ...... 71 1 98 - 1 0 2 Calculating Margin For Day-Trading And Cross-Guaranteed Accounts ...... 75 9 98 - 9 5 Fixed Income Pricing System Additions, Changes, And Deletions As Of September 23, 1998...... 71 3 98 - 1 0 3 Maximum SOES Order Sizes Set To Change January 1, 1999 ...... 76 5

December 98 - 1 0 4 Fixed Income Pricing System Additions, Changes, And Deletions As Of October 23, 1998.. . . 77 3 98 - 9 6 NASD Elaborates On Member Firms’ Supervision Responsibilities For Trade Reporting 98 - 1 0 5 NASD 1999 Holiday Schedule...... 77 5 And Market-Making Activities...... 73 1 98 - 1 0 6 Trade DateÐSettlement Date Schedule 98 - 9 7 Notice Of Increase In Advertising For 1999...... 77 7 Review Fees ...... 73 7 98 - 1 0 7 NASD Reminds Members Of Their 98 - 9 8 SEC Approves Rule Change Relating To Obligations To Disclose Mutual Fund Fees ...... 78 3 Mutual Fund Breakpoint Sales...... 73 9 Special December 1998 98 - 9 9 SEC Issues No-Action Letter On 98 - 1 0 8 NASD Extends Deadline For Updating Proprietary Accounts Of Introducing Firm Contact Information Via The NASD Broker/Dealers...... 74 1 Regulation Web Site To February 1, 1999 ...... 80 5

© 1999, National Association of Securities Dealers, Inc. (NASD). All rights 98 - 1 0 0 FOCUS Filing Due Dates For 1999 ...... 75 1 re s e r v e d .

NASD Notice to Members 99-18 Feb ru a r y 1999 103 As of December 22, 1998, the following bonds were added to the Fixed NA S D Income Pricing SystemSM (F I P S ¨). Notice to Sy m b o l Na m e Co u p o n Ma t u r i t y AE S . G F AES Corp. 8. 0 0 0 12 / 3 1 / 0 8 CA I . G B Continental Airlines Inc. 8. 0 0 0 12 / 1 5 / 0 5 Members ES P I . G C E Spire Communications Inc. 10 . 6 2 5 07 / 0 1 / 0 8 GB B P . G A GBB Capital II 0. 0 0 0 09 / 1 5 / 2 8 99 - 1 9 HR H O . G A Harrahs Operating Co. Inc. 7. 8 7 5 12 / 1 5 / 0 5 LO D G . G B Sholodge Inc. Series A 9. 7 5 0 11 / 0 1 / 0 6 PA P A . G A Rapid American Corp. Del 0. 0 0 0 03 / 0 1 / 0 0 PA P A . G B Rapid American Corp. Del 0. 0 0 0 03 / 0 1 / 0 1 PA P A . G C Rapid American Corp. Del 0. 0 0 0 03 / 0 1 / 0 2 Fi x ed Income Pric i n g PA P A . G D Rapid American Corp. Del 0. 0 0 0 03 / 0 1 / 0 3 System Additions, PA P A . G E Rapid American Corp. Del 0. 0 0 0 03 / 0 1 / 0 4 Ch a n g e s , And Deletions PA P A . G F Rapid American Corp. Del 0. 0 0 0 03 / 0 1 / 0 5 As Of December 22, 1998 PA P A . G G Rapid American Corp. Del 0. 0 0 0 03 / 0 1 / 0 6 PA P A . G H Rapid American Corp. Del 0. 0 0 0 03 / 0 1 / 0 7 PA P A . G I Rapid American Corp. Del 0. 0 0 0 03 / 0 1 / 9 9 PD C H . G A Plaid Clothing Group Inc. 11 . 0 0 0 08 / 0 1 / 0 3 PI D M . K C Piedmont Aviation Inc. Series I 9. 9 5 0 11 / 0 8 / 0 9 Su g gested Routing PI D M . K D Piedmont Aviation Inc. Series H 9. 9 5 0 11 / 0 8 / 1 0 Senior Management PI D M . K E Piedmont Aviation Inc. Series I 9. 9 5 0 11 / 0 8 / 1 0 PI D M . K F Piedmont Aviation Inc. Series H 10 . 0 0 0 11 / 0 8 / 1 1 Ad v e r t i s i n g PI D M . K G Piedmont Aviation Inc. Series I 10 . 0 0 0 11 / 0 8 / 1 1 Continuing Education PI D M . K H Piedmont Aviation Inc. Series H 10 . 0 0 0 11 / 0 8 / 1 2 PI D M . K I Piedmont Aviation Inc. Series I 10 . 0 0 0 11 / 0 8 / 1 2 Corporate Finance PI D M . K J Piedmont Aviation Inc. Series J 9. 8 0 0 05 / 1 3 / 9 9 Government Securities PI D M . K K Piedmont Aviation Inc. Series K 9. 8 0 0 05 / 1 3 / 9 9 In s t i t u t i o n a l PI D M . K L Piedmont Aviation Inc. Series J 9. 8 5 0 05 / 1 3 / 0 0 PI D M . K M Piedmont Aviation Inc. Series K 9. 8 5 0 05 / 1 3 / 0 0 In s u r a n c e PI D M . K N Piedmont Aviation Inc. Series J 9. 9 0 0 05 / 1 3 / 0 1 Internal Audit PI D M . K O Piedmont Aviation Inc. Series K 9. 9 0 0 05 / 1 3 / 0 1 Legal & Compliance PI D M . K P Piedmont Aviation Inc. Series J 9. 9 0 0 05 / 1 3 / 0 2 PI D M . K Q Piedmont Aviation Inc. Series K 9. 9 0 0 05 / 1 3 / 0 2 Mu n i c i p a l PI D M . K R Piedmont Aviation Inc. Series J 9. 9 5 0 05 / 1 3 / 0 3 Mutual Fund PI D M . K S Piedmont Aviation Inc. Series K 9. 9 5 0 05 / 1 3 / 0 3 PI D M . K T Piedmont Aviation Inc. Series J 10 . 0 0 0 05 / 1 3 / 0 4 Op e r a t i o n s PI D M . K U Piedmont Aviation Inc. Series K 10 . 0 0 0 05 / 1 3 / 0 4 Op t i o n s PI D M . K V Piedmont Aviation Inc. Series J 10 . 0 5 0 05 / 1 3 / 0 5 Registered Representatives PI D M . K W Piedmont Aviation Inc. Series K 10 . 0 5 0 05 / 1 3 / 0 5 PI D M . K X Piedmont Aviation Inc. Series J 10 . 1 0 0 05 / 1 3 / 0 7 Re g i s t r a t i o n PI D M . K Y Piedmont Aviation Inc. Series K 10 . 1 0 0 05 / 1 3 / 0 7 Re s e a r c h PI D M . K Z Piedmont Aviation Inc. Series J 10 . 1 0 0 05 / 1 3 / 0 8 Sy n d i c a t e PI D M . L A Piedmont Aviation Inc. Series K 10 . 1 0 0 05 / 1 3 / 0 8 PI D M . L B Piedmont Aviation Inc. Series J 10 . 1 0 0 05 / 1 3 / 0 9 Sy s t e m s PI D M . L C Piedmont Aviation Inc. Series K 10 . 1 0 0 05 / 1 3 / 0 9 Tr a d i n g PI D M . L D Piedmont Aviation Inc. Series J 10 . 1 5 0 05 / 1 3 / 1 0 PI D M . L E Piedmont Aviation Inc. Series K 10 . 1 5 0 05 / 1 3 / 1 0 Tr a i n i n g PI D M . L F Piedmont Aviation Inc. Series J 10 . 1 5 0 05 / 1 3 / 1 1 Variable Contracts PI D M . L G Piedmont Aviation Inc. Series K 10 . 1 5 0 05 / 1 3 / 1 1 PI D M . L H Piedmont Aviation Inc. Series J 10 . 2 0 0 05 / 1 3 / 1 2 PI M O . G A Primeco Inc. 12 . 7 5 0 03 / 0 1 / 0 5

NASD Notice to Members 99-19 Feb ru a r y 1999 105 Sy m b o l Na m e Co u p o n Ma t u r i t y

PR S . G B Presidio Oil Inc. 11 . 5 0 0 09 / 1 5 / 0 0 PU S M . G A Purity Supreme Inc. Series B 11 . 7 5 0 08 / 0 1 / 9 9 RC E O . G A Robertson-Ceco Corp. 12 . 0 0 0 11 / 3 0 / 9 9 RD F L . G A RailRoad Financial Corp. 10 . 0 0 0 01 / 3 1 / 9 9 RD N H . G B Radnor Holdings Inc. Series B 10 . 0 0 0 12 / 0 1 / 0 3 RE V I . G B Reeves Industries Inc. 11 . 0 0 0 01 / 1 5 / 0 2 RI C P . G A Riggs Capital Trust II 8. 8 7 5 03 / 1 5 / 2 7 RM G Y . G A Ram Energy Inc. 11 . 5 0 0 02 / 1 5 / 0 8 RV D U . G A Reeves Industries Inc. 13 . 0 0 0 11 / 1 5 / 0 4 SA T H . G A Shop at Home Inc. 11 . 0 0 0 04 / 0 1 / 0 5 SB D U . G A Signature Brands USA Inc. 13 . 0 0 0 08 / 1 5 / 0 2 SC O P . G A SCM Corp. 13 . 0 0 0 01 / 1 5 / 0 8 SE L O . G B Selmer Co. Inc. 11 . 0 0 0 06 / 3 0 / 0 0 SE L O . G C Selmer Co. Inc. 10 . 9 2 0 06 / 3 0 / 0 0 SF X B . G C SFX Broadcasting Inc. 11 . 3 7 5 10 / 0 1 / 0 0 SH G . G A Sun Healthcare Group Inc. Series B 9. 5 0 0 07 / 0 1 / 0 7 SL R P . G A Sellco Corp. 12 . 0 0 0 12 / 1 5 / 0 4 SL T . G B Salant Corp. 10 . 5 0 0 12 / 3 1 / 9 8 SL T F . G C Specialty Foods Acq Corp. Series B 11 . 2 5 0 08 / 1 5 / 0 3 SM D U . G A Smith Food & Drug Ctrs Inc. Series 94A2 8. 6 4 0 07 / 0 2 / 1 2 SM D U . G B Smith Food & Drug Ctrs Inc. Series 94A3 9. 2 0 0 07 / 0 2 / 1 8 SM F D . G A Smiths Food & Drug Ctrs Inc. 11 . 2 5 0 05 / 1 5 / 0 7 SM K G . G A Supermarkets General Holdings Co r p . 11 . 6 2 5 06 / 1 5 / 0 2 SN G Y . G B Synergy Group Inc. 9. 5 0 0 09 / 1 5 / 0 0 SN S A . G A Statia Terminals Inc. Series B 11 . 7 5 0 11 / 1 5 / 0 3 SP R T . G B Sprint Spectrum LP 11 . 0 0 0 08 / 1 5 / 0 6 SR E T . G C Specialty Retailers Inc. Series B 11 . 0 0 0 08 / 1 5 / 0 3 ST W . G A Standard Commercial Corp. 8. 8 7 5 08 / 0 1 / 0 5 TB A G . G A 3 Bealls Holdings Corp. 12 . 0 0 0 12 / 3 1 / 0 2 TD H C . G B Thermadyne Holdings Corp. 10 . 7 5 0 11 / 0 1 / 0 3 TL L P . G D Toll Corp. 7. 7 5 0 09 / 1 5 / 0 7 TR H G . G A Trump Holdings & Funding 15 . 5 0 0 06 / 1 5 / 0 5 TR L Y . G A Trans-Lux Corp. 9. 5 0 0 12 / 0 1 / 1 2 TT G . G A Transtexas Gas Corp. Series D 13 . 7 5 0 12 / 3 1 / 0 1 TU B C . G B Tuboscope Inc. 10 . 7 5 0 04 / 1 5 / 0 3 TX F . G C Te x fi Industries Inc. Series C 13 . 0 0 0 04 / 0 1 / 0 0 TY V T . G A Taylor Investment Corp. 11 . 0 0 0 01 / 0 1 / 0 1 UA T S . G A United Artists Theater Co. Series 95-A 9. 3 0 0 07 / 0 1 / 1 5 UC . G D United Cos Financial Corp. 7. 7 0 0 01 / 1 5 / 0 4 UL M E . G A Ultimate Electronics Inc. 10 . 2 5 0 01 / 3 1 / 0 5 US A R . G D US Air Inc. Series A 10 . 2 5 0 01 / 1 5 / 9 9 US A R . G E US Air Inc. Series B 10 . 2 5 0 01 / 1 5 / 9 9 US A R . G F US Air Inc. Series C 10 . 2 5 0 01 / 1 5 / 9 9 US A R . G G US Air Inc. Series D 10 . 2 5 0 01 / 1 5 / 9 9 US A R . G H US Air Inc. Series E 10 . 2 5 0 01 / 1 5 / 9 9 US A R . G I US Air Inc. Series F 10 . 2 5 0 01 / 1 5 / 9 9

NASD Notice to Members 99-19 Feb ru a r y 1999 106 Sy m b o l Na m e Co u p o n Ma t u r i t y

US A R . G J US Air Inc. Series A 10 . 3 0 0 01 / 1 5 / 0 0 US A R . G K US Air Inc. Series B 10 . 3 0 0 01 / 1 5 / 0 0 US A R . G L US Air Inc. Series C 10 . 3 0 0 01 / 1 5 / 0 0 US A R . G M US Air Inc. Series D 10 . 3 0 0 01 / 1 5 / 0 0 US A R . G N US Air Inc. Series E 10 . 3 0 0 01 / 1 5 / 0 0 US A R . G O US Air Inc. Series F 10 . 3 0 0 01 / 1 5 / 0 0 US A R . G P US Air Inc. Series A 10 . 3 5 0 01 / 1 5 / 0 1 US A R . G Q US Air Inc. Series B 10 . 3 5 0 01 / 1 5 / 0 1 US A R . G R US Air Inc. Series C 10 . 3 5 0 01 / 1 5 / 0 1 US A R . G S US Air Inc. Series D 10 . 3 5 0 01 / 1 5 / 0 1 US A R . G T US Air Inc. Series E 10 . 3 5 0 01 / 1 5 / 0 1 US A R . G U US Air Inc. Series F 10 . 3 5 0 01 / 1 5 / 0 1 US A R . G V US Air Inc. Series A 10 . 4 0 0 01 / 1 5 / 0 2 US A R . G W US Air Inc. Series B 10 . 4 0 0 01 / 1 5 / 0 2 US A R . G X US Air Inc. Series C 10 . 4 0 0 01 / 1 5 / 0 2 US A R . G Y US Air Inc. Series D 10 . 4 0 0 01 / 1 5 / 0 2 US A R . G Z US Air Inc. Series E 10 . 4 0 0 01 / 1 5 / 0 2 US A R . H A US Air Inc. Series F 10 . 4 0 0 01 / 1 5 / 0 2 US A R . H B US Air Inc. Series A 10 . 4 5 0 01 / 1 5 / 0 3 US A R . H C US Air Inc. Series B 10 . 4 5 0 01 / 1 5 / 0 3 US A R . H D US Air Inc. Series C 10 . 4 5 0 01 / 1 5 / 0 3 US A R . H E US Air Inc. Series D 10 . 4 5 0 01 / 1 5 / 0 3 US A R . H F US Air Inc. Series E 10 . 4 5 0 01 / 1 5 / 0 3 US A R . H G US Air Inc. Series F 10 . 4 5 0 01 / 1 5 / 0 3 US A R . H H US Air Inc. Series A 10 . 5 0 0 01 / 1 5 / 0 4 US A R . H I US Air Inc. Series B 10 . 5 0 0 01 / 1 5 / 0 4 US A R . H J US Air Inc. Series C 10 . 5 0 0 01 / 1 5 / 0 4 US A R . H K US Air Inc. Series D 10 . 5 0 0 01 / 1 5 / 0 4 US A R . H L US Air Inc. Series E 10 . 5 0 0 01 / 1 5 / 0 4 US A R . H M US Air Inc. Series F 10 . 5 0 0 01 / 1 5 / 0 4 US A R . H N US Air Inc. Series A 10 . 5 5 0 01 / 1 5 / 0 5 US A R . H O US Air Inc. Series B 10 . 5 5 0 01 / 1 5 / 0 5 US A R . H P US Air Inc. Series C 10 . 5 5 0 01 / 1 5 / 0 5 US A R . H Q US Air Inc. Series D 10 . 5 5 0 01 / 1 5 / 0 5 US A R . H R US Air Inc. Series E 10 . 5 5 0 01 / 1 5 / 0 5 US A R . H S US Air Inc. Series F 10 . 5 5 0 01 / 1 5 / 0 5 US A R . H T US Air Inc. Series C 10 . 7 0 0 01 / 1 5 / 0 6 US A R . H U US Air Inc. Series D 10 . 7 0 0 01 / 1 5 / 0 6 US A R . H V US Air Inc. Series E 10 . 7 0 0 01 / 1 5 / 0 6 US A R . H W US Air Inc. Series F 10 . 7 0 0 01 / 1 5 / 0 6 US A R . H X US Air Inc. Series A 10 . 7 0 0 01 / 1 5 / 0 7 US A R . H Y US Air Inc. Series B 10 . 7 0 0 01 / 1 5 / 0 7 US A R . H Z US Air Inc. Series C 10 . 7 0 0 01 / 1 5 / 0 7 US A R . I A US Air Inc. Series D 10 . 7 0 0 01 / 1 5 / 0 7 US A R . I B US Air Inc. Series E 10 . 7 0 0 01 / 1 5 / 0 7 US A R . I C US Air Inc. Series F 10 . 7 0 0 01 / 1 5 / 0 7 US A R . I D US Air Inc. Series A 10 . 7 0 0 01 / 1 5 / 0 8 US A R . I E US Air Inc. Series B 10 . 7 0 0 01 / 1 5 / 0 8 US A R . I F US Air Inc. Series C 10 . 7 0 0 01 / 1 5 / 0 8 US A R . I G US Air Inc. Series D 10 . 7 0 0 01 / 1 5 / 0 8 US A R . I H US Air Inc. Series E 10 . 7 0 0 01 / 1 5 / 0 8 US A R . I I US Air Inc. Series F 10 . 7 0 0 01 / 1 5 / 0 8

NASD Notice to Members 99-19 Feb ru a r y 1999 107 Sy m b o l Na m e Co u p o n Ma t u r i t y

US A R . I J US Air Inc. Series A 10 . 7 5 0 01 / 1 5 / 0 9 US A R . I K US Air Inc. Series B 10 . 7 5 0 01 / 1 5 / 0 9 US A R . I L US Air Inc. Series C 10 . 7 5 0 01 / 1 5 / 0 9 US A R . I M US Air Inc. Series D 10 . 7 5 0 01 / 1 5 / 0 9 US A R . I N US Air Inc. Series E 10 . 7 5 0 01 / 1 5 / 0 9 US A R . I O US Air Inc. Series F 10 . 7 5 0 01 / 1 5 / 0 9 US A R . I P US Air Inc. Series A 10 . 7 5 0 01 / 1 5 / 1 0 US A R . I Q US Air Inc. Series B 10 . 7 5 0 01 / 1 5 / 1 0 US A R . I R US Air Inc. Series C 10 . 7 5 0 01 / 1 5 / 1 0 US A R . I S US Air Inc. Series D 10 . 7 5 0 01 / 1 5 / 1 0 US A R . I T US Air Inc. Series E 10 . 7 5 0 01 / 1 5 / 1 0 US A R . I U US Air Inc. Series F 10 . 7 5 0 01 / 1 5 / 1 0 US A R . I V US Air Inc. Series A 10 . 7 5 0 01 / 1 5 / 1 1 US A R . I W US Air Inc. Series B 10 . 7 5 0 01 / 1 5 / 1 1 US A R . I X US Air Inc. Series F 10 . 7 5 0 01 / 1 5 / 1 1 US A R . I Y US Air Inc. Series 88-A 9. 7 0 0 01 / 1 5 / 9 9 US A R . I Z US Air Inc. Series 88-B 9. 7 0 0 01 / 1 5 / 9 9 US A R . J A US Air Inc. Series 88-C 9. 7 0 0 01 / 1 5 / 9 9 US A R . J B US Air Inc. Series 88-D 9. 7 0 0 01 / 1 5 / 9 9 US A R . J C US Air Inc. Series 88-A 9. 8 0 0 01 / 1 5 / 0 0 US A R . J D US Air Inc. Series 88-B 9. 8 0 0 01 / 1 5 / 0 0 US A R . J E US Air Inc. Series 88-C 9. 8 0 0 01 / 1 5 / 0 0 US A R . J F US Air Inc. Series 88-D 9. 8 0 0 01 / 1 5 / 0 0 US A R . J G US Air Inc. Series 88-A 9. 9 0 0 01 / 1 5 / 0 1 US A R . J H US Air Inc. Series 88-B 9. 9 0 0 01 / 1 5 / 0 1 US A R . J I US Air Inc. Series 88-C 9. 9 0 0 01 / 1 5 / 0 1 US A R . J J US Air Inc. Series 88-D 9. 9 0 0 01 / 1 5 / 0 1 US A R . J K US Air Inc. Series 88-A 10 . 0 0 0 01 / 1 5 / 0 2 US A R . J L US Air Inc. Series 88-B 10 . 0 0 0 01 / 1 5 / 0 2 US A R . J M US Air Inc. Series 88-C 10 . 0 0 0 01 / 1 5 / 0 2 US A R . J N US Air Inc. Series 88-D 10 . 0 0 0 01 / 1 5 / 0 2 US A R . J O US Air Inc. Series 88-A 10 . 0 5 0 01 / 1 5 / 0 3 US A R . J P US Air Inc. Series 88-B 10 . 0 5 0 01 / 1 5 / 0 3 US A R . J Q US Air Inc. Series 88-C 10 . 0 5 0 01 / 1 5 / 0 3 US A R . J R US Air Inc. Series 88-D 10 . 0 5 0 01 / 1 5 / 0 3 US A R . J S US Air Inc. Series 88-A 10 . 1 5 0 01 / 1 5 / 0 4 US A R . J T US Air Inc. Series 88-B 10 . 1 5 0 01 / 1 5 / 0 4 US A R . J U US Air Inc. Series 88-C 10 . 1 5 0 01 / 1 5 / 0 4 US A R . J V US Air Inc. Series 88-D 10 . 1 5 0 01 / 1 5 / 0 4 US A R . J W US Air Inc. Series 88-A 10 . 2 0 0 01 / 1 5 / 0 5 US A R . J X US Air Inc. Series 88-B 10 . 2 0 0 01 / 1 5 / 0 5 US A R . J Y US Air Inc. Series 88-C 10 . 2 0 0 01 / 1 5 / 0 5 US A R . J Z US Air Inc. Series 88-D 10 . 2 0 0 01 / 1 5 / 0 5 US A R . K A US Air Inc. Series 88-A 10 . 2 5 0 01 / 1 5 / 0 7 US A R . K B US Air Inc. Series 88-B 10 . 2 5 0 01 / 1 5 / 0 7 US A R . K C US Air Inc. Series 88-C 10 . 2 5 0 01 / 1 5 / 0 7 US A R . K D US Air Inc. Series 88-D 10 . 2 5 0 01 / 1 5 / 0 7 US A R . K E US Air Inc. Series 88-A 10 . 3 0 0 07 / 1 5 / 0 8 US A R . K F US Air Inc. Series 88-B 10 . 3 0 0 07 / 1 5 / 0 8 US A R . K G US Air Inc. Series 88-C 10 . 3 0 0 07 / 1 5 / 0 8 US A R . K H US Air Inc. Series 88-D 10 . 3 0 0 07 / 1 5 / 0 8 US A R . K I US Air Inc. Series 88-A 10 . 3 0 0 07 / 1 5 / 0 9

NASD Notice to Members 99-19 Feb ru a r y 1999 108 Sy m b o l Na m e Co u p o n Ma t u r i t y

US A R . K J US Air Inc. Series 88-B 10 . 3 0 0 07 / 1 5 / 0 9 US A R . K K US Air Inc. Series 88-C 10 . 3 0 0 07 / 1 5 / 0 9 US A R . K L US Air Inc. Series 88-D 10 . 3 0 0 07 / 1 5 / 0 9 US A R . K M US Air Inc. Series 88-A 10 . 3 0 0 07 / 1 5 / 1 0 US A R . K N US Air Inc. Series 88-B 10 . 3 0 0 07 / 1 5 / 1 0 US A R . K O US Air Inc. Series 88-C 10 . 3 0 0 07 / 1 5 / 1 0 US A R . K P US Air Inc. Series 88-D 10 . 3 0 0 07 / 1 5 / 1 0 US A R . K Q US Air Inc. Series 88-A 10 . 3 0 0 01 / 1 5 / 0 8 US A R . K R US Air Inc. Series 88-B 10 . 3 0 0 01 / 1 5 / 0 8 US A R . K S US Air Inc. Series 88-C 10 . 3 0 0 01 / 1 5 / 0 8 US A R . K T US Air Inc. Series 88-D 10 . 3 0 0 01 / 1 5 / 0 8 US A R . K U US Air Inc. Series 88-E 10 . 5 0 0 01 / 1 5 / 9 9 US A R . K V US Air Inc. Series 88-F 10 . 5 0 0 01 / 0 1 / 9 9 US A R . K W US Air Inc. Series 88-G 10 . 5 0 0 01 / 0 1 / 9 9 US A R . K X US Air Inc. Series 88-H 10 . 5 0 0 01 / 0 1 / 9 9 US A R . K Y US Air Inc. Series 88-I 10 . 5 0 0 01 / 0 1 / 9 9 US A R . K Z US Air Inc. Series 88-J 10 . 5 0 0 01 / 0 1 / 9 9 US A R . L C US Air Inc. Series 88-E 10 . 5 5 0 01 / 0 1 / 0 0 US A R . L D US Air Inc. Series 88-F 10 . 5 5 0 01 / 0 1 / 0 0 US A R . L E US Air Inc. Series 88-G 10 . 5 5 0 01 / 0 1 / 0 0 US A R . L F US Air Inc. Series 88-H 10 . 5 5 0 01 / 0 1 / 0 0 US A R . L G US Air Inc. Series 88-I 10 . 5 5 0 01 / 0 1 / 0 0 US A R . L H US Air Inc. Series 88-J 10 . 5 5 0 01 / 0 1 / 0 0 US A R . L I US Air Inc. Series 88-K 10 . 5 5 0 01 / 0 1 / 0 0 US A R . L J US Air Inc. Series 88-L 10 . 5 5 0 01 / 0 1 / 0 0 US A R . L K US Air Inc. Series 88-E 10 . 6 0 0 01 / 0 1 / 0 1 US A R . L L US Air Inc. Series 88-F 10 . 6 0 0 01 / 0 1 / 0 1 US A R . L M US Air Inc. Series 88-G 10 . 6 0 0 01 / 0 1 / 0 1 US A R . L N US Air Inc. Series 88-H 10 . 6 0 0 01 / 0 1 / 0 1 US A R . L O US Air Inc. Series 88-I 10 . 6 0 0 01 / 0 1 / 0 1 US A R . L P US Air Inc. Series 88-J 10 . 6 0 0 01 / 0 1 / 0 1 US A R . L Q US Air Inc. Series 88-K 10 . 6 0 0 01 / 0 1 / 0 1 US A R . L R US Air Inc. Series 88-L 10 . 6 0 0 01 / 0 1 / 0 1 US A R . L S US Air Inc. Series 88-E 10 . 6 0 0 01 / 0 1 / 0 2 US A R . L T US Air Inc. Series 88-F 10 . 7 0 0 01 / 0 1 / 0 2 US A R . L U US Air Inc. Series 88-G 10 . 7 0 0 01 / 0 1 / 0 2 US A R . L V US Air Inc. Series 88-H 10 . 7 0 0 01 / 0 1 / 0 2 US A R . L W US Air Inc. Series 88-I 10 . 7 0 0 01 / 0 1 / 0 2 US A R . L X US Air Inc. Series 88-J 10 . 7 0 0 01 / 0 1 / 0 2 US A R . L Y US Air Inc. Series 88-K 10 . 7 0 0 01 / 0 1 / 0 2 US A R . L Z US Air Inc. Series 88-L 10 . 7 0 0 01 / 0 1 / 0 2 US A R . M A US Air Inc. Series 88-E 10 . 7 0 0 01 / 0 1 / 0 3 US A R . M B US Air Inc. Series 88-F 10 . 7 0 0 01 / 0 1 / 0 3 US A R . M C US Air Inc. Series 88-G 10 . 7 0 0 01 / 0 1 / 0 3 US A R . M D US Air Inc. Series 88-H 10 . 7 0 0 01 / 0 1 / 0 3 US A R . M E US Air Inc. Series 88-I 10 . 7 0 0 01 / 0 1 / 0 3 US A R . M F US Air Inc. Series 88-J 10 . 7 0 0 01 / 0 1 / 0 3 US A R . M G US Air Inc. Series 88-K 10 . 7 0 0 01 / 0 1 / 0 3 US A R . M H US Air Inc. Series 88-L 10 . 7 0 0 01 / 0 1 / 0 3 US A R . M I US Air Inc. Series 88-E 10 . 7 5 0 01 / 0 1 / 0 4 US A R . M J US Air Inc. Series 88-F 10 . 7 5 0 01 / 0 1 / 0 4 US A R . M K US Air Inc. Series 88-G 10 . 7 5 0 01 / 0 1 / 0 4

NASD Notice to Members 99-19 Feb ru a r y 1999 109 Sy m b o l Na m e Co u p o n Ma t u r i t y

US A R . M L US Air Inc. Series 88-H 10 . 7 5 0 01 / 0 1 / 0 4 US A R . M M US Air Inc. Series 88-I 10 . 7 5 0 01 / 0 1 / 0 4 US A R . M N US Air Inc. Series 88-J 10 . 7 5 0 01 / 0 1 / 0 4 US A R . M O US Air Inc. Series 88-K 10 . 7 5 0 01 / 0 1 / 0 4 US A R . M P US Air Inc. Series 88-L 10 . 7 5 0 01 / 0 1 / 0 4 US A R . M Q US Air Inc. Series 88-E 10 . 8 0 0 01 / 0 1 / 0 5 US A R . M R US Air Inc. Series 88-F 10 . 8 0 0 01 / 0 1 / 0 5 US A R . M S US Air Inc. Series 88-G 10 . 8 0 0 01 / 0 1 / 0 5 US A R . M T US Air Inc. Series 88-H 10 . 8 0 0 01 / 0 1 / 0 5 US A R . M U US Air Inc. Series 88-I 10 . 8 0 0 01 / 0 1 / 0 5 US A R . M V US Air Inc. Series 88-J 10 . 8 0 0 01 / 0 1 / 0 5 US A R . M W US Air Inc. Series 88-K 10 . 8 0 0 01 / 0 1 / 0 5 US A R . M X US Air Inc. Series 88-L 10 . 8 0 0 01 / 0 1 / 0 5 US A R . M Y US Air Inc. Series 88-E 10 . 8 5 0 01 / 0 1 / 0 6 US A R . M Z US Air Inc. Series 88-F 10 . 8 5 0 01 / 0 1 / 0 6 US A R . N A US Air Inc. Series 88-G 10 . 8 5 0 01 / 0 1 / 0 6 US A R . N B US Air Inc. Series 88-H 10 . 8 5 0 01 / 0 1 / 0 6 US A R . N C US Air Inc. Series 88-I 10 . 8 5 0 01 / 0 1 / 0 6 US A R . N D US Air Inc. Series 88-J 10 . 8 5 0 01 / 0 1 / 0 6 US A R . N E US Air Inc. Series 88-K 10 . 8 5 0 01 / 0 1 / 0 6 US A R . N F US Air Inc. Series 88-L 10 . 8 5 0 01 / 0 1 / 0 6 US A R . N G US Air Inc. Series 88-E 10 . 8 5 0 01 / 0 1 / 0 7 US A R . N H US Air Inc. Series 88-F 10 . 8 5 0 01 / 0 1 / 0 7 US A R . N I US Air Inc. Series 88-G 10 . 8 5 0 01 / 0 1 / 0 7 US A R . N J US Air Inc. Series 88-H 10 . 8 5 0 01 / 0 1 / 0 7 US A R . N K US Air Inc. Series 88-I 10 . 8 5 0 01 / 0 1 / 0 7 US A R . N L US Air Inc. Series 88-J 10 . 8 5 0 01 / 0 1 / 0 7 US A R . N M US Air Inc. Series 88-K 10 . 8 5 0 01 / 0 1 / 0 7 US A R . N N US Air Inc. Series 88-L 10 . 8 5 0 01 / 0 1 / 0 7 US A R . N O US Air Inc. Series 88-E 10 . 9 0 0 01 / 0 1 / 0 8 US A R . N P US Air Inc. Series 88-F 10 . 9 0 0 01 / 0 1 / 0 8 US A R . N Q US Air Inc. Series 88-G 10 . 9 0 0 01 / 0 1 / 0 8 US A R . N R US Air Inc. Series 88-H 10 . 9 0 0 01 / 0 1 / 0 8 US A R . N S US Air Inc. Series 88-I 10 . 9 0 0 01 / 0 1 / 0 8 US A R . N T US Air Inc. Series 88-J 10 . 9 0 0 01 / 0 1 / 0 8 US A R . N U US Air Inc. Series 88-K 10 . 9 0 0 01 / 0 1 / 0 8 US A R . N V US Air Inc. Series 88-L 10 . 9 0 0 01 / 0 1 / 0 8 US A R . N W US Air Inc. Series 88-E 10 . 9 0 0 01 / 0 1 / 0 9 US A R . N X US Air Inc. Series 88-F 10 . 9 0 0 01 / 0 1 / 0 9 US A R . N Y US Air Inc. Series 88-G 10 . 9 0 0 01 / 0 1 / 0 9 US A R . N Z US Air Inc. Series 88-H 10 . 9 0 0 01 / 0 1 / 0 9 US A R . O A US Air Inc. Series 88-I 10 . 9 0 0 01 / 0 1 / 0 9 US A R . O B US Air Inc. Series 88-J 10 . 9 0 0 01 / 0 1 / 0 9 US A R . O C US Air Inc. Series 88-K 10 . 9 0 0 01 / 0 1 / 0 9 US A R . O D US Air Inc. Series 88-L 10 . 9 0 0 01 / 0 1 / 0 9 US A R . O E US Air Inc. Series 88-E 10 . 9 0 0 01 / 0 1 / 1 0 US A R . O F US Air Inc. Series 88-F 10 . 9 0 0 01 / 0 1 / 1 0 US A R . O G US Air Inc. Series 88-G 10 . 9 0 0 01 / 0 1 / 1 0 US A R . O H US Air Inc. Series 88-H 10 . 9 0 0 01 / 0 1 / 1 0 US A R . O I US Air Inc. Series 88-I 10 . 9 0 0 01 / 0 1 / 1 0 US A R . O J US Air Inc. Series 88-J 10 . 9 0 0 01 / 0 1 / 1 0 US A R . O K US Air Inc. Series 88-K 10 . 9 0 0 01 / 0 1 / 1 0

NASD Notice to Members 99-19 Feb ru a r y 1999 110 Sy m b o l Na m e Co u p o n Ma t u r i t y

US A R . O L US Air Inc. Series 88-L 10 . 9 0 0 01 / 0 1 / 1 0 US A R . O M US Air Inc. Series 88-B 10 . 1 8 0 06 / 2 7 / 9 9 US A R . O N US Air Inc. Series 88-C 10 . 1 8 0 06 / 2 7 / 9 9 US A R . O O US Air Inc. Series 88-A 10 . 1 8 0 06 / 2 7 / 9 9 US A R . O P US Air Inc. Series 88-D 10 . 1 8 0 06 / 2 7 / 9 9 US A R . O Q US Air Inc. Series 88-C 10 . 2 3 0 06 / 2 7 / 0 0 US A R . O R US Air Inc. Series 88-A 10 . 2 3 0 06 / 2 7 / 0 0 US A R . O S US Air Inc. Series 88-B 10 . 2 3 0 06 / 2 7 / 0 0 US A R . O T US Air Inc. Series 88-D 10 . 2 3 0 06 / 2 7 / 0 0 US A R . O U US Air Inc. Series 88-C 10 . 2 3 0 06 / 2 7 / 0 1 US A R . O V US Air Inc. Series 88-A 10 . 2 3 0 06 / 2 7 / 0 1 US A R . O W US Air Inc. Series 88-B 10 . 2 3 0 06 / 2 7 / 0 1 US A R . O X US Air Inc. Series 88-D 10 . 2 8 0 06 / 2 7 / 0 1 US A R . O Y US Air Inc. Series 88-C 10 . 3 3 0 06 / 2 7 / 0 2 US A R . O Z US Air Inc. Series 88-A 10 . 3 3 0 06 / 2 7 / 0 2 US A R . P A US Air Inc. Series 88-B 10 . 3 3 0 06 / 2 7 / 0 2 US A R . P B US Air Inc. Series 88-D 10 . 3 3 0 06 / 2 7 / 0 2 US A R . P C US Air Inc. Series 88-C 10 . 3 8 0 06 / 2 7 / 0 3 US A R . P D US Air Inc. Series 88-A 10 . 3 8 0 06 / 2 7 / 0 3 US A R . P E US Air Inc. Series 88-B 10 . 3 8 0 06 / 2 7 / 0 3 US A R . P F US Air Inc. Series 88-D 10 . 3 8 0 06 / 2 7 / 0 3 US A R . P G US Air Inc. Series 88-C 10 . 4 3 0 06 / 2 7 / 0 4 US A R . P H US Air Inc. Series 88-A 10 . 4 3 0 06 / 2 7 / 0 4 US A R . P I US Air Inc. Series 88-B 10 . 4 3 0 06 / 2 7 / 0 4 US A R . P J US Air Inc. Series 88-D 10 . 4 3 0 06 / 2 7 / 0 4 US A R . P K US Air Inc. Series 88-C 10 . 4 9 0 06 / 2 7 / 0 5 US A R . P L US Air Inc. Series 88-A 10 . 4 9 0 06 / 2 7 / 0 5 US A R . P M US Air Inc. Series 88-B 10 . 4 9 0 06 / 2 7 / 0 5 US A R . P N US Air Inc. Series 88-D 10 . 4 9 0 06 / 2 7 / 0 5 US A R . P O US Air Inc. Series 88-C 10 . 5 5 0 06 / 2 7 / 0 6 US A R . P P US Air Inc. Series 88-A 10 . 5 5 0 06 / 2 7 / 0 6 US A R . P Q US Air Inc. Series 88-B 10 . 5 5 0 06 / 2 7 / 0 6 US A R . P R US Air Inc. Series 88-D 10 . 5 5 0 06 / 2 7 / 0 6 US A R . P S US Air Inc. Series 88-A 10 . 6 1 0 06 / 2 7 / 0 7 US A R . P T US Air Inc. Series 88-C 10 . 6 1 0 06 / 2 7 / 0 7 US A R . P U US Air Inc. Series 88-B 10 . 6 1 0 06 / 2 7 / 0 7 US A R . P V US Air Inc. Series 88-D 10 . 6 1 0 06 / 2 7 / 0 7 US A R . P W US Air Inc. Series 88-A 10 . 6 8 0 06 / 2 7 / 0 8 US A R . P X US Air Inc. Series 88-C 10 . 6 8 0 06 / 2 7 / 0 8 US A R . P Y US Air Inc. Series 88-B 10 . 6 8 0 06 / 2 7 / 0 8 US A R . P Z US Air Inc. Series 88-D 10 . 6 8 0 06 / 2 7 / 0 8 US A R . Q A US Air Inc. Series 88-A 10 . 7 6 0 06 / 2 7 / 0 9 US A R . Q B US Air Inc. Series 88-B 10 . 7 6 0 06 / 2 7 / 0 9 US A R . Q C US Air Inc. Series 88-D 10 . 7 6 0 06 / 2 7 / 0 9 US A R . Q D US Air Inc. Series 88-A 10 . 7 6 0 06 / 2 7 / 1 0 US A R . Q E US Air Inc. Series 88-B 10 . 7 6 0 06 / 2 7 / 1 0 US A R . Q F US Air Inc. Series 88-C 10 . 7 6 0 06 / 2 7 / 1 0 US A R . Q G US Air Inc. Series 88-D 10 . 7 6 0 06 / 2 7 / 1 0 US A R . Q H US Air Inc. Series 88-A 10 . 7 6 0 06 / 2 7 / 1 1 US A R . Q I US Air Inc. Series 88-B 10 . 7 6 0 06 / 2 7 / 1 1 US A R . Q J US Air Inc. Series 88-C 10 . 7 6 0 06 / 2 7 / 1 1 US A R . Q K US Air Inc. Series 88-D 10 . 7 6 0 06 / 2 7 / 1 1

NASD Notice to Members 99-19 Feb ru a r y 1999 111 Sy m b o l Na m e Co u p o n Ma t u r i t y

US A R . Q L US Air Inc. Series 88-C 10 . 7 6 0 06 / 2 7 / 1 2 US A R . Q M US Air Inc. Series 88-C 10 . 7 6 0 06 / 2 7 / 1 3 US A R . Q N US Air Inc. Series 89A1 9. 3 3 0 01 / 0 1 / 0 6 US A R . Q O US Air Inc. Series 89A2 9. 8 2 0 01 / 0 1 / 1 3 US A R . Q P US Air Inc. Series 90A1 11 . 2 0 0 03 / 1 9 / 0 5 US A R . Q Q US Air Inc. Series 90A2 11 . 3 5 0 03 / 1 9 / 1 4 US A R . Q R US Air Inc. Series 93A2 9. 6 2 5 09 / 0 1 / 0 3 US A R . Q S US Air Inc. Series 93A3 10 . 3 7 5 03 / 0 1 / 1 3 UX V T . G A Unifrax Investment Corp. 10 . 5 0 0 11 / 0 1 / 0 3 WC I I . G D Winstar Communications Inc. 10 . 0 0 0 03 / 1 5 / 0 8 WC I I . G E Winstar Communications Inc. 11 . 0 0 0 03 / 1 5 / 0 8

As of December 22, 1998, the following bonds were deleted from FIPS.

Sy m b o l Na m e Co u p o n Ma t u r i t y

AE N . G B AMC Entertainment Inc. 12 . 6 2 5 07 / 1 5 / 0 2 AN C P . G D Anacomp Inc. 10 . 8 7 5 04 / 0 1 / 0 4 CC I R . G A CCI Corp. 12 . 7 5 0 12 / 1 5 / 0 3 CC I R . G A CCI Corp. 12 . 7 5 0 12 / 1 5 / 9 8 CV X P . G C Cleveland Elec Illum Co. 8. 3 7 5 12 / 0 1 / 1 1 EE . G A El Paso Electric Co. 7. 2 5 0 02 / 0 1 / 9 9 EN V I . G A Envirotest Systems Corp. 9. 6 2 5 04 / 0 1 / 0 3 EN V I . G B Envirotest Systems Corp. 9. 1 2 5 03 / 1 5 / 0 1 GP A D . G A GPA Delaware Inc. 8. 7 5 0 12 / 1 5 / 0 3 GP A D . G A GPA Delaware Inc. 8. 7 5 0 12 / 1 5 / 9 8 HA V A . G A Harvard Industries Inc. 12 . 0 0 07 / 1 5 / 0 4 HA V A . G C Harvard Industries Inc. 11 . 1 2 5 08 / 0 1 / 0 5 HH I . G B Home Holdings Inc. 7. 7 5 0 12 / 1 5 / 0 3 HH I . G B Home Holding Inc. 7. 7 5 0 12 / 1 5 / 9 8 IB U I . G A Intl Business Interiors Corp. 14 . 2 5 0 12 / 1 5 / 0 3 IB U I . G A Intl Business Interiors Corp. 14 . 2 5 0 12 / 1 5 / 9 8 KO B . G A Coca Cola Bottling Group SW Inc. 9. 0 0 0 11 / 1 5 / 0 3 MB C A . G B Metropolitan Broadcasting Corp. 13 . 2 5 0 09 / 3 0 / 0 6 MB N . G A MBNA Capital I 8. 2 7 8 12 / 0 1 / 2 6 MB N . G B MBNA Capital I 6. 4 8 7 02 / 0 1 / 2 7 NV R . G A NVR Inc. 11 . 0 0 0 04 / 1 5 / 0 3 PH O . G A People’s Telephone Co. Inc. 12 . 2 5 0 07 / 1 5 / 0 2 PI D M . G A Piedmont Aviation Series A 9. 7 0 0 01 / 1 5 / 9 9 PI D M . G B Piedmont Aviation Series B 9. 7 0 0 01 / 1 5 / 9 9 PI D M . G C Piedmont Aviation Series C 9. 7 0 0 01 / 1 5 / 9 9 PL S T . G A Plastic Specialties & Tech Inc. 11 . 2 5 0 12 / 0 1 / 0 3 SK L E . G A Safety Kleen Corp. 9. 2 5 0 09 / 1 5 / 9 9 SL B C . G A Sullivan Broadcasting Inc. 9. 6 2 5 12 / 1 5 / 0 3 SP E Q . G A Specialty Equip Cos Inc. 11 . 3 7 5 12 / 0 1 / 0 3 SP R T . G A Sprint Spectrum LP 12 . 5 0 0 08 / 1 5 / 0 6 TE X N . G E Texas New Mexico Power Co. 12 . 5 0 0 01 / 1 5 / 9 9 TN C . G A Town & Country Corp. 13 . 0 0 0 05 / 3 1 / 9 8 TU B C . G B Tuboscope Inc. 10 . 7 5 0 04 / 1 5 / 0 3 US A R . G D US Air Inc. Series A 10 . 2 5 01 / 1 5 / 9 9

NASD Notice to Members 99-19 Feb ru a r y 1999 112 Sy m b o l Na m e Co u p o n Ma t u r i t y

US A R . G E US Air Inc. Series B 10 . 2 5 01 / 1 5 / 9 9 US A R . G F US Air Inc. Series C 10 . 2 5 01 / 1 5 / 9 9 US A R . G G US Air Inc. Series D 10 . 2 5 01 / 1 5 / 9 9 US A R . G H US Air Inc. Series E 10 . 2 5 01 / 1 5 / 9 9 US A R . G I US Air Inc. Series F 10 . 2 5 01 / 1 5 / 9 9 US A R . I Y US Air Inc. Series 88-A 9. 7 0 01 / 1 5 / 9 9 US A R . I Z US Air Inc. Series 88-B 9. 7 0 01 / 1 5 / 9 9 US A R . J A US Air Inc. Series 88-C 9. 7 0 01 / 1 5 / 9 9 US A R . J B US Air Inc. Series 88-D 9. 7 0 01 / 1 5 / 9 9 US A R . K U US Air Inc. Series 88-E 10 . 5 0 0 01 / 1 5 / 9 9 US A R . K V US Air Inc. Series 88-F 10 . 5 0 0 01 / 0 1 / 9 9 US A R . K W US Air Inc. Series 88-G 10 . 5 0 0 01 / 0 1 / 9 9 US A R . K X US Air Inc. Series 88-H 10 . 5 0 0 01 / 0 1 / 9 9 US A R . K Y US Air Inc. Series 88-I 10 . 5 0 0 01 / 0 1 / 9 9 US A R . K Z US Air Inc. Series 88-J 10 . 5 0 0 01 / 0 1 / 9 9

All bonds listed above are subject to trade-reporting requirements. Questions pertaining to FIPS trade-reporting rules should be directed to Stephen Simmes, Market Regulation, NASD RegulationSM , at (301) 590-6451.

Any questions regarding the FIPS master file should be directed to Cheryl Glowacki, Nasdaq¨ Market Operations, at (203) 385-6310.

© 1999, National Association of Securities Dealers, Inc. (NASD). All rights reserved.

NASD Notice to Members 99-19 Feb ru a r y 1999 113 NASD Regulation, Inc. (NASD variable annuities had been sold by Di s c i p l i n a r y Re g u l a t i o n SM ) has taken disciplinary another registered representative. actions against the following firms and individuals for violations of National Burton, however, shall not be Actions Association of Securities Dealers, Inc. required to serve the suspension, (N A S D ¨) rules; federal securities laws, having already served a 14-day rules, and regulations; and the rules of suspension in July 1996 imposed by the Municipal Securities Rulemaking his member firm based on the same Board (MSRB). Unless otherwise indi- co n d u c t . Di s c i p l i n a r y Actions cated, suspensions will begin with the Re p o r ted For Feb ru a r y opening of business on Tuesday, Firms And Individuals Fined February 16, 1999. The information Equity Programs Corporation (San relating to matters contained in this Diego, California) and Ba r t o n No t i c e is current as of the end of Jan- Basel Switzer (Registered Princi- uary 20, 1999. pal, Ramona, California) su b m i t t e d an Offer of Settlement pursuant to which they were censured and fine d Firm Fined, Individual $25,000, jointly and severally. With- Sanctioned out admitting or denying the allega- Ascend Financial Services, Inc. tions, the respondents consented to (St. Paul, Minnesota) and Ba r r y the described sanctions and to the Howard Burton (Registered entry of findings that the firm, acting Representative, Great Falls, through Switzer, failed to establish, Vi r g i n i a ) submitted Letters of maintain, and enforce a system rea- Acceptance, Waiver, and Consent sonably designed to achieve compli- pursuant to which the firm was ance with applicable securities laws censured and fined $20,000, and and regulations, and the rules of the Burton was censured, fined $5,000, NASD in order to supervise the activ- and suspended from association with ities of a branch office. The firm also any NASD member in any capacity knew, or should have known, that the for 14 days. Without admitting or branch office was offering and selling denying the allegations, the interests in a contingent offering. respondents consented to the described sanctions and to the entry Kennedy, Cabot & Co., (Beverly of findings that the firm allowed a Hills, California) and Ja m e s registered representative to sign a Dominic Toussaint (Registered variable annuity application as the Principal, Los Angeles, California) registered representative of record, submitted a Letter of Acceptance, falsely indicating that he had sold the Waiver, and Consent pursuant to investment, when, in fact, the which they were censured and fine d variable annuity had been sold by $25,000, jointly and severally, and another registered representative. the firm was fined an additional Moreover, the NASD found that the $2,000. Without admitting or denying firm accepted the variable annuity the allegations, the respondents con- application knowing that the sented to the described sanctions individual had never met with and/or and to the entry of findings that the discussed the variable annuity firm, acting through Toussaint, aired investment with the client. The television commercials concerning findings also stated that Burton registered investment companies, signed two variable annuities and failed to file the advertisements applications as the registered with the NASD’s Advertising Depart- representative of record, falsely ment. The findings also stated that indicating that he had sold the the firm, acting through Toussaint, investments, when, in fact, the engaged in communications to the

NASD Notices to Members—Disciplinary Actions Feb ru a r y 1999 115 public through television commer- Firms Fined reported transactions to the ACT in cials that failed to provide a sound Joseph Stevens & Company, Inc. violation of applicable securities laws basis for evaluating the facts in (New York, New York) submitted a and regulations regarding trade regard to the securities offered, and Letter of Acceptance, Waiver, and reporting. The findings also stated omitted material facts and qualifica - Consent pursuant to which the firm that the firm failed to preserve for a tions which, in light of the context of was censured and fined $38,393. period of not less than three years the material presented, caused the Without admitting or denying the alle- the memoranda of brokerage orders advertisements to be misleading. gations, the firm consented to the and failed to show the correct time of Moreover, the NASD found that the described sanctions and to the entry execution, or the time of execution, firm, acting through Toussaint, made of findings that it permitted a regis- on memoranda of brokerage orders. exaggerated and unwarranted tered person to continue to perform The firm also failed to establish, claims, and/or contained comparative duties as a registered person even maintain, and enforce adequate writ- references that were incomplete and though the person had not complied ten supervisory procedures reason- unbalanced. The NASD also deter- with the NASD continuing education ably designed to achieve compliance mined that the firm failed to establish, requirements. with the applicable securities laws, maintain, and enforce adequate pro- regulations, and rules regarding cedures to address the NASD’s fili n g M.H. Meyerson & Company, Inc. trade reporting and recordkeeping. requirements for mutual fund adver- (Jersey City, New Jersey) su b m i t - tisements, and to identify in its written ted a Letter of Acceptance, Waiver, W. J. Nolan & Company, Inc. (New supervisory procedures, a superviso- and Consent pursuant to which the York, New York) submitted a Letter ry principal responsible for communi- firm was censured and fine d of Acceptance, Waiver, and Consent cations with the public. $10,000. Without admitting or deny- pursuant to which the firm was cen- ing the allegations, the firm consent- sured and fined $5,000, jointly and Pellett Investments, Inc. (Missoula, ed to the described sanctions and to severally, with an individual, and Mo n t a n a ) and Ronald Neil Pellett the entry of findings that it reported required to disgorge $22,060 in (Registered Principal, Missoula, transactions to the Automated Confir- excessive markups to public cus- Mo n t a n a ) submitted a Letter of mation Transaction ServiceSM (A C T SM ) tomers. Should disgorgement pay- Acceptance, Waiver, and Consent in violation of applicable securities ments not be completed by a pursuant to which they were cen- laws and regulations regarding trade sp e c i fi ed time, the firm will be sus- sured and fined $10,000, jointly and reporting. The findings also stated pended until such time as such pay- severally. Without admitting or deny- that the firm failed to update its own ments have been completed. Without ing the allegations, the respondents quotation for broadcast orders into admitting or denying the allegations, consented to the described sanctions Se l e c t N e t SM immediately. Further- the firm consented to the described and to the entry of findings that the more, the firm failed to display cus- sanctions and to the entry of find i n g s firm, acting through Pellett, participat- tomer limit orders immediately when that, acting through an individual, it ed in contingent offerings of limited the orders were at a price that would effected municipal securities principal partnership interests and failed to have improved the firm’s bid or offer transactions at excessive markups. transmit funds received from in each security related to those investors to a proper escrow account orders, or when the full size of the William E. Simon & Sons Munici- as required by Securities and orders was priced equal to the firm ’ s pal Securities, Inc. (Morristown, Exchange Commission (SEC) Rule bid or offer and the national best bid New Jersey) submitted a Letter of 15c2-4(b). The findings also stated or offer and the orders represented Acceptance, Waiver, and Consent that the firm, acting through Pellett, more than a de minimis change in pursuant to which the firm was cen- failed to maintain records document- relation to the size associated with sured and fined $10,000. Without ing the completion of the continuing the firm’s bid or offer in each security. admitting or denying the allegations, education training plan for covered the firm consented to the described registered persons, and failed to Smith Barney, Inc. (New York, New sanctions and to the entry of find i n g s complete and implement a needs Yo r k ) submitted a Letter of Accep- that it made a $10,000 payment to a analysis and training plan for the tance, Waiver, and Consent pursuant member firm purportedly in connec- Continuing Education Firm Element. to which the firm was censured and tion with a municipal bond transac- fined $17,000. Without admitting or tion in the hope of developing a denying the allegations, the firm con- business relationship with the firm . sented to the described sanctions According to the findings, the respon- and to the entry of findings that it dent’s records regarding expenses

NASD Notices to Members—Disciplinary Actions Feb ru a r y 1999 116 for the transaction inaccurately capacity. Without admitting or deny- offering would be used to pay the re fl ected that $10,000 was paid to ing the allegations, Boliere consent- purchase price of real estate and the other firm in connection with that ed to the described sanctions and to of fi ce building improvements. The offering and its records regarding dis- the entry of findings that he failed to NASD found that Buob knew, or bursement of cash and debits for the respond to NASD requests for infor- should have known, that only transaction inaccurately reflected that mation. $64,399.43 of the necessary $10,000 was paid to the firm as man- $212,500 had been raised and, agement fees for that offering. Clyde Joseph Bruff (Registered therefore, the proceeds were insuffi- Principal, Oakland, California) wa s cient to pay the purchase price of Individuals Barred Or censured and barred from associa- such real estate and were instead Su s p e n d e d tion with any NASD member in any used to pay suppliers of goods or Craig Douglas Baker (Registered capacity. The SEC affirmed the sanc- services consumed or used by Buob Representative, West Jordan, tions following appeal of an August in the conduct of his business. Utah) submitted a Letter of Accep- 1997 National Business Conduct tance, Waiver, and Consent pursuant Committee (NBCC) decision. The Harvey Michael Burstein (Regis- to which he was censured, fine d sanctions were based on find i n g s tered Representative, Leawood, $12,250, and barred from association that Bruff exercised effective control Kansas) submitted a Letter of with any NASD member in any over the account of a public cus- Acceptance, Waiver, and Consent capacity. Without admitting or deny- tomer and made recommendations pursuant to which he was censured, ing the allegations, Baker consented to the customer that resulted in fined $57,100, and suspended from to the described sanctions and to the unsuitable excessive trading. association with any NASD member entry of findings that he intercepted in any capacity for one year. Without approximately $450 worth of gift cer- This action has been appealed to the admitting or denying the allegations, ti fi cates/checks intended to compen- Ninth Circuit Court of Appeals and Burstein consented to the described sate other employees for overtime the sanctions are not in effect pend- sanctions and to the entry of find i n g s they had earned, deposited the ing consideration of the appeal. that he engaged in outside business checks into his own bank account, activities for which he received com- and used the money for his personal John Milford Buob (Registered pensation and engaged in private use. Representative, Henderson, Neva- securities transactions without prior da ) submitted an Offer of Settlement written notice to, and approval from, Alfred Gerald Block (Registered pursuant to which he was censured his member firm . Principal, Livingston, New Jersey) and barred from association with any submitted an Offer of Settlement pur- NASD member in any capacity. With- Peter Thomas Chen (Registered suant to which he was censured, out admitting or denying the allega- Principal, Sayville, New York) wa s fined $2,500, and suspended from tions, Buob consented to the censured, fined $30,000, and barred acting as a principal for 30 days. described sanctions and to the entry from association with any NASD Without admitting or denying the alle- of findings that he participated in pri- member in any capacity. The sanc- gations, Block consented to the vate securities transactions and tions were based on findings that described sanctions and to the entry failed to provide prompt written notifi- Chen failed to respond to NASD of findings that he failed to have a cation to his member firm prior to requests for information and failed to financial and operations principal reg- participating in such transactions. appear for testimony. istered with the NASD at his member The findings also stated that, in con- firm, and as a result, he was respon- nection with the offer or sale of limit- Michael Henry Christ (Registered sible for the firm’s failure to file some ed partnership interests, Buob made Principal, Lynbrook, New York) of its FOCUS reports, to file some misrepresentations to investors and was censured, fined $50,000, and FOCUS reports in a timely manner, failed to return investor funds when barred from association with any and to file its annual audit report. the terms of the contingency were NASD member in any capacity. The not met. The findings also stated that sanctions were based on find i n g s Djoly Boliere (Associated Person, Buob recommended and induced that Christ failed to respond to NASD Stamford, Connecticut) su b m i t t e d public customers to purchase the requests for information. an Offer of Settlement pursuant to security by means of fraudulent and which he was censured, fine d deceptive devices and contrivances Keith Robert Cottrell (Registered $25,000, and barred from association in that he represented to customers Representative, Washington, D.C.) with any NASD member in any that proceeds of a limited partnership was censured, fined $25,000, and

NASD Notices to Members—Disciplinary Actions Feb ru a r y 1999 117 barred from association with any transactions in a public customer’s Acceptance, Waiver, and Consent NASD member in any capacity. The account. pursuant to which he was censured, sanctions were based on find i n g s fined $100,000, barred from associa- that Cottrell failed to respond to Carlton Case Ellis (Registered tion with any NASD member in any NASD requests for information. Principal, Mercer Island, Washing- capacity, and ordered to pay $18,000 to n ) was censured, fined $25,000, in restitution to defrauded investment Dennis Wayne Cowden (Regis- suspended from association with any club members. Without admitting or tered Representative, Pittsburgh, NASD member in any capacity for six denying the allegations, Hryn con- Pennsylvania) was censured, sus- months, and required to requalify by sented to the described sanctions pended from association with any exam in all capacities before again and to the entry of findings that he NASD member in any capacity for being employed in the securities converted approximately $18,000 two months, and required to requalify industry. The sanctions were based from members of an investment club, by exam before again becoming reg- on findings that Ellis participated in of which he was also a member, istered in any capacity. The sanc- private securities transactions without without the consent or authority of tions were based on findings that giving his member firm prior written the club members. Cowden recommended and effected no t i fi cation. Ellis also signed a letter securities transactions for the agreement on behalf of his member’s James Andrew Hyde (Registered accounts of public customers without clearing firm without authority to do Principal, Niwet, Colorado) su b m i t - having reasonable grounds to so. ted an Offer of Settlement pursuant believe that such transactions were to which he was censured, fine d suitable based on the information Gregory Marclafaun Hawkins, Jr. $15,000, and suspended from asso- disclosed by the customers concern- (Registered Representative, Mis- ciation with any NASD member in ing their financial situations and sion Viejo, California) submitted a any capacity for two years. Without needs. Letter of Acceptance, Waiver, and admitting or denying the allegations, Consent pursuant to which he was Hyde consented to the described Rudolph Crockett, Jr. (Registered censured, fined $112,900, barred sanctions and to the entry of find i n g s Representative, Westerville, Ohio) from association with any NASD that he failed to respond to NASD submitted a Letter of Acceptance, member in any capacity, and ordered requests for information in a timely Waiver, and Consent pursuant to to pay $7,580 in restitution to a public ma n n e r . which he was censured, fine d customer. Without admitting or deny- $925,000, barred from association ing the allegations, Hawkins consent- Ann Wei Ping Lo (Registered Prin- with any NASD member in any ed to the described sanctions and to cipal, New York, New York) wa s capacity, and required to pay the entry of findings that he solicited censured, fined $25,000, and barred $179,642 in restitution to a member and sold to a public customer an from association with any NASD firm. Without admitting or denying the investment in a business entity he member in any capacity. The sanc- allegations, Crockett consented to formed away from his member firm . tions were based on findings that Lo the described sanctions and to the Although the customer gave Hawkins failed to appear for an on-the-record entry of findings that he received $20,000 for investment purposes, the interview. funds totaling $179,642 from public customer received a promissory note customers. The NASD determined evidencing only a $10,000 invest- James Dean Loeffelbein (Regis- that Crockett deposited these funds ment in the company. In addition, the tered Representative, Bucyrus, into accounts under his control with- NASD found that Hawkins proceed- Kansas) submitted a Letter of out the knowledge or permission of ed to convert approximately $7,580 Acceptance, Waiver, and Consent the customers and used the funds for of the customer’s funds to his per- pursuant to which he was censured, his own benefit without their knowl- sonal use and benefit. The above- fined $5,000, and suspended from edge, authorization, or consent. described transactions were effected association with any NASD member outside the regular course and scope in any capacity for one day. Without Glenn Adam Davis (Registered of his employment with his member admitting or denying the allegations, Principal, West Palm Beach, Flori- firm, and Hawkins failed to provide Loeffelbein consented to the da ) was censured, fined $75,000, prior written notice to, or obtain writ- described sanctions and to the entry and barred from association with any ten approval from, his firm. of findings that he engaged in private NASD member in any capacity. The securities transactions without prior sanctions were based on find i n g s Kirby Michael Hryn (Registered written notice to, and approval from, that Davis executed unauthorized Representative, Clearfield, Penn- his member firm. sylvania) submitted a Letter of NASD Notices to Members—Disciplinary Actions Feb ru a r y 1999 118 Smail Loutfi (Registered Repre- of compensation received from out- James Basil Peters (Registered sentative, Brooklyn, New York) side business activities. Representative, Oxnard, Califor- submitted a Letter of Acceptance, ni a ) was censured, fined $5,000, Waiver, and Consent pursuant to Donerval Kevin Moreland (Regis- suspended from association with any which he was censured, fine d tered Representative, San NASD member in any capacity for 30 $213,437.31, and barred from asso- Clemente, California) was cen- days, and required to requalify as a ciation with any NASD member in sured, fined $65,000, barred from general securities representative. any capacity. Without admitting or association with any NASD member The NAC imposed the sanctions fol- denying the allegations, Loutfi co n - in any capacity, and ordered to pay lowing appeal of a Los Angeles sented to the described sanctions $25,000 plus interest in restitution to DBCC decision. The sanctions were and to the entry of findings that he a public customer. The sanctions based on findings that Peters forged arranged to have an impostor take were based on findings that More- the signature of a bank branch man- the Series 7 exam on his behalf. land recommended, offered, and sold ager on documents submitted to his securities without being properly reg- firm that falsely reflected purchases Robert Gregory McCormack (Reg- istered. Furthermore, Moreland rec- involving new funds and thereby istered Principal, Ft. Myers, Flori- ommended securities to a public increased Peters’ commission pay- da) was censured, fined $60,000, customer without having reasonable ou t . and barred from association with any grounds for believing the securities NASD member in any capacity. The were suitable for the customer. More- Christopher John Plucinski (Reg- sanctions were based on find i n g s land also failed to respond to NASD istered Representative, Stevenson that McCormack conducted a securi- requests for information about his Ranch, California) submitted an ties business while not registered. sales practices. Offer of Settlement pursuant to which McCormack also forged a registered he was censured, fined $255,000, representative’s signature on a new Vincent Michael Nunez (Regis- barred from association with any account application and failed to tered Representative, Staten NASD member in any capacity, and respond to NASD requests for infor- Island, New York) was censured, ordered to pay $782.17 in restitution mation. fined $50,000, barred from associa- to a member firm. Without admitting tion with any NASD member in any or denying the allegations, Plucinski Arleigh Clayton Merrill (Registered capacity, and ordered to disgorge to consented to the described sanctions Representative, Jacksonville, the NASD all monies he earned in and to the entry of findings that he Florida) was censured, fine d the securities industry before becom- received $35,000 from a public cus- $17,500, and suspended from asso- ing registered, in the amount of at tomer for investment purposes. ciation with any NASD member in least $5,151. The sanctions were According to the findings, Plucinski any capacity for six months. The based on findings that Nunez did not apply the funds as directed by sanctions were based on find i n g s arranged to have an impostor take the customer, and instead, converted that Merrill effected a private securi- the Series 7 exam on his behalf. the funds to his own use and benefit ties transaction and guaranteed a Nunez also failed to respond to by depositing the funds into his bank customer against a loss. NASD requests to appear for on-the- account, and writing personal and record interviews. business checks on the funds without Norman Mathias Merz (Registered the customer’s knowledge or con- Principal, Brookfield, Wisconsin) Donald Charles Panek (Registered sent. was censured, fined $110,000, and Representative, Fort Madison, barred from association with any Io w a ) submitted a Letter of Accep- Donald Eugene Radle (Registered NASD member in any capacity. The tance, Waiver, and Consent pursuant Principal, Springfield, Missouri) National Adjudicatory Council (NAC) to which he was censured, fine d was censured, fined $25,000, and af fi rmed the sanctions following $50,000, and barred from association barred from association with any review of a Chicago District Business with any NASD member in any NASD member in any capacity. The Conduct Committee (DBCC) deci- capacity. Without admitting or deny- sanctions were based on find i n g s sion. The sanctions were based on ing the allegations, Panek consented that Radle failed to respond to NASD findings that Merz engaged in private to the described sanctions and to the requests to appear for an on-the- securities transactions without prior entry of findings that he participated record interview. written notice to, and approval from, in private securities transactions with- his member firm. Merz also failed to out prior written notice to, and written Kirk Francis Ruffler (Registered give prompt written notice to his firm approval and/or acknowledgment Representative, Perrineville, New from, his member firm s . Jersey) was censured, fine d NASD Notices to Members—Disciplinary Actions Feb ru a r y 1999 119 $25,000, and barred from associa- the sanctions following appeal of a Daniel Wright Sisson (Registered tion with any NASD member in any December 1996 NBCC decision. The Principal, Menlo Park, California) capacity. The sanctions were based sanctions were based on find i n g s was censured, fined $35,000, sus- on findings that Ruffler failed to that Sanders charged excessive pended from association with any respond to NASD requests for infor- markups in the sale of warrants as a NASD member in any capacity for 10 mation. consequence of his member firm ’ s business days, and required to domination and control of the market requalify by exam as a general secu- Randel Arthur Russell (Registered for those securities. In addition, rities representative. The NAC Representative, Wheeling, West Porush failed to establish and imposed the sanctions following Vi r g i n i a ) submitted a Letter of Accep- enforce supervisory requirements review of a San Francisco DBCC tance, Waiver, and Consent pursuant that might have prevented the decision. The sanctions were based to which he was censured, fine d markup violations. on findings that Sisson recommend- $5,000, and suspended from associa- ed trades that were unsuitable as to tion with any NASD member in any Steven Albert Seager (Registered size and frequency in the accounts of capacity for six months. Without Representative, Geneseo, New public customers. admitting or denying the allegations, Yo r k ) submitted a Letter of Accep- Russell consented to the described tance, Waiver, and Consent pur- Chad Robert Soerens (Registered sanctions and to the entry of find i n g s suant to which he was censured, Representative, Middleton, Wis- that he received cash from a public fined $275,000, barred from associa- co n s i n ) was censured, fine d customer intended for deposit into a tion with any NASD member in any $25,000, and barred from associa- money market account and failed to capacity, and required to pay tion with any NASD member in any handle the funds properly. According $49,935.37 in restitution to a mem- capacity. The sanctions were based to the findings, Russell placed the ber firm. Without admitting or deny- on findings that Soerens failed to funds in a non-secure location and ing the allegations, Seager respond to NASD requests for infor- certain funds were lost. The find i n g s consented to the described sanctions mation. also stated that Russell accepted and to the entry of findings that he checks intended for employee contri- caused loans totaling $49,935.37 to Gerald James Stoiber (Registered butions to a company-sponsored Sim- be made against the life insurance Representative, Mokena, Illinois) ple Individual Retirement Account policies of public customers. Accord- was censured, fined $450,000, sus- (IRA) and failed to forward those ing to the findings, Seager caused pended from association with any checks promptly to the mutual fund the checks for these loans to be NASD member in any capacity for six company for investment. mailed to a post office box under his months, and required to pay control, endorsed the checks, and $450,000 in restitution to public cus- Russell Marlowe Ryan (Registered used the proceeds for his own bene- tomers. The SEC affirmed the sanc- Representative, Hempstead, New fit without the prior authorization or tions following appeal of a March York) was censured, fined $25,000, consent of the customers. 1996 NBCC decision, and following and barred from association with any dismissal of an appeal to the U.S. NASD member in any capacity. The Wallace Efford Sheely (Registered Court of Appeals. The sanctions were sanctions were based on find i n g s Principal, Gulfport, Mississippi) based on findings that Stoiber that Ryan failed to respond to NASD submitted a Letter of Acceptance, engaged in private securities transac- requests to appear for on-the-record Waiver, and Consent pursuant to tions while failing to give prior written interviews. which he was censured, fine d no t i fi cation to his member firm of his $6,800, and suspended from associ- intention to engage in such activities. Steven Paul Sanders (Registered ation with any NASD member in any Principal, Jericho, New York) an d capacity for 10 days. Without admit- Steve Tabaluyan (Associated Pe r - Daniel Mark Porush (Registered ting or denying the allegations, son, Palatine, Illinois) submitted a Principal, Oyster Bay Cove, New Sheely consented to the described Letter of Acceptance, Waiver, and Yo r k ) . Sanders was censured, fine d sanctions and to the entry of find i n g s Consent pursuant to which he was $25,000, and barred from associa- that he exercised discretion in the censured, fined $5,000, and barred tion with any NASD member in any individual accounts of public cus- from association with any NASD capacity, and Porush was censured, tomers without prior written autho- member in any capacity, with the fined $250,000, and barred from rization from the customers and prior right to reapply for association with association with any NASD member written acceptance of the accounts an NASD member firm three years in any capacity. The SEC affirm e d as discretionary by his member firm . from the date of the effectiveness of

NASD Notices to Members—Disciplinary Actions Feb ru a r y 1999 120 the bar. Without admitting or denying tees, misrepresentations about Woods consented to the described the allegations, Tabaluyan consent- issuers, failures to execute customer sanctions and to the entry of find i n g s ed to the described sanctions and to orders, and requiring customers to that he forged the signature of a pub- the entry of findings that he altered purchase aftermarket shares as a lic customer onto documents that his Series 6 test results to show that condition of receiving initial public caused the customer’s IRA accounts he passed the exam, when in fact, offering units, and other high pres- to be transferred to another firm , he failed the exam, and presented sure tactics. In addition, the NASD without the prior knowledge or con- the altered results to his member determined that Vornea, through his sent of the customer. firm . direct and indirect actions, caused his firm and its registered represen- Carlos Christopher Tellez (Regis- tatives to manipulate the prices of Individuals Fined tered Representative, Darmstadt, securities in aftermarket trading, and Lance Reed Dalton (Registered Ge r m a n y ) submitted an Offer of Set- as a result, the firm generated over Representative, Isle Of Palms, tlement pursuant to which he was $6 million in illegal profits. Vornea South Carolina) submitted a Letter of censured, fined $13,000, and sus- also failed to supervise the activities Acceptance, Waiver, and Consent pended from association with any of his member firm’s registered rep- pursuant to which he was censured NASD member in any capacity for 45 resentatives to ensure compliance and fined $22,400. Without admitting days. Without admitting or denying with applicable securities laws, regu- or denying the allegations, Dalton the allegations, Tellez consented to lations, and NASD rules. consented to the described sanctions the described sanctions and to the and to the entry of findings that he entry of findings that he misused John Jeffrey Walker (Registered engaged in numerous purchase and $155,000 belonging to a public cus- Representative, Covington, Ken- sale transactions in various securities tomer. According to the find i n g s , tu c k y ) was censured, fined $25,000, without having reasonable grounds Tellez deposited the funds in his per- and barred from association with any for believing that such recommen- sonal business account, failed to pur- NASD member in any capacity. The dations were suitable for the cus- chase mutual fund shares for the sanctions were based on find i n g s tomers and accounts in view of the customer, and failed to promptly that Walker failed to respond to frequency of the recommended return the funds to the customer as NASD requests for information. transactions; the risks associated with re q u e s t e d . the recommended transactions; and Andrew Neal Watson (Registered the customers’ financial situations, Steven Harry Vornea (Registered Principal, Raleigh, North Carolina) objectives, circumstances, and needs. Representative, Brookville, New submitted a Letter of Acceptance, Yo r k ) submitted a Letter of Accep- Waiver, and Consent pursuant to William H. Gerhauser, Sr. tance, Waiver, and Consent pur- which he was censured, fine d (Registered Principal, Surrey, suant to which he was censured, $125,000, and barred from associa- Great Britain) and William C. fined $700,000, and barred from tion with any NASD member in any Gerhauser, Jr. (Registered association with any NASD member capacity. Without admitting or deny- Principal, Brentwood, New York) in any capacity. Without admitting or ing the allegations, Watson consent- were censured and fined $15,000, denying the allegations, Vornea con- ed to the described sanctions and to jointly and severally. In addition, sented to the described sanctions the entry of findings that he misap- William H. Gerhauser was required and to the entry of findings that he propriated $19,137.78 from his mem- to requalify by exam as a fina n c i a l acted as principal of his member firm ber firm by arranging to have himself and operations principal, and William while failing to register as a principal paid unauthorized increases in his C. Gerhauser was required to with the NASD. The findings also sa l a r y . requalify by exam as a general stated that Vornea caused his firm securities principal. The SEC and its registered representatives to Todd Richard Woods (Registered imposed the sanctions following purchase securities before the com- Representative, Columbus, Ohio) appeal of a November 1997 NBCC pletion of each of the distributions. submitted a Letter of Acceptance, decision. The sanctions were based Furthermore, the NASD found that Waiver, and Consent pursuant to on findings that the Gerhausers, Vornea, through his direct and indi- which he was censured, fine d acting on behalf of a member firm , rect actions, caused his firm to $5,000, and suspended from associ- conducted a securities business engage in numerous sales practice ation with any NASD member in any while failing to maintain adequate net abuses including, but not limited to, capacity for 60 days. Without admit- capital. The firm, acting through baseless price predictions or guaran- ting or denying the allegations, William H. Gerhauser, file d

NASD Notices to Members—Disciplinary Actions Feb ru a r y 1999 121 inaccurate FOCUS Part I and IIA $1,000 and $5,050, and in an issued by the NASD. Issuance of a reports, failed to maintain accurate attempt to conceal his conversion, he disciplinary complaint represents the books and records, and failed to give backdated the $5,050 check. initiation of a formal proceeding by telegraphic notice of a net capital Kendzierski appealed this action to the NASD in which findings as to the de fic i e n c y . the NAC and the sanctions are not in allegations in the complaint have not effect pending consideration of the been made, and does not represent Decisions Issued appeal. a decision as to any of the allega- The following decisions have been tions contained in the complaint. issued by the DBCC or the Office of Terry Don Rader (Registered Prin- Because these complaints are unad- Hearing Officers and have been cipal, Dallas, Texas) was censured, judicated, you may wish to contact appealed to or called for review by fined $25,000, and barred from asso- the respondents before drawing any the NAC as of January 20, 1999. ciation with any NASD member in conclusions regarding the allegations The findings and sanctions imposed any capacity. The sanctions were in the complaint. in the decision may be increased, based on findings that Rader failed decreased, modified, or reversed by to respond to NASD requests for Ralph Charles Altomare (Regis- the NAC. Initial decisions whose time information. tered Representative, Bellevue, for appeal has not yet expired will be Washington) was named as a reported in the next Notices to Rader has appealed this action to respondent in an NASD complaint Me m b e r s . the NAC and the sanctions are not in alleging that he effected transactions effect pending consideration of the in the accounts of public customers Roger Harry Chlowitz (Registered appeal. without the prior authorization and Principal, Northridge, California) consent of the customers. was censured, fined $25,000, and Jerome Edward Rosen (Registered barred from association with any Representative, Miami, Florida) Daniel Richard Howard (Regis- NASD member in any capacity. The was censured, fined $62,000, and tered Representative, Cambridge, sanctions were based on find i n g s suspended from association with any Massachusetts) was named as a that Chlowitz failed to respond to NASD member in any capacity for six respondent in an NASD complaint NASD requests for information and months. The sanctions were based alleging that he recommended and to provide documents. on findings that Rosen engaged in initiated purchase and sales transac- anti-competitive harassment of anoth- tions in the securities account of a Chlowitz has appealed this action to er Market Maker by making a series public customer without having rea- the NAC and the sanctions are not in of telephone calls to the broker in sonable grounds for believing that effect pending consideration of the which he attempted to harass the the recommendations and resulting ap p e a l . broker for engaging in competitive transactions were suitable for the trading and entering competitive quo- customer in view of the size, fre- Robert Jay Kendzierski tations, and otherwise attempted to quency, concentration of speculative (Registered Representative, Erie, improperly influence and/or interfere securities; the nature of the recom- Pe n n s y l v a n i a ) was censured, fine d with the broker’s competitive activi- mended transactions; and in light of $80,000, and barred from ties. Rosen also made certain threat- the customer’s financial situation, association with any NASD member ening statements to the broker. The investment objectives, circum- in any capacity. The sanctions were findings also stated that Rosen stances, and needs. The complaint based on findings that Kendzierski backed away from a specific order also alleges that Howard falsely converted $6,000 in funds given to another broker placed with him at his answered a question on his Form U- him by a public customer by quoted bid or offer for a Nasdaq 4 and failed to update his Form U-4 receiving checks totaling $10,000 Sm a l l C a p SM security. to reflect that he was the subject of from the customer to be deposited in an NASD investigation in connection an interest-bearing insurance policy. Rosen has appealed this action to with his recommendation of unsuit- Kendzierski altered the checks made the NAC and the sanctions are not in able securities to a customer. payable to his member firm and effect pending consideration of the wrote his name instead on the payee ap p e a l . Damon Todd Lazar (Registered line of the checks, converted $6,000 Representative, Plainview, New of the funds to his own use and York) was named as a respondent in be n e fi t. Also, Kendzierski made two Complaints Filed an NASD complaint alleging that he payments to repay the customer for The following complaints were knowingly or recklessly made numer-

NASD Notices to Members—Disciplinary Actions Feb ru a r y 1999 122 ous material misrepresentations of Firms Suspended/Canceled Fundamental Service Corporation, fact to a public customer in connec- The following firms were suspended New York, New York (January 13, tion with his recommendation to pur- from membership in the NASD for 19 9 9 ) chase common stock. The complaint failure to comply with formal written also alleges that the misrepresenta- requests to submit financial informa- J. Robbins Securities, L.L.C., New tions were material to the investment tion to the NASD. The actions were York, New York (January 13, 1999) decision of the customer and caused based on the provisions of NASD him to refrain from executing sales of Rule 8210 and Article VII, Section 2 Suspensions Lifted his position in the common stock. of the NASD By-Laws. The date the The NASD has lifted the suspension The customer was thereby lulled by suspensions commenced is listed from membership on the dates Lazar into a false sense of security after the entry. If the firm has com- shown for the following firm s with respect to his position in the plied with the requests for informa- because they have complied with for- common stock. tion, the listing also includes the date mal written requests to submit fina n - the suspension concluded. cial information. John Anthony Massaro (Regis- tered Representative, Smithtown, Alden Capital Markets, Inc., New Northbridge Financial Services, New York) was named as a respon- York, New York (January 13, 1999) Ann Arbor, Michigan (December 18, dent in an NASD complaint alleging 19 9 8 ) that he made material misrepresen- American Freedom Securities, tations, failed to disclose material In c . , Rochester, New York (January Individuals Suspended facts, and made fraudulent price pre- 13, 1999) Pursuant To NASD Rule Series dictions to public customers in con- 9510 For Failure To Pay nection with his solicitation to Ash Financial Corp., Great Neck, Arbitration Awards customers to purchase securities. New York (January 13, 1999) Bryant, Steven Ernest, Pompano The complaint also alleges that Mas- Beach, Florida (January 13, 1999 - saro effected transactions in the Cassidy & Co., Inc., Blue Bell, January 15, 1999) accounts of public customers without Pennsylvania (January 13, 1999) the prior authorization of the cus- © 1999, National Association of Securities Dealers, tomers. The complaint alleges that Elswick, Banks and Associates, Inc. (NASD). All rights reserved. Massaro failed to execute sell orders In c . , Atlanta, Georgia (January 13, as instructed by public customers. 19 9 9 ) The complaint also alleges that Mas- saro failed to respond to NASD Fisher Hill Securities Corporation, requests for information. San Francisco, California (January 13, 1999)

NASD Notices to Members—Disciplinary Actions Feb ru a r y 1999 123

Executive Summary designate terms of the option (i. e . , NASD On January 11, 1999, the Securities the exercise price, exercise style, and Exchange Commission (SEC) expiration date, or option type). approved amendments to National Notice to Association of Securities Dealers, NASD Rule 2860(b)(3)(A) imposes a Inc. (NASD¨) Rule 2860(b)(3)(A), ceiling or position limit on the number tripling the position limits on of conventional and standardized Members standardized (exchange-traded) equity options contracts in each class equity options to make them on the same side of the market (i. e . , 99-20 equivalent to the limits on aggregating long calls and short puts conventional (over-the-counter) or long puts and short calls) that can equity options overlying the same be held or written by a member, a SEC Approves Rule security. These amendments were person associated with a member, a Change Increasing effective upon approval. customer, or a group of customers acting in concert. NASD Rule Position Limits On Separately, NASD Regulation’s 2860(b)(3)(A) provides that the St a n d a r d i z ed Equity Market Regulation Department is position limits for equity options are Options; NASD Reminds reminding members of their determined according to a five - t i e r e d Members Of Their reporting obligations when trading system in which more actively-traded Re p o r ting Obli g a t i o n s op t i o n s . stocks with larger public floats are When Trading Options subject to higher position limits. Questions regarding the amendments to Rule 2860(b)(3)(A) The SEC recently approved Suggested Routing may be directed to Gary L. amendments tripling the limits for 1 Senior Management Goldsholle, Assistant General standardized equity options. Un d e r Counsel, Office of General Counsel, the new amendments, the five tiers Ad v e r t i s i n g NASD Regulation, Inc. (NASD are: 13,500; 22,500; 31,500; 60,000; Continuing Education Re g u l a t i o n SM ) at (202) 728-8104; and and 75,000 contracts. These new questions regarding members’ limits conform the NASD’s position Corporate Finance reporting obligations may be directed limits for standardized equity options Executive Representatives to Jospeh Alotto, Supervisor, Market to the increased limits recently Government Securities Regulation Department, NASD approved by the SEC for the options Regulation, at (301) 590-6845. ex c h a n g e s . 2 These new limits are In s t i t u t i o n a l also the same tiers that are in effect In s u r a n c e Tripling Standardi z ed Equity for conventional equity options. Internal Audit Options Position Limits Members are reminded that the NASD Rule 2860(b)(3)(A) governs NASD’s limits on standardized equity Legal & Compliance members’ activities in standardized, options are applicable only to those Mu n i c i p a l conventional, and FLEX equity members who are not also members options. Standardized options are of the exchange on which the options Mutual Fund exchange-traded options issued by are traded. Members that conduct a Op e r a t i o n s the Options Clearing Corporation business in standardized options but Op t i o n s (OCC) that have standardized terms are not members of the exchange on for strike prices, expiration dates, which such options are listed and Registered Representatives and the amount of the underlying traded are commonly referred to as Re g i s t r a t i o n security. Conventional options are “access” firms. By contrast, the Re s e a r c h any other options contracts not NASD’s limits on conventional equity issued, or subject to issuance, by the options are applicable to all members. Sy n d i c a t e OCC. Conventional options are also Sy s t e m s frequently referred to as over-the- Members also should note that as counter options. FLEX equity options part of the recent amendments, Tr a d i n g are exchange-traded options issued NASD Regulation deleted the Tr a i n i n g by OCC that give investors the provisions of Rule 2860(b)(3)(A) that Variable Contracts ability, within specified limits, to established that the limits for

NASD Notice to Members 99-20 March 1999 127 conventional equity options are Members have an obligation to and file the report with NASD “three times” the limits for report option positions in the Regulation Market Regulation standardized equity options overlying following situations: Department no later than each the same security. This numerical business day following the relationship was established in a ¥ A long and/or short position of establishment of the reportable prior rule change3 that was designed 200 or more options contracts of position. Following this Notice are a to increase the limits on conventional the put class and the call class on copy of the Option Position equity options to correspond to the the same side of the market is Summary Report, instructions, and a numerical limits that were previously established in the account. sample report. in effect with respect to FLEX equity op t i o n s . 4 Under current rules, the ¥ There is an increase in a Text Of Amendments position limits for standardized and previously reported position (Note: New text is underlined; deletions are conventional equity options are the (e. g . , from 225 to 250 contracts). br a c k e t e d . ) same. Thus, the recent increase in limits for standardized equity option ¥ There is a decrease in a Rule 2860. Options. position limits did not previously reported position to a correspondingly increase the position position of less than 200 (3) Position Limits limits for conventional equity options. contracts (e. g . , 225 contracts to 199 contracts). Once a position (A) Stock Options--Except in highly NASD Reminds Members Of has been reduced to less than unusual circumstances, and with the Their Reporting Obli g a t i o n s 200 contracts, no subsequent prior written approval of the Associa- When Trading Options position reports would have to be tion pursuant to the Rule 9600 Series Rule 2860(b)(5) addresses members’ filed until the account once again for good cause shown in each options reporting obligations and is established a long and/or short instance, no member shall effect for applicable to all standardized and position of 200 or more contracts any account in which such member FLEX option positions established by of the put class and call class on has an interest, or for the account of “access” firms or their customers, and the same side of the market. any partner, officer, director or all conventional option positions employee thereof, or for the account established by member firms and Members are also reminded that of any customer, an opening transac- their customers. Rule 2860(b)(5) intra-day option positions of 200 or tion through Nasdaq, the over-the- requires members to file a report with more contracts of the put class and counter market or on any exchange the NASD if the member’s account, a the call class on the same side of the in a stock option contract of any class customer’s account, or an associated market covering the same underlying of stock options if the member has person’s account establishes an security or index must be reported reason to believe that as a result of aggregate options position of 200 or even if the position decreases to less such transaction the member or part- more options contracts (whether long than 200 contracts by the end of the ner, officer, director or employee or short) of the put class and the call day. For example, if an option thereof, or customer would, acting class on the same side of the market position increases from 199 alone or in concert with others, direct- covering the same underlying contracts to 225 contracts at 11:00 ly or indirectly, hold or control or be security or index. In aggregating a.m., and then at 3:00 p.m. there is a obligated in respect of an aggregate options on the “same side of the decrease in the position from 225 equity options position in excess of: market,” long calls in any class of contracts to 199 contracts, the options should be combined with member firm must file a report to (i) [4,500] 13 , 5 0 0 option contracts of short puts on the same class and re fl ect the position at 11:00 a.m. that the put class and the call class on short calls should be combined with exceeded 200 option contracts, even the same side of the market covering long puts to determine whether the though the option position at the end the same underlying security, com- member has a reporting obligation. of the day was less than 200 bining for purposes of this position Members should not “net out” long contracts. The member firm is also limit long positions in put options with and short positions for the same required to file a report reflecting the short positions in call options, and class in the same account (e. g . , 200 decrease in the option position. short positions in put options with contracts long and 200 contracts long positions in call options; or short in the same options class in the To report an option position, same account should both be members should complete the (ii) [7,500] 22 , 5 0 0 options contracts reported). Option Position Summary Report of the put class and the call class on

NASD Notice to Members 99-20 March 1999 128 the same side of the market covering same side of the market covering the through (v) for which the underlying the same underlying security, provid- same underlying security, providing security qualifies or would be able to ing that the [7,500] 22 , 5 0 0 co n t r a c t that the [25,000] 75 , 0 0 0 co n t r a c t qu a l i f y . position limit shall only be available position limit shall only be available for option contracts on securities for option contracts on securities b. In order for a security not subject which underlie Nasdaq or exchange- which underlie Nasdaq or exchange- to standardized equity options trad- traded options qualifying under appli- traded options qualifying under appli- ing to qualify for an options position cable rules for a position limit of cable rules for a position limit of limit of more than [4,500] 13 , 5 0 0 [7,500] 22 , 5 0 0 option contracts; or [25,000] 75 , 0 0 0 option contracts; or contracts, a member must firs t demonstrate to the Association’s (iii) [10,500] 31 , 5 0 0 option contracts * * * Market Regulation Department that of the put class and the call class on the underlying security meets the the same side of the market covering (ix) Conventional Equity Options standards for such higher options the same underlying security provid- position limit and the initial listing ing that the [10,500] 31 , 5 0 0 co n t r a c t a. For purposes of this paragraph standards for standardized options position limit shall only be available (b), standardized equity options con- tr a d i n g . for option contracts on securities tracts of the put class and call class which underlie Nasdaq or exchange- on the same side of the market over- traded options qualifying under appli- lying the same security shall not be Endnotes cable rules for a position limit of aggregated with conventional equity 164 Fed. Reg. 2930 (January 19, 1999). [10,500] 31 , 5 0 0 option contracts; or options contracts or FLEX Equity Options contracts overlying the same 2See 64 Fed. Reg. 1842 (January 12, 1999) (iv) [20,000] 60 , 0 0 0 options contracts security on the same side of the mar- (approving File Nos. SR-CBOE-98-25, SR- of the put and the call class on the ket. Conventional equity options con- Amex-98-22, SR-PCX-98-33, and SR-Phlx- same side of the market covering the tracts of the put class and call class 98-36). same underlying security, providing on the same side of the market over- that the [20,000] 60 , 0 0 0 co n t r a c t lying the same security shall be sub- 363 Fed. Reg. 23317 (April 28, 1998). position limit shall only be available ject to a position limit equal to the for option contracts on securities greater of: 4Position limits on FLEX equity options have which underlie Nasdaq or exchange- be eliminated pursuant to a two-year pilot traded options qualifying under appli- 1. [three times] the basic limit of program. See 62 Fed. Reg. 48638 (Septem- cable rules for a position limit of [4,500] 13 , 5 0 0 contracts, or ber 16, 1997). [20,000] 60 , 0 0 0 option contracts; or 2. [three times] any standardized © 1999, National Association of Securities Dealers, (v) [25,000] 75 , 0 0 0 options contracts equity options position limit as set Inc. (NASD). All rights reserved. of the put and the call class on the forth in subparagraphs (b)(3)(A)(ii)

NASD Notice to Members 99-20 March 1999 129

Executive Summary ments and then enter each of those On January 13, 1999, The Nasdaq five 1,000-share segments into NASD ¨ Stock Market, Inc. (Nasdaq ), filed a SOES. Likewise, the splitting of a rule change with the Securities and 5,000-share order into a 4,000-share Notice to Exchange Commission (SEC or Se l e c t N e t SM order and a 1,000-share Commission) that would eliminate SOES order would, in Nasdaq's the single investment decision view, also violate the prohibition on Members aggregation presumption for Small order splitting. Order Execution SystemSM (S O E S SM ) 99-21 orders entered within five minutes of In Notice to Members 88-61, the each other contained in National NASD, interpreting Rule 4730(c)(3), Association of Securities Dealers, established a presumption that The Nasdaq Stock Inc. (NASD¨) Notice to Members orders entered within five minutes of Market Eliminates The 88 - 6 1 .1 The elimination of the each other into any Nasdaq system presumption is effective immediately. were based on a single investment SOES Five-Minute decision and that the share amounts Presumption Questions regarding the elimination purchased or sold by those trades of the five-minute presumption were to be aggregated together to should be directed to Robert E. Aber, determine if the orders, when com- Senior Vice President and General bined, violated Rule 4730's limits on Suggested Routing Counsel, Office of General Counsel, SOES usage. Senior Management The Nasdaq Stock Market‚ at (202) 728-8290; or Thomas P. Moran, On January 13, 1999, Nasdaq filed a Ad v e r t i s i n g Assistant General Counsel, Office of proposed rule change to eliminate Continuing Education General Counsel, The Nasdaq Stock the single investment decision Market, at (202) 728-8401. aggregation presumption. Nasdaq Corporate Finance eliminated the presumption in Executive Representatives Background And Summary response to SEC concerns raised in Government Securities SOES was developed in 1984 to pro- communications with Nasdaq staff vide a simple and efficient means to and NASD senior management In s t i t u t i o n a l execute the small agency orders of about various aspects of the pre- In s u r a n c e public customers at the inside quote. sumption including what the Com- Internal Audit Trading is done automatically and is mission perceived as the lack of negotiation-free. SOES participation guidelines as to how the presump- Legal & Compliance is mandatory for all Market Makers in tion could ever be rebutted.2 Th e Mu n i c i p a l Nasdaq National Market¨ se c u r i t i e s Commission also questioned the and each Nasdaq issue is assigned continued use of such a presumption Mutual Fund a maximum SOES order share size given the advent of the Actual Size Op e r a t i o n s limit of either 200, 500, or 1,000 Rule (ASR). The ASR now allows Op t i o n s shares which is determined by the Market Makers to display the actual particular trading characteristics of size of their trading interest in their Registered Representatives that security. quotes and replaced previous man- Re g i s t r a t i o n dates that Market Makers display a Re s e a r c h NASD Rule 4730(c)(3) prohibits the minimum share size equal to the splitting of orders larger than the SOES order size of the quoted Sy n d i c a t e applicable SOES maximum share security. Sy s t e m s size order limit into smaller parts so as to make any of those smaller Given the SEC’s concerns about the Tr a d i n g parts eligible for entry into SOES. For practicability of rebutting the pre- Tr a i n i n g example, it is a violation of NASD sumption, and the ASR's removal of Variable Contracts rules to break up a 5,000-share order ar t i fi cial mandatory minimum quote for a Nasdaq security having a increments which now increase the 1,000-share SOES order entry limit ability of Market Makers to manage into five separate 1,000-share seg- their exposure to automatic order

NASD Notice to Members 99-21 March 1999 133 execution, Nasdaq has determined the presumption changes only the 2Letter from Richard R. Lindsey, Director, to eliminate the presumption. procedures for enforcing the rule, United States Securities and Exchange and makes no changes to the rule's Commission, to Robert E. Aber, Vice Presi- While eliminating the single invest- substantive mandates. In short, the dent and General Counsel, The Nasdaq ment decision presumption, it is splitting of larger orders into smaller Stock Market, Inc. dated June 16, 1997. important to note that the restrictions parts to obtain SOES access on splitting up larger orders to obtain remains prohibited. © 1999, National Association of Securities Dealers, SOES access contained in NASD Inc. (NASD). All rights reserved. Rule 4730(c)(3) remain in effect and, Endnotes if violated, may still serve as the 1See SEC Release No. 34-41015 (February basis for disciplinary action by NASD 3, 1999), 64 FR 6415 (February 9, 1999). Regulation, Inc. The elimination of

NASD Notice to Members 99-21 March 1999 134 Executive Summary $250, and two or more Market NASD Effective April 1, 1999, the maximum Ma k e r s . Small Order Execution SystemSM (S O E S SM ) order sizes for 383 Nasdaq In accordance with Rule 4710, Nas- Notice to National Market¨ (NNM) securities daq periodically reviews the maxi- will be revised in accordance with mum SOES order size applicable to National Association of Securities each NNM security to determine if Members Dealers, Inc. (NASD¨) Rule 4710(g). the trading characteristics of the issue have changed so as to warrant For more information, please contact an adjustment. Such a review was 99-22 ¨ Na s d a q Market Operations at (203) conducted using data as of Decem- 37 8 - 0 2 8 4 . ber 31, 1998, pursuant to the afore- Maximum SOES Order mentioned standards. The maximum Sizes Set To Change SOES order-size changes called for Description by this review are being implemented April 1, 1999 Under Rule 4710, the maximum with three exceptions. SOES order size for an NNM security is 1,000, 500, or 200 shares, ¥ First, issues were not permitted to depending on the trading characteris- move more than one size level. For Suggested Routing tics of the security. The Nasdaq example, if an issue was previously ¨ Senior Management Workstation II (NWII) indicates the categorized in the 1,000-share maximum SOES order size for each level, it would not be permitted to Ad v e r t i s i n g NNM security. The indicator “NM10,” move to the 200-share level, even if Continuing Education “NM5,” or “NM2” displayed in NWII the formula calculated that such a corresponds to a maximum SOES move was warranted. The issue Corporate Finance order size of 1,000, 500, or 200 could move only one level to the Executive Representatives shares, respectively.1 500-share level as a result of any Government Securities single review. The criteria for establishing maxi- In s t i t u t i o n a l mum SOES order sizes are as fol- ¥ Second, for securities priced below In s u r a n c e lo w s : $1 where the reranking called for a Internal Audit reduction in the level, the maximum (1) a 1,000-share maximum order SOES order size was not reduced. Legal & Compliance size shall apply to NNM securities Mu n i c i p a l on SOES with an average daily ¥ Third, for the top 50 Nasdaq securi- non-block volume of 3,000 shares ties based on market capitalization, Mutual Fund or more a day, a bid price of less the maximum SOES order sizes Op e r a t i o n s than or equal to $100, and three or were not reduced, regardless of Op t i o n s more Market Makers; whether the reranking called for a re d u c t i o n . Registered Representatives (2) a 500-share maximum order size Re g i s t r a t i o n shall apply to NNM securities on In addition, with respect to initial pub- Re s e a r c h SOES with an average daily non- lic offerings (IPOs), the SOES order- block volume of 1,000 shares or size reranking procedures provide Sy n d i c a t e more a day, a bid price of less than that a security must first be traded on Sy s t e m s or equal to $150, and two or more Nasdaq for at least 45 days before it Market Makers; and is eligible to be reclassified . Tr a d i n g Tr a i n i n g (3) a 200-share maximum order size Thus, IPOs listed on Nasdaq within Variable Contracts shall apply to NNM securities with the 45 days prior to December 31, an average daily non-block volume 1998, were not subject to SOES of less than 1,000 shares a day, a order-size reranking procedures. bid price of less than or equal to

NASD Notice to Members 99-22 March 1999 135 Following is a listing of the 383 NNM size for an NNM security in an amount equal ing unit when a Market Maker is not display- issues that will have the maximum to the maximum SOES order size for that ing a limit order, and which thus eliminated SOES order size changed on April 1, security. See generally, NASD Rule the requirement that Market Makers quote a 1999. 4613(a)(1) - (2). On July 15, 1998, the Secu- size equal to the maximum SOES order size. rities and Exchange Commission approved Endnote an amendment to NASD Rule 4613(a)(1)(C), © 1999, National Association of Securities Dealers, 1 Previously, Nasdaq Market Makers were which reduced the minimum quotation size Inc. (NASD). All rights reserved. required to maintain a minimum quotation for all Nasdaq securities to one normal trad-

Ma x i m um SOES Order Size Changes In NNM Securities All Issues In Alphabetical Order By Security Name (E f fe c t i v e April 1, 1999)

Old New Old New Symbol Security Name Level Level Symbol Security Name Level Level

SR C E P 1ST SOURCE CAP I P 50 0 20 0 BM C C P BANDO MCGLOC PFD A 20 0 50 0 TC H C 21ST CENTURY HLDG 20 0 50 0 BN S C BANK OF SANTA CLAR 20 0 50 0 TF S M 24/7 MEDIA INC 50 0 10 0 0 BW F C BANK WEST FIN CORP 50 0 10 0 0 BK F R BANKFIRST CORP 20 0 50 0 BA Y B BAY BANCSHARES 10 0 0 50 0 A BC S B BCSB BANKCORP 50 0 10 0 0 BE B E BEBE STORES INC 50 0 10 0 0 AC L N F A C L N LIMITED 50 0 10 0 0 BN H N A BENIHANA INC A 50 0 10 0 0 AB G X ABGENIX INC 50 0 10 0 0 BY N D BEYOND.COM CORP 50 0 10 0 0 AC T U ACTUATE SOFTWARE 50 0 10 0 0 BE E R F BIG ROCK BREWERY LTD 20 0 50 0 AD G O ADAMS GOLF INC 50 0 10 0 0 BV E W BINDVIEW DEV CORP 50 0 10 0 0 AA A B B ADMIRALTY BCP B 20 0 50 0 RI N O BLUE RHINO CORP 50 0 10 0 0 AL G X ALLEGIANCE TELECOM 50 0 10 0 0 BO G N BOGEN COMMUN INT 50 0 10 0 0 AL L N ALLIN COMMUNICATION 10 0 0 50 0 BO G N W BOGEN COMMUN WT 50 0 10 0 0 AH A A ALPHA INDS INC 50 0 10 0 0 BO R A Y BORAL LTD ADS 50 0 20 0 AI R S AMERICAN AIRCARRIE 50 0 10 0 0 BP F H BOSTON PVT FIN 10 0 0 50 0 AX T I AMERICAN XTAL TECH 50 0 10 0 0 BO Y D BOYD BROS TRANS IN 10 0 0 50 0 AM P I AMPLICON INC 10 0 0 50 0 BN B C BROAD NATL BNCP 50 0 10 0 0 AF S C ANCHOR FIN CORP 50 0 10 0 0 BC S T BR O A D C A S T . C O M 50 0 10 0 0 AN D R ANDERSEN GROUP INC 50 0 20 0 BR C M BROADCOM CORP CL A 10 0 0 50 0 AN S R ANSWERTHINK CONS 50 0 10 0 0 AS Y C F ARCHITEL SYST CORP 50 0 10 0 0 C AR S C W ARIS CORP WTS 50 0 10 0 0 AS Y M ASYMETRIX LEARNING 50 0 10 0 0 CB B I C B BANCSHARES 10 0 0 50 0 AT P C ATHEY PRODUCTS CP 10 0 0 50 0 CE M X C E M CP 10 0 0 50 0 AD S C ATLANTIC DATA SVCS 50 0 10 0 0 CE R B C E R B C O INC 10 0 0 50 0 AI I I AUTOLOGIC INFO INT 50 0 10 0 0 CF C I C F C INTL INC 50 0 10 0 0 AX H M AXIOHM TRANS SOL 20 0 50 0 FL Y A F C H C HELICO CL A 50 0 20 0 AZ T C AZTEC TECH PTNRS 50 0 10 0 0 CN B F C N B FINANCIAL CP 10 0 0 50 0 CR H C Y C R H PLC ADR 50 0 10 0 0 B CS P I C S P INC 10 0 0 50 0 CI B N CALIFORNIA IND BNC 20 0 50 0 BE S I F B E SEMICON ORD SHRS 20 0 50 0 CN E B F CALL-NET ENTRPR CL B 20 0 50 0 BF E N B F ENTERPRISES IN 20 0 50 0 CN T L CANTEL INDS INC 10 0 0 50 0 BH A G B H A GP HLDGS 50 0 10 0 0 CC B G CAPITAL CITY BANK 10 0 0 50 0 BN B C P B N B CAP TR PFD 50 0 20 0 CS W C CAPITAL SOUTHWEST 50 0 10 0 0 BB A R BALANCE BAR CO 50 0 10 0 0 CP R K CAPROCK COMM 20 0 50 0 BP A O BALDWIN PIANO ORGA 50 0 10 0 0 CA N I CA R R E K E R - A N T I N O R I 50 0 10 0 0

NASD Notice to Members 99-22 March 1999 136 Old New Old New Symbol Security Name Level Level Symbol Security Name Level Level CR R B CARROLLTON BANCORP 20 0 50 0 E CA S A CASA OLE' RESTRS I 10 0 0 50 0 CE C X CASTLE ENERGY CP 10 0 0 50 0 EG L B EAGLE BANCGROUP IN 50 0 10 0 0 CL P A CELL PATHWAYS INC 20 0 50 0 EW B X EARTH WEB INC 20 0 50 0 CF A C CENTRAL FIN ACCEPT 50 0 10 0 0 EL O N ECHELON CORP 50 0 10 0 0 CI T Z CFS BANCORP INC 50 0 10 0 0 EC L P ECLIPSYS CORP 50 0 10 0 0 CH E R A CHERRY CP CL A 10 0 0 50 0 EL B O ELECTRONICS BOUT 50 0 10 0 0 CN B A CHESTER BANCORP IN 10 0 0 50 0 EN B R F ENBRIDGE INC 50 0 20 0 CI T C CITADEL COMMUN CP 50 0 10 0 0 EN G E F ENGEL GNRL DEV SE 50 0 10 0 0 CH C O P CITY HLDG CAP TR 20 0 50 0 EN S R ENSTAR INC 10 0 0 50 0 CI V C CIVIC BANCORP 10 0 0 50 0 EN T U ENTRUST TECHS INC 20 0 50 0 CL K B CLARK/BARDES HLDGS 20 0 50 0 EQ S B EQUITABLE FED SAV 50 0 10 0 0 CL R S CLARUS CORP 50 0 10 0 0 ES B F ESB FINANCIAL 10 0 0 50 0 CC H E CLINICHEM A 50 0 10 0 0 ES C A ESCALADE INC 10 0 0 50 0 CM G I CMG INC 10 0 0 50 0 EM C C EUROPEAN MICRO HLD 50 0 10 0 0 CN Y F CNY FINANCIAL CP 20 0 50 0 EX C O EXCO RESOURCES INC 20 0 50 0 CT B P COAST BANCORP 50 0 20 0 CT S H COGNIZANT TECH SOL 50 0 10 0 0 F CS O N COHESION TECHS 50 0 10 0 0 CL T X COLLATERAL THERAP 50 0 10 0 0 FM C O F M S FINANCIAL CP 10 0 0 50 0 CO B Z COLORADO BUS BCSHS 50 0 10 0 0 FS B I FIDELITY BANCORP I 20 0 50 0 CB B O COLUMBIA BANCORP 20 0 50 0 FF F L P FIDELITY CAP TR I 50 0 10 0 0 CF K Y COLUMBIA FIN KY 10 0 0 50 0 FM S T FINISHMASTER INC 50 0 10 0 0 CM T O COM21 INC 50 0 10 0 0 FB S I FIRST BANCSHARES I 50 0 20 0 CL B K COMMERCIAL BANKSHR 10 0 0 50 0 FB C G FIRST BKG CO SE GA 20 0 50 0 CF I C COMMUNITY FIN CP 50 0 10 0 0 BU S E FIRST BUSEY CL A 20 0 50 0 CF B C COMMUNITY FIRST BN 10 0 0 50 0 FF E S FIRST FED S L E.HT 50 0 10 0 0 CD I R CONCEPTS DIRECT 50 0 10 0 0 TH F F FIRST FIN CP (IN) 10 0 0 50 0 CO O P COOPERATIVE BKSHS 50 0 10 0 0 FT F N FIRST FIN CP (RI) 20 0 50 0 CO M M F CORECOMM LTD 20 0 50 0 FF I N FIRST FINL BKSHS I 50 0 10 0 0 DL V R Y CORTECS PLC ADS 50 0 10 0 0 FF H S FIRST FRANKLIN CP 50 0 20 0 CU L S COST-U-LESS INC 50 0 10 0 0 FG H C FIRST GEORG HLDGS 10 0 0 50 0 CR R C COURIER CP 10 0 0 50 0 FK A N FIRST KANSAS FIN 50 0 10 0 0 CY O E COYOTE NETWORK SYS 20 0 50 0 CA S H FIRST MIDWST FIN I 10 0 0 50 0 CR D T CREDITRUST CORP 50 0 10 0 0 FM S B FIRST MUTUAL SVGS 10 0 0 50 0 CT B I P CTBI PFD CAP TRUST 50 0 20 0 FR G B FIRST REGIONAL BNC 50 0 20 0 CM L S CUMULUS MEDIA INC 50 0 10 0 0 FU N C FIRST UNITED CORP 10 0 0 50 0 CU R T F CURTIS INTL LTD 20 0 50 0 FL B K FLORIDA BANKS INC 50 0 10 0 0 CO O L CYBERIAN OUTPOST 50 0 10 0 0 FC I N FLOUR CITY INTL 50 0 10 0 0 FK K Y FRANKFORT FRST 10 0 0 50 0 D FS V B P FRANKLIN FIN PD A 10 0 0 50 0 FR E E Y FREEPAGES GR PLC ADR 20 0 50 0 DE C C D & E COMMUNICATIO 50 0 10 0 0 FT B K FRONTIER FIN CORP 10 0 0 50 0 DL T D F DELPHI INTL LTD 20 0 50 0 FF H H FSF FINANCIAL CP 10 0 0 50 0 DC B I DELPHOS CITIZENS B 10 0 0 50 0 FT N B FULTON BANCORP INC 50 0 10 0 0 DC B K DESERT COMMUNITY B 50 0 20 0 DR I V DIGITAL RIVER INC 50 0 10 0 0 G DO C D F DOCDATA NV 50 0 10 0 0 DX C P O DYNEX CAPITAL PFD B 50 0 10 0 0 GL D B P GBCI CAP TR PFD 20 0 50 0 GF L S P GCB CAP TRUST PFD 20 0 50 0 GE N B B GENESEE CP B 50 0 10 0 0

NASD Notice to Members 99-22 March 1999 137 Old New Old New Symbol Security Name Level Level Symbol Security Name Level Level GZ M O GENZYME MOLEC 20 0 50 0 IY C O Y ITO YOKADO CO ADR 50 0 10 0 0 GC T Y GE O C I T I E S 50 0 10 0 0 CM I V IVI CHECKMATE CORP 50 0 10 0 0 GS C I GEOSCIENCE CP 10 0 0 50 0 XO S Y IXOS SOFTWARE ADS 20 0 50 0 GI G X GIGA INFO GROUP 50 0 10 0 0 GF C O GLENWAY FIN CP 50 0 20 0 J GB L X GLOBAL CROSSING 50 0 10 0 0 GI S X GLOBAL IMAGING SYS 50 0 10 0 0 JE F F P J B I CAPITAL TR PFD 50 0 20 0 VI N T GOLDEN ST VINT B 50 0 10 0 0 JP S P JPS PACKAGING CO 50 0 10 0 0 GN C N F GORAN CAPITAL INC 50 0 10 0 0 JP S T JPS TEXTILE GRP 50 0 10 0 0 GU C O GRAND UNION CO 20 0 50 0 GT P S GREAT AMER BNCP IN 10 0 0 50 0 K GF L S GREATER COMMUNITY 50 0 10 0 0 KA S P KASPER ASL LTD 50 0 10 0 0 H KE S I KENTUCKY ELEC STEE 50 0 10 0 0 KN A P KNAPE AND VOGT MFG 10 0 0 50 0 HP S C H P S C INC 10 0 0 50 0 NI T E KNIGHT/TRIMARK GR 50 0 10 0 0 HA C H A HACH COMPANY CL A 50 0 10 0 0 KO S S KOSS CP 10 0 0 50 0 HA H N HAHN AUTOMOTIVE 20 0 50 0 HC R C HALLWOOD CONS RES 50 0 20 0 L HN B C HARLEYSVILLE NATL 50 0 10 0 0 HF G I HARRINGTON FIN GRP 10 0 0 50 0 LX B K L S B BANCSHARES N 10 0 0 50 0 HA V A HARVARD IND NEW 20 0 50 0 LA B H LAB HOLDINGS INC 10 0 0 50 0 HA S T HASTINGS ENT INC 50 0 10 0 0 LA N D LANDAIR CORP 20 0 50 0 HM L K HEMLOCK FED FIN CO 10 0 0 50 0 LA R K LANDMARK BSCHS INC 50 0 20 0 HT B K HERITAGE COMMERCE 50 0 20 0 LW I N LEAP WIRELESS 20 0 50 0 HB N K HIGHLAND BANCORP 50 0 20 0 LG S A F LGS GROUP CL A 20 0 50 0 HO R T HINES HORTICULTURE 50 0 10 0 0 LI B B LIBERTY BANCORP 50 0 10 0 0 HO E N HOENIG GP INC 10 0 0 50 0 LI Q B LIQUI BOX CP 50 0 10 0 0 HL G C F HOLLINGER INC 50 0 20 0 LM I A LMI AEROSPACE INC 50 0 10 0 0 HE P H HOLLIS-EDEN PHARM 50 0 10 0 0 LO N D Y LONDON INTL PLC ADR 20 0 50 0 HO L O HOLOPAK TECHS INC 50 0 10 0 0 LI C B LONG ISLAND FIN 50 0 10 0 0 HB F W HOME BANCORP 10 0 0 50 0 LS B I LSB FINANCIAL CP 50 0 20 0 HL F C HOME LOAN FINL CP 50 0 10 0 0 HC A R HOMETOWN AUTO CL A 50 0 10 0 0 M HC O W HORIZON ORGANIC HD 50 0 10 0 0 HR B T HUDSON RVR BNCP 50 0 10 0 0 MF R I M F R I INC 50 0 10 0 0 ML C H M L C HOLDINGS INC 50 0 10 0 0 I MK F C F MACKENZIE FIN CP 50 0 20 0 MT L X MARINE TRANSPORT 50 0 10 0 0 IC O G F ICO GLOBAL COMM 50 0 10 0 0 FM A R P MARINER CAP TR PFD 50 0 10 0 0 ID G B IDG BOOKS WRLDWIDE 50 0 10 0 0 MV I I MARK VII INC 10 0 0 50 0 IN D B P INDEP CAP TR I PFD 20 0 50 0 MA R S A MARSH SUPERMARKETS A 10 0 0 50 0 IN D Y Y INDEP ENERGY ADS 50 0 10 0 0 MA R S B MARSH SUPERMARKETS B 50 0 10 0 0 IN H O INDEPENDENCE HLDG 50 0 20 0 MA S B MASSBANK CP 50 0 10 0 0 IH I I Z INDUSTRIAL HLDG WT 20 0 50 0 MA G R MASTER GRAPICS INC 50 0 10 0 0 IM G K INTERACTIVE MAGIC 50 0 10 0 0 MA T E MATEWAN BCSHS INC 20 0 50 0 IN T G INTERGROUP CP THE 20 0 50 0 MA X E MAX ERMAS RESTR IN 10 0 0 50 0 IP L Y INTERPLAY ENT CORP 50 0 10 0 0 MA X C MAXCO INC 50 0 10 0 0 IV B K INTERVISUAL BOOKS 50 0 10 0 0 MX T R MAXTOR CORP 50 0 10 0 0 IC U B INTL INTEGRATION 50 0 10 0 0 MF L R MAYFLOWER CO OP BK 20 0 50 0 IS K O ISCO INC 50 0 10 0 0 MD C A MDC COMMUN CORP 20 0 50 0

NASD Notice to Members 99-22 March 1999 138 Old New Old New Symbol Security Name Level Level Symbol Security Name Level Level MB I A MERCHANTS BNCP IL 10 0 0 50 0 PE R M PERMANENT BNCP INC 50 0 10 0 0 MR E T MERIT HOLDING CP 10 0 0 50 0 PH L Y L PHIL CONS GR PRIDE 50 0 20 0 ME T F P METROPOLITAN CAP 10 0 0 50 0 PI L T PILOT NETWORK SVC 50 0 10 0 0 MS T R MICROSTRATEGY INC 50 0 10 0 0 PH F C P PITT HOME CAP TR 20 0 50 0 MD S T MID-STATE BCSH 50 0 10 0 0 PO S I F POINT OF SALE LTD 50 0 10 0 0 MB S I MILLER BUILDING SY 10 0 0 50 0 PN T E POINTE FINCL CORP 50 0 10 0 0 MN M D MINIMED INC 10 0 0 50 0 BP O P P POPULAR INC PFD A 50 0 20 0 MM A N MINUTEMAN INTL INC 20 0 50 0 PL S I A PREMIER LASER SY 50 0 10 0 0 MI P S MIPS TECHS INC 50 0 10 0 0 PR E N P PRICE ENTERPR PFD 20 0 50 0 MC R I MONARCH CASINO 50 0 10 0 0 PS M T PRICESMART INC 10 0 0 50 0 MU E L MUELLER PAUL CO 50 0 20 0 PD I I PROF DETAILING INC 50 0 10 0 0 LA B L MULTI COLOR CP 50 0 10 0 0 PR S P PROSPERITY BNCSHS 20 0 50 0 PA M C PROVIDENT AMER 20 0 50 0 N PS B I PSB BANCORP INC 50 0 10 0 0 PU L B PULASKI FINL CORP 50 0 10 0 0 NS D B N S D BANCORP INC 20 0 50 0 PL F C PULASKI FURNITURE 50 0 10 0 0 NS S C NAPCO SEC SYS INC 10 0 0 50 0 NA R A NARA BANK N A 10 0 0 50 0 Q NA D X NATL DENTEX CP 50 0 10 0 0 NT O L NATROL INC 50 0 10 0 0 QC F B Q C F BANCORP INC 50 0 20 0 FL Y R NAVIGANT INTL INC 50 0 10 0 0 QL G C QLOGIC CP 10 0 0 50 0 NE R A Y NERA AS ADR 50 0 10 0 0 NT B K NET.BANK INC 20 0 50 0 R NE T G NETGRAVITY INC 50 0 10 0 0 NS O L NETWORK SOLUTIONS 10 0 0 50 0 RG F C P R&G FIN CP PFD A 20 0 50 0 NB S C NEW BRUNSWICK SCI 10 0 0 50 0 RA G S RAG SHOPS INC 10 0 0 50 0 NR T I NOONEY REALTY TRUS 50 0 20 0 RW K S RAILWORKS CORP 50 0 10 0 0 NS Y S NORTECH SYSTEMS IN 10 0 0 50 0 RB O W RAINBOW RENTALS 50 0 10 0 0 NO V B NORTH VALLEY BNCP 50 0 10 0 0 RD G E READING ENT INC 50 0 10 0 0 NE I B NORTHEAST IND BNCP 10 0 0 50 0 RI G X REALTY INFO GROUP 50 0 10 0 0 NS C F NORTHSTAR COMPUTER 50 0 10 0 0 RE B C REDWOOD EMPIRE BCP 20 0 50 0 TO N S F NOVAMERICAN STEEL 50 0 10 0 0 RB C A A REPUBLIC BCP CL A 50 0 10 0 0 RS T O RESTORATION HARDWR 50 0 10 0 0 O RT S T D RIGHT START INC (THE) 50 0 10 0 0 RI F L ROYAL PRECISION INC 50 0 10 0 0 OL G R OILGEAR CO 20 0 50 0 RU S M F RUSSELL METALS 50 0 20 0 OD F L OLD DOMINION FREIG 10 0 0 50 0 OL C W F OLICOM A/S WTS 50 0 10 0 0 S FI B R OSICOM TECH 50 0 10 0 0 OW O S OWOSSO CP 50 0 10 0 0 SG V B S G V BANCORP INC 50 0 20 0 ST V I S T V GROUP INC 50 0 10 0 0 P SA V B SAVANNAH BNCP INC 50 0 20 0 SC C X SCC COMMUNICATIONS 50 0 10 0 0 PB C I PAMRAPO BNCP INC 10 0 0 50 0 SA V O SCHULTZ SAV O STOR 50 0 10 0 0 PG E O F PARADIGM GEOPHYS 50 0 10 0 0 ST I Z SCIENTIFIC TECH IN 50 0 10 0 0 PC C I P PCC CAPITAL I PFD 20 0 50 0 SC O T SCOTT AND STRINGF 10 0 0 50 0 PN N W PENNICHUCK CP 20 0 50 0 SE W Y SEAWAY FOOD TOWN I 10 0 0 50 0 PP C O PENWEST PHARM 50 0 10 0 0 SN F C A SECURITY NATL FINL A 20 0 50 0 PS F C PEOPLES-SIDNEY FIN 10 0 0 50 0 SE V N SEVENSON ENVIRONME 10 0 0 50 0 PE B K PEOPLES BANK 20 0 50 0 SF N C A SIMMONS FIRST NATL A 10 0 0 50 0 PE B O PEOPLES BNCP INC 10 0 0 50 0 SK Y E Y SKYEPHARMA PLC 50 0 10 0 0

NASD Notice to Members 99-22 March 1999 139 Old New Old New Symbol Security Name Level Level Symbol Security Name Level Level SE C B Y SOCIETE EUR ADS B 20 0 50 0 UL T I ULTIMATE SOFTWARE 50 0 10 0 0 SW R X SOFTWORKS INC 50 0 10 0 0 UC F C UNITED COMM FIN CP 50 0 10 0 0 SO M R SOMERSET GP INC TH 20 0 50 0 UN E W Y UNITED NEWS & MEDIA 50 0 20 0 SF F S SOUND FED BANCORP 20 0 50 0 UN T Y UNITY BANCORP INC 20 0 50 0 SM B C SOUTHERN MO BNCP I 10 0 0 50 0 OK S B SOUTHWEST BNCP INC 10 0 0 50 0 V SP Z N SPEIZMAN INDS INC 10 0 0 50 0 ST H L Y STET HELL ADS 50 0 10 0 0 VS E C V S E CP 20 0 50 0 SC S A Y STOLT COMEX ADS 50 0 10 0 0 VD R Y VACU DRY CO 20 0 50 0 SU B K SUFFOLK BNCP 50 0 10 0 0 VN G I VALLEY NATL GASES 10 0 0 50 0 SN B C P SUN CAPITAL TR PFD 50 0 20 0 VA L U VALUE LINE INC 50 0 10 0 0 SN B C O SUN CAPITL TR II 20 0 50 0 VT R A O VBC CAPITAL I CAP 50 0 20 0 SU N H SUNDANCE HOMES INC 50 0 10 0 0 VE N T VENTURIAN CP 50 0 10 0 0 SN R S SUNRISE TECHNOLOGIES 50 0 10 0 0 VI T X VI TECHNOLOGIES 50 0 10 0 0 SP P R SUPERTEL HOSPITALI 50 0 10 0 0 VL G E A VILLAGE SUPER MKT A 10 0 0 50 0 SI V B P SVB CAPITAL I PFD 50 0 10 0 0 VB N J VISTA BANCORP INC 10 0 0 50 0 SV B F SVB FIN SVCS INC 50 0 20 0 SW M A Y SWEDISH MATCH AB ADR 50 0 10 0 0 W SY N M SYNTROLEUM CORP 50 0 10 0 0 WV F C W V S FINANCIAL CP 10 0 0 50 0 T WB C O WASHINGTON BKG CO 50 0 10 0 0 WC N X WASTE CONNECTIONS 50 0 10 0 0 TH R D T F FINANCIAL CP 50 0 10 0 0 WE F C WELLS FINANCIAL CP 10 0 0 50 0 TS A T B TCI SAT ENT SER B 20 0 50 0 WC S T F WESCAST INDS INC A 20 0 50 0 TS R C TECHNISOURCE INC 50 0 10 0 0 WE B K WEST ESSEX BANCORP 20 0 50 0 TB F C TELEBANC FIN CP 50 0 10 0 0 WO F C WESTERN OHIO FIN 10 0 0 50 0 TI W I F TELESYSTEM INTL 50 0 10 0 0 WT F C P WINTRUST CAP PFD 20 0 50 0 TE R N TERAYON COMMUN SYS 20 0 50 0 WO R K WORKFLOW MGMT INC 50 0 10 0 0 TG L O THEGLOBE.COM INC 20 0 50 0 WH R T F WORLD HEART CORP 50 0 10 0 0 TH T L THISTLE GROUP HLDG 50 0 10 0 0 TW N E TOWNE SVCS INC 50 0 10 0 0 X TR K A TRAK AUTO CP 50 0 10 0 0 TR E D TREADCO INC 50 0 10 0 0 XC E D XCEED INC 50 0 10 0 0 TB C O L TRIATHALON BD DEP SH 50 0 20 0 TF C O TUFCO TECHS INC 50 0 10 0 0 Z TW T R TWEETER HOME ENT 50 0 10 0 0 ZV X I ZEVEX INTL INC 20 0 50 0 U

UF P T U F P TECH INC 50 0 10 0 0 UC B H UCBH HOLDINGS INC 20 0 50 0

NASD Notice to Members 99-22 March 1999 140 Executive Summary Background NASD On February 16, 1999, the Securities Since its adoption of the Code in and Exchange Commission (SEC) 1968, the NASD has subsidized a approved amendments to the fee substantial portion of the cost of the Notice to schedules for customer and member arbitration program from general arbitrations contained in Rules 10205 member assessment revenue. The and 10332 of the National Associa- current filing fee and hearing session Members tion of Securities Dealers, Inc. deposit schedules in the Code have (N A S D ¨) Code of Arbitration Proce- been in effect since 1990. Under the 99-23 dure (Code). This is the first increase current schedule, only a relatively in these fees since 1990. The fili n g small portion of the cost of the pro- fees and hearing session deposits gram is paid by filing fees and hear- are being increased to permit the ing session deposits. NASD to cover more of its costs of SEC Approves New operating the arbitration forum from Because the NASD believes that the Ar b i t r ation Fees; Effec t i v e revenue generated by the users of cost of the arbitration process should March 18, 1999 the forum; however, a large portion be borne by the users of the pro- of the operating costs are covered by gram, the organization has been surcharges and other fees imposed engaged in an effort to develop a fee Suggested Routing only on members. In addition, even structure that accomplishes that goal Senior Management though filing fees and hearing ses- without imposing significant burdens sion deposits are being increased, on public customers who bring arbi- Ad v e r t i s i n g the small percentage of arbitration tration claims to the NASD’s forum. Continuing Education fee revenue paid by customers ver- The first step toward that goal sus the large percentage paid by occurred in January 1998 when the Corporate Finance members will remain approximately NASD adopted a new process fee Executive Representatives the same as in the past. Arbitrator imposed entirely on member firm s Government Securities honoraria are also being increased in named as parties to arbitration pro- order to attract and retain qualified ceedings (see Notice to Members In s t i t u t i o n a l arbitrators willing to devote the time 98 - 0 1 (January 1998)). In addition, in In s u r a n c e necessary to thoroughly consider July 1997, the NASD substantially Internal Audit arbitration claims. increased the surcharge on mem- bers named as parties to arbitration Legal & Compliance The filing fee and hearing session proceedings. Both of these fees shift Mu n i c i p a l deposit increases will be effective on much of the cost of the arbitration March 18, 1999, for all cases filed on program from general membership Mutual Fund or after the effective date of the assessment revenue collected from Op e r a t i o n s amendments. The arbitrator hono- all NASD members to specific fees Op t i o n s raria increases will be effective for imposed on members which are par- arbitrators appointed to hear cases ties to arbitration proceedings. Registered Representatives filed on or after the effective date of Re g i s t r a t i o n the amendments. The text of the The final step in revamping the fee Re s e a r c h amendments, including the new fee structure is to increase the filing fees schedules, follows this No t i c e . and hearing session deposits Sy n d i c a t e required for customer arbitrations Sy s t e m s Questions regarding this No t i c e ma y and member arbitrations. In all be directed to Tom Wynn, Associate cases, the NASD is attempting as Tr a d i n g Director, Office of Dispute Resolu- much as possible to match the fili n g Tr a i n i n g tion, NASD Regulation, Inc. (NASD fees to the actual costs the NASD SM Variable Contracts Re g u l a t i o n ) at (212) 858-4392; or incurs in the average case. Similarly, Elliott R. Curzon, Assistant General the new hearing session deposit Counsel, NASD Regulation, at (202) amounts reflect the NASD’s actual 72 8 - 8 4 5 1 . costs of conducting hearings. Also, the initial costs to customers fili n g

NASD Notice to Members 99-23 March 1999 141 arbitration claims will not increase 10205. Schedule of Fees for (b) No change substantially relative to the amount of Industry and Clearing the claim. Finally, because the Controversies (c) No change NASD’s experience shows that the large majority of fees assessed by (a) At the time of filing a Claim, (d) No change arbitrators in an award are assessed Counterclaim, Third Party Claim, or against members and not customers, Cross-Claim in an industry or clear- (e) If the dispute, claim, or controver- the NASD believes that the overall ing controversy which is required to sy does not involve, disclose, or impact of the fee increases on cus- be submitted to arbitration before the specify a money claim, the non- tomers will be small. Association as set forth in Rule refundable filing fee assessed on a 10201, above, a party who is a mem- party who is a member shall be $500. be r shall pay a non-refundable fili n g If the dispute, claim, or controversy Text Of Amendments fee and shall remit a hearing session does not involve, disclose, or specify (Note: New text is underlined; deletions are deposit to the Association in the a money claim, the hearing session br a c k e t e d . ) amounts stated in paragraph (k) deposit to be remitted by a party shall unless such fee or deposit is specifi- be $1 0 0 0 [$600]. These amounts IM-10104. Arbitrator’s cally waived by the Director of Arbi- may be adjusted by the Director of Honorarium tration. A party who is an associated Arbitration or the panel of arbitrators person shall pay a non-refundable fil- may require the maximum amount All persons [serving on panels of ing fee and shall pay a hearing ses- sp e c i fi ed in the schedule [$1,000]. arbitrators pursuant to Rule 10104 sion deposit in the amounts specified of] selected to serve as arbitrators for customer claimants in Rule (f) No change pursuant to the Association’s Code 10332. If the associated person is a of Arbitration Procedure shall be paid joint claimant with a member, the (g) No change an honorarium for each hearing ses- member shall pay a non-refundable sion (including a prehearing confer- filing fee and shall pay a hearing ses- (h) No change en c e ) in which they participate [while sion deposit in the amounts specified in the performance of said duties]. in paragraph (k) of this Rule. Wh e r e (i) If an eligible matter is submitted multiple hearing sessions are for arbitration as a large and complex The honorarium shall be $[150]20 0 required, the arbitrator(s) may case, under the procedures set forth for [a single] each hearing session [, require any of the parties to make in Rule 10334, or under procedures $225 for a double session], $50 for additional hearing deposits for each agreed upon by the parties, following travel to a canceled hearing, and additional hearing session. In no the Administrative Conference speci- $[ 5 0 ] 75 per day additional honorari- event shall the amount deposited by fied in Rule 10334(b), the fees and um to the chairperson of the panel. all parties per hearing session deposits for such matter shall be The honorarium for a case not exceed the amount of the largest ini- those set forth in the schedule of requiring a hearing [is $75 per case] tial hearing deposit made by any fees for claims over $1 0 , 0 0 0 , 0 0 0 shall be $125. party under the paragraph (k) below. [$ 5 , 0 0 0 , 0 0 0 ] .

(j) No change

NASD Notice to Members 99-23 March 1999 142 (k) Schedule of Fees

Sc hedule of Fees

Deposit for Cases Amount in Dispute Claim Filing Fee to be Decided on Hearing Session Deposit (Exclusive of Interest the Paper Record and Expenses) [S i m p l i fie d 1] One Arbitrator1[2 ] Three Arbitrators2[3 ]

$.01 -- $1,000 $ 20 0 [5 0 0 ] $ 25 [ 75] $ 25 [3 0 0 ] NA $1 , 0 0 0 . 0 1 - $ 2 , 5 0 0 $ 30 0 [5 0 0 ] $ 50 [ 75] $ 50 [3 0 0 ] NA $2 , 5 0 0 . 0 1 - $ 5 , 0 0 0 $ 40 0 [5 0 0 ] $ 12 5 [ 75] $ 12 5 [3 0 0 ] NA $5 , 0 0 0 . 0 1 - $ 1 0 , 0 0 0 $ 500 $ 25 0 [ 75] $ 25 0 [3 0 0 ] NA $1 0 , 0 0 0 . 0 1 - $2 5 , 0 0 0 $ 750 $ 300 $ 450 NA $25 , 0 0 0 . 0 1- $ 3 0 , 0 0 0 $1, 0 0 0 [5 0 0 ] NA $ 45 0 [3 0 0 ] $ 600 $3 0 , 0 0 0 . 0 1 - $ 5 0 , 0 0 0 $1, 0 0 0 [5 0 0 ] NA $ 45 0 [3 0 0 ] $ 600 $50,000.01- $100,000 $1, 0 0 0 [5 0 0 ] NA $ 450 3 [3 0 0 4] $ 75 0 [ 600] $100,000.01-$500,000 $1, 0 0 0 [5 0 0 ] NA $ 450 3 [3 0 0 4] $1, 1 2 5 [ 750] $5 0 0 . 0 0 0 . 0 1 - $ 1, 0 0 0 , 0 0 0 $1 , 2 5 0 NA $ 450 3 $1, 2 0 0 $1 , 0 0 0 , 0 0 0 . 0 1 -$ 5 , 0 0 0 , 0 0 0 $2, 0 0 0 [5 0 0 ] NA $ 450 3 [3 0 0 4] $1, 2 0 0 [ 1,000] [O v e r ] $ 5 , 0 0 0 , 0 0 0 . 01 - $1 0 , 0 0 0 , 0 0 0 . 0 0 $2, 5 0 0 [5 0 0 ] NA $ 450 3 [3 0 0 4] $1, 2 0 0 [ 1,500] Over $10,000,000 $5 , 0 0 0 NA $ 4503 $1 , 2 0 0

[1Si m p l i fi ed Arbitration (Without Hearing)] 1[2 ] The dispute is resolved by o[O]ne a[A]rbitrator per hearing session, including pre-hearing conferences. [(Per Hearing Session)] 2[3 ] The dispute is resolved by t[T]hree [or more] a[A]rbitrators per hearing session. [(Per hearing session)] 3[4 ] Fee applies only to p[P]re-hearing c[C]onferences [Only] with a single arbitrator.

* * * *

10332. Schedule of Fees for or such greater or lesser amount as fees for claims over $1 0 , 0 0 0 , 0 0 0 Customer Disputes the Director of Arbitration or the [$ 5 , 0 0 0 , 0 0 0 ] . panel of arbitrators may require, but (a) No change shall not exceed the maximum (i) No change amount specified in the schedule (b) No change [$ 1 , 0 0 0 ] . (j) No change

(c) No change (f) No change (k) Schedule of Fees

(d ) No change (g) No change For purposes of the schedule of fees, the term “claim” includes Claims, (e) If the dispute, claim, or controver- (h) If an eligible matter is submitted Counterclaims, Third Party Claims, sy does not involve, disclose, or for arbitration as a large and complex and Cross-Claims. Any such claim specify a money claim, the non- case under the procedures set forth made by a customer or associated refundable filing fee for a public cus- in Rule 10334, or under procedures pe r s o n is treated as a customer tomer shall be $250 and the agreed upon by the parties, following claim for purposes of the schedule of non-refundable filing fee for an the Administrative Conference speci- fe e s . Any such claim made by a industry party shall be $500[.00]. The fied in Rule 10334(b), the fees and member [or associated person of a hearing session deposit to be remit- deposits for such matter shall be member] is an industry claim. ted by a party shall be $10 0 0 [$ 6 0 0 ] those set forth in the schedule of

NASD Notice to Members 99-23 March 1999 143 Customer or Associated Person Cl a i m a n t Deposit for Cases Amount in Dispute Claim Filing Fee to be Decided on Hearing Session Deposit (Exclusive of Interest the Paper Record and Expenses) [S i m p l i fie d 1] One Arbitrator1[2 ] Three Arbitrators2[3 ]

$.01 -- $1,000 $ 25 [ 15] $ 25 [1 5 ] $ 25 [ 15] NA $1 , 0 0 0 . 0 1 - $ 2 , 5 0 0 $ 25 $ 50 [2 5 ] $ 50 [ 25] NA $2 , 5 0 0 . 0 1 - $ 5 , 0 0 0 $ 50 $ 12 5 [7 5 ] $ 12 5 [1 0 0 ] NA $5 , 0 0 0 . 0 1 - $ 1 0 , 0 0 0 $ 75 $ 25 0 [7 5 ] $ 25 0 [2 0 0 ] NA $1 0 , 0 0 0 . 0 1 - $2 5 , 0 0 0 $12 5 [1 0 0 ] $ 30 0 [N A ] $ 450 NA $25 , 0 0 0 . 0 1 -$ 3 0 , 0 0 0 $1 5 0 NA $ 45 0 [3 0 0 ] $ 60 0 [ 400] $3 0 , 0 0 0 . 0 1 - $ 5 0 , 0 0 0 $17 5 [1 2 0 ] NA $ 45 0 [3 0 0 ] $ 60 0 [ 400] $5 0 , 0 0 0 . 0 1 - $ 1 0 0 , 0 0 0 $22 5 [1 5 0 ] NA $ 450 3 [3 0 0 4] $ 75 0 [ 500] $100,000.01-$500,000 $30 0 [2 0 0 ] NA $ 450 3 [3 0 0 4] $1, 1 2 5 [ 750] $5 0 0 . 0 0 0 . 0 1 - $1 , 0 0 0 , 0 0 0 $3 7 5 [2 5 0 ] NA $ 450 3 [3 0 0 4] $1, 2 0 0 [1 , 0 0 0 ] $1 , 0 0 0 , 0 0 0 . 0 1 - $ 3 , 0 0 0 , 0 0 0 $5 0 0 NA $ 450 3 $1 , 2 0 0 $3 , 0 0 0 , 0 0 0 . 0 1 - $ 5 , 0 0 0 , 0 0 0 $6 0 0 NA $ 450 3 $1 , 2 0 0 [O v e r ] $ 5 , 0 0 0 , 0 0 0 . 0 1 - $1 0 , 0 0 0 , 0 0 0 $60 0 [3 0 0 ] NA $ 450 3 [3 0 0 4] $1, 2 0 0 [1 , 5 0 0 ] Over $10,000,000 $6 0 0 NA $ 450 3 $1 , 2 0 0

[1Simplified Arbitration (Without Hearing)] 1[2]The dispute is resolved by o[O]ne a[A]rbitrator per hearing session, including pre-hearing conferences. [(Per Hearing Session)] 2[3]The dispute is resolved by t[T]hree [or more] a[A]rbitrators per hearing session. [(Per hearing session)] 3[4]Fee applies only to p[P]re-hearing c[C]onferences [Only] with a single arbitrator.

Me m b e r [Industry] Claimant

Deposit for Cases Amount in Dispute Claim Filing Fee to be Decided on Hearing Session Deposit (Exclusive of Interest the Paper Record and Expenses) [S i m p l i fie d 1] One Arbitrator1[2 ] Three Arbitrators2[ 3 ]

$.01 -- $1,000 $ 20 0 [5 0 0 ] $ 25 [ 75] $ 25 [3 0 0 ] NA $1 , 0 0 0 . 0 1 - $ 2 , 5 0 0 $ 30 0 [5 0 0 ] $ 50 [ 75] $ 50 [3 0 0 ] NA $2 , 5 0 0 . 0 1 - $ 5 , 0 0 0 $ 40 0 [5 0 0 ] $ 12 5 [ 75] $ 12 5 [3 0 0 ] NA $5 , 0 0 0 . 0 1 - $ 1 0 , 0 0 0 $ 500 $ 25 0 [ 75] $ 25 0 [3 0 0 ] NA $1 0 , 0 0 0 . 0 1 - $2 5 , 0 0 0 $ 750 $ 300 $ 450 NA $25 , 0 0 0 . 0 1 -$ 3 0 , 0 0 0 $1, 0 0 0 [5 0 0 ] NA $ 45 0 [3 0 0 ] $ 600 $3 0 , 0 0 0 . 0 1 - $ 5 0 , 0 0 0 $1, 0 0 0 [5 0 0 ] NA $ 45 0 [3 0 0 ] $ 600 $50,000.01- $100,000 $1, 0 0 0 [5 0 0 ] NA $ 450 3 [3 0 0 4] $ 75 0 [ 600] $100,000.01-$500,000 $1, 0 0 0 [500] NA $ 450 3 [3 0 0 4] $1, 1 2 5 [ 750] $5 0 0 . 0 0 0 . 0 1 - $ 1, 0 0 0 , 0 0 0 $1 , 2 5 0 $ 450 3 $1 , 2 0 0 $1 , 0 0 0 , 0 0 0 . 0 1 -$ 5 , 0 0 0 , 0 0 0 $2, 0 0 0 [5 0 0 ] NA $ 450 3 [3 0 0 4] $1, 2 0 0 [1 , 0 0 0 ] [O v e r ] $ 5 , 0 0 0 , 0 0 0 .0 1 - $10,000,000 $2, 5 0 0 [5 0 0 ] NA $ 450 3 [3 0 0 4] $1, 2 0 0 [1 , 5 0 0 ] Over $10,000,000 $5 , 0 0 0 $ 4503 $1 , 2 0 0

[1Simplified Arbitration (Without Hearing)] 1[2]The dispute is resolved by o[O]ne a[A]rbitrator per hearing session, including pre-hearing conferences. [(Per Hearing Session)] 2[3]The dispute is resolved by t[T]hree [or more] a[A]rbitrators per hearing session. [(Per hearing session)] 3[4]Fee applies only to p[P]re-hearing c[C]onferences [Only] with a single arbitrator. © 1999, National Association of Securities Dealers, Inc. (NASD). All rights reserved.

NASD Notice to Members 99-23 March 1999 144 As of January 21, 1999, the following bonds were added to the Fixed Income NA S D Pricing SystemSM (F I P S ¨). Notice to Sy m b o l Na m e Co u p o n Ma t u r i t y AD L A . G L Adelphia Communications Corp. Series B 8. 1 2 5 07 / 1 5 / 0 3 Members AE C R . G A American Eco Corp. Series B 9. 6 2 5 05 / 1 5 / 0 8 AE U S . G A Aetna Industries Inc. 11 . 8 7 5 10 / 0 1 / 0 6 99 - 2 4 AK I H . G A Aki Holding Corp. 13 . 5 0 0 07 / 0 1 / 0 9 AM C U . G A American Communication LLC Series B 10 . 2 5 0 06 / 3 0 / 0 8 AP O A . G A Apcoa Inc. 9. 2 5 0 03 / 1 5 / 0 8 AR I P . G A American President Co. Ltd 7. 1 2 5 11 / 1 5 / 0 3 Fi x ed Income Pric i n g AR I P . G B American President Co. Ltd 8. 0 0 0 01 / 1 5 / 2 4 System Additions, AT A C . G B Aftermarket Technology Corp. 12 . 0 0 0 08 / 0 1 / 0 4 Ch a n g e s , And Deletions AV H C . G A Advance Holding Corp. Series B 12 . 8 7 5 04 / 1 5 / 0 9 As Of Janu a r y 21, 1999 AV S R . G A Advance Stores Inc. Series B 10 . 2 5 0 04 / 1 5 / 0 8 AV U S . G A Advanta Capital Trust I Series B 8. 9 9 0 12 / 1 7 / 2 6 BC E G . G A Bank of New England Corp. 0. 0 0 0 07 / 1 5 / 4 9 BC E G . G B Bank of New England Corp. 9. 8 7 5 09 / 1 5 / 9 9 BC E G . G C Bank of New England Corp. 9. 5 0 0 02 / 1 5 / 4 9 Su g gested Routing BC E G . G D Bank of New England Corp. 8. 7 5 0 04 / 0 1 / 9 9 Senior Management BC E G . G E Bank of New England Corp. 8. 8 5 0 03 / 0 1 / 9 9 BC F D . G A Brand Scaffold Services Inc. 10 . 2 5 0 02 / 1 5 / 0 8 Ad v e r t i s i n g BN C C . G A BNC Corp. Inc. 8. 6 2 5 05 / 3 1 / 0 4 Continuing Education BS P O . G A Bell Sports Inc. 11 . 0 0 0 08 / 1 5 / 0 8 BY X . G A Bayou Steel Corp. 9. 5 0 0 05 / 1 5 / 0 8 Corporate Finance CG M . G A Congoleum Corp. 8. 6 2 5 08 / 0 1 / 0 8 Government Securities CG O . G B Atlas Air Inc. 9. 2 5 0 04 / 1 5 / 0 8 In s t i t u t i o n a l CH C A . G E Chancellor Media Corp. 9. 0 0 0 10 / 0 1 / 0 8 CI L P . G A Calair LLC/Calair Cap Corp. 8. 1 2 5 04 / 0 1 / 0 8 In s u r a n c e CK M H . G B Clark Material Handling Co. Internal Audit Series D 10 . 7 5 0 11 / 1 5 / 0 6 Legal & Compliance CK R M . G C Clark R&M Inc. 8. 6 2 5 08 / 1 5 / 0 8 CL U A . G A Cluett American Corp. Series B 10 . 1 2 5 05 / 1 5 / 0 8 Mu n i c i p a l CM S . G F CMS Energy Corp. 7. 5 0 0 01 / 1 5 / 0 9 Mutual Fund CN N B . G A Colonial National Bank USA 7. 0 0 0 08 / 0 1 / 0 3 CO Y N . G A Coyne International Enterprises Corp.11 . 2 5 0 06 / 0 1 / 0 8 Op e r a t i o n s CP N . G E Calpine Corp. 7. 8 7 5 04 / 0 1 / 0 8 Op t i o n s CP V U . G A Cooperative Computing Inc. 9. 0 0 0 02 / 0 1 / 0 8 Registered Representatives CV D U . G A Covad Comm. Grp Inc. Series B 13 . 5 0 0 03 / 1 5 / 0 8 DB W R . G A Dobson Wireline Co. 12 . 2 5 0 06 / 1 5 / 0 8 Re g i s t r a t i o n DC U C . G A Decora Industries Inc. Series B 11 . 0 0 0 05 / 0 1 / 0 5 Re s e a r c h DH D G . G A DTI Holdings Group LP Series B 12 . 5 0 0 03 / 0 1 / 0 8 Sy n d i c a t e DH I . G C Horton (D.R.) Inc. 8. 0 0 0 02 / 0 1 / 0 9 DV I . G B DVI Inc. 9. 8 7 5 02 / 0 1 / 0 4 Sy s t e m s EG E O . G A Eagle Geophysical Inc. Series B 10 . 7 5 0 07 / 1 5 / 0 8 Tr a d i n g EP L C . G A Epic Resort LLC/Cap Corp. Series B 13. 0 0 0 06 / 1 5 / 0 5 ES C Q . G A ESI Tractebel Acquisition Corp. 7. 9 9 0 12 / 3 0 / 1 1 Tr a i n i n g EV H C . G A Everest Healthcare Svs Corp. 9. 7 5 0 05 / 0 1 / 0 8 Variable Contracts EX D S . G B Exodus Communications Inc. 11 . 2 5 0 07 / 0 1 / 0 8 FC L U . G A Focal Communications Corp. Series B 12 . 1 2 5 02 / 1 5 / 0 8

NASD Notice to Members 99-24 March 1999 145 Sy m b o l Na m e Co u p o n Ma t u r i t y

FH G P . G A Falcon Holding Group LP Series B 8. 3 7 5 04 / 1 5 / 1 0 FH G P . G B Falcon Holding Group LP Series B 9. 2 8 5 04 / 1 5 / 1 0 FN R V . G A Fine Air Services Inc. 9. 8 7 5 06 / 0 1 / 0 8 FO I L . G C Forest Oil Corp. 10 . 5 0 0 01 / 1 5 / 0 6 FW L D . G A Firstworld Communication Inc. 13 . 0 0 0 04 / 1 5 / 0 8 FX I L . G A Flexitronics Intl Ltd. Series B 8. 7 5 0 10 / 1 5 / 0 7 GB H N . G A Global Health Science Inc. 11 . 0 0 0 05 / 0 1 / 0 8 GB I X . G A Globix Corp. 13 . 0 0 0 05 / 0 1 / 0 5 GC K G . G A Graham Packaging/GPC Cap Series B 10 . 7 5 0 01 / 1 5 / 0 9 GH C K . G A Graham Packaging Co./GPC Cap Corp. Series B 8. 7 5 0 01 / 1 5 / 0 8 GN B U . G A Glenborough Properties LP Series B 7. 6 2 5 03 / 1 5 / 0 5 GR V W . G A Grove Worldwide LLC/Cap Inc. 9. 2 5 0 05 / 0 1 / 0 8 GS C W . G A GS Escrow Corp. 6. 7 5 0 08 / 0 1 / 0 1 GS C W . G B GS Escrow Corp. 7. 0 0 0 08 / 0 1 / 0 3 GS C W . G C GS Escrow Corp. 7. 1 2 5 08 / 0 1 / 0 5 HB C R . G A Harborside Healthcare Corp. 11 . 0 0 0 08 / 0 1 / 0 8 HD C O . G A Hadco Corp. 9. 5 0 0 06 / 1 5 / 0 8 HM I T . G A Home Interiors & Gifts Inc. 10 . 1 2 5 06 / 0 1 / 0 8 HN Y C . G A Henry Co. Series B 10 . 0 0 0 04 / 1 5 / 0 8 HR C H . G A Hard Rock Hotel Inc. Series B 9. 2 5 0 04 / 0 1 / 0 5 IC F P . G A Intl Comfort Products Hldgs Inc. Series B 8. 6 2 5 05 / 1 5 / 0 8 IC G V . G A ICG Service Inc. 9. 8 7 5 05 / 0 1 / 0 8 IE S C . G A Indesco International Inc. 9. 7 5 0 04 / 1 5 / 0 8 IH M D . G A Imperial Home Decor Group Inc. Series B 11 . 0 0 0 03 / 1 5 / 0 8 IH S C . G A Insight Health Svs Corp. Series B 9. 6 2 5 06 / 1 5 / 0 8 IN H G . G A Iron Age Holdings Corp. 12 . 1 2 5 05 / 0 1 / 0 9 IN S L . G A Insilco Holding Co. 14 . 0 0 0 08 / 1 5 / 0 8 IP C G . G A Impac Group Inc. Series B 10 . 1 2 5 03 / 1 5 / 0 8 IP S C . G B ImpSat Corp. 12 . 3 7 5 06 / 1 5 / 0 8 IR N P . G A Iron Age Corp. 9. 8 7 5 05 / 0 1 / 0 8 IR U C . G A Intramericas Communication Corp. 14 . 0 0 0 10 / 2 7 / 0 7 JN E T . G A Jones International Networks Ltd. 11 . 7 5 0 07 / 0 1 / 0 5 JR G E . G A Jorgensen Earle M. Co. Series B 9. 5 0 0 04 / 0 1 / 0 5 KO G C . G C Kelley Oil & Gas Corp. Series D 10 . 3 7 5 10 / 1 5 / 0 6 LD H G . G A Lodestar Holdings Inc. 11 . 5 0 0 05 / 1 5 / 0 5 LE N F . G C Lenfest Communications Inc. 7. 6 2 5 02 / 1 5 / 0 8 LE N F . G D Lenfest Communications Inc. 8. 2 5 0 02 / 1 5 / 0 8 LF F U . G A Lifestyle Furnishings Inc. 10 . 8 7 5 08 / 0 1 / 0 6 LN H G . G A Lin Holdings Corp. 10 . 0 0 0 03 / 0 1 / 0 8 LN R . G B LNR Property Corp. 10 . 5 0 0 01 / 1 5 / 0 9 LN T V . G A Lin Television Corp. 8. 3 7 5 03 / 0 1 / 0 8 MC U M . G A Michael Petroleum Corp. Series B 11 . 5 0 0 04 / 0 1 / 0 5 MR S M . G A Morris Materials Handling Inc. 9. 5 0 0 04 / 0 1 / 0 8 MT L M . G A Metal Management Inc. 10 . 0 0 0 05 / 1 5 / 0 8 NE R U . G A NE Restaurant Co. Inc. 10 . 7 5 0 07 / 1 5 / 0 8 NF F . G A Neff Corp. 10 . 2 5 0 06 / 0 1 / 0 8 NR T Y . G A Norton McNaughton Inc. 12 . 5 0 0 06 / 0 1 / 0 5 NT L Q . G A National Equipment Svs Inc. Service B 10 . 0 0 0 11 / 3 0 / 0 4 NASD Notice to Members 99-24 March 1999 146 Sy m b o l Na m e Co u p o n Ma t u r i t y

OX A U . G B Oxford Automotive Inc. 10 . 1 2 5 06 / 1 5 / 0 7 PH C O . G A Philipp Brothers Chemicals Inc. 9. 8 7 5 06 / 0 1 / 0 8 PK V W . G A Park N View Inc. Series B 13 . 0 0 0 05 / 1 5 / 0 8 PL H Y . G A Pierce Leahy Command Co. 8. 1 2 5 05 / 1 5 / 0 8 PL W C . G A Plainwell Inc. Series B 11 . 0 0 0 03 / 0 1 / 0 8 PN H G . G A Pen Holdings Inc. Series B 9. 8 7 5 06 / 1 5 / 0 8 PR D . G A Polaroid Corp. 11 . 5 0 0 02 / 1 5 / 0 6 PS R I . G A Phase Metrics Inc. 10 . 7 5 0 02 / 0 1 / 0 5 PV H . G B Philips Van Heusen Corp. 9. 5 0 0 05 / 0 1 / 0 8 PZ E W . G A PX Escrow corp. 9. 6 2 5 02 / 0 1 / 0 6 QS R I . G A Queen Sand Resources Inc. 12 . 5 0 0 07 / 0 1 / 0 8 RH N Y . G A R. H. Donnelly Inc. 9. 1 2 5 06 / 0 1 / 0 8 RH Y C . G A Rhythms Net Connections Inc. Series B 13 . 5 0 0 05 / 1 5 / 0 8 RM D P . G A Renaissance Media Cap Corp. 10 . 0 0 0 04 / 1 5 / 0 8 RS A U . G A The Restaurant Co. 11 . 2 5 0 05 / 1 5 / 0 8 RS V . G A Rental Service Corp. 9. 0 0 0 05 / 1 5 / 0 8 SA M C . G A Samsonite Corp. 10 . 7 5 0 06 / 1 5 / 0 8 SG L S . G A Safelite Glass Corp. Series B 9. 8 7 5 12 / 1 5 / 0 6 SH U F . G A Schuff Steel Co. 10 . 5 0 0 06 / 0 1 / 0 8 SK L N . G A Safety-Kleen Srvs 9. 2 5 0 06 / 0 1 / 0 8 SK S . G B Saks Incorp. 7. 3 7 5 02 / 1 5 / 1 9 SM U I . G A Simonds Industries Inc. 10 . 2 5 0 07 / 0 1 / 0 8 SP C Y . G A Spincycle Inc. 12 . 7 5 0 05 / 0 1 / 0 5 SP L C . G A Splitrock Services Inc. Series B 11 . 7 5 0 07 / 1 5 / 0 8 SW W . G A Sitel Corp. 9. 2 5 0 03 / 1 5 / 0 6 SY T G . G A Styling Technology Corp. 10 . 8 7 5 07 / 0 1 / 0 8 TC O M . G B Tele-Commun Inc. Series E 10 . 2 5 0 09 / 3 0 / 0 0 TH Y H . G A Thermadyne Holdings Corp. 9. 8 7 5 06 / 0 1 / 0 8 TL L P . G E Toll Corp. 8. 1 2 5 02 / 0 1 / 0 9 TL N U . G A Talon Automotive Group Inc. Series B 9. 6 2 5 05 / 0 1 / 0 8 TO D R . G A Tri-State Outdoor Media Group Inc. 11 . 0 0 0 05 / 1 5 / 0 8 TS I C . G A Tropical Sportswear Intl Corp. Series A 11 . 0 0 0 06 / 1 5 / 0 8 TS U B . G A Treasure Bay Gaming & Resort Inc. 12 . 0 0 0 08 / 0 1 / 0 6 UH S P . G A Universal Hospital Svs Inc. 10 . 2 5 0 03 / 0 1 / 0 8 UM P R . G A Universal Compression Inc. 9. 8 7 5 02 / 1 5 / 0 8 US O F . G A US Office Products Co. 9. 7 5 0 06 / 1 5 / 0 8 US X G . G A US Xchange LLC 15 . 0 0 0 07 / 0 1 / 0 8 UV C G . G A Universal Compression Holdings Inc. 11 . 3 7 5 02 / 1 5 / 0 9 VC M K . G A Victory Markets Inc. 12 . 5 0 0 03 / 1 5 / 0 0 VN D H . G A Vendell Healthcare Inc. 12 . 0 0 0 05 / 1 5 / 0 0 VY T L . G A Viatel Inc. 12 . 5 0 0 04 / 1 5 / 0 8 VY T L . G B Viatel Inc. 11 . 2 5 0 04 / 1 5 / 0 8 WA X . G D Waxman Industries Inc. 13 . 7 5 0 06 / 0 1 / 9 9 WB B . G F Webb (Del) Corp. 10 . 2 5 0 02 / 1 5 / 1 0 WC O H . G A Westworld Comm Healthcare Inc. 14 . 3 7 5 12 / 0 1 / 0 0 WF S G . G B Wilshire Financial Service Group Inc. 13 . 0 0 0 01 / 0 1 / 0 4 WI R L . G A Wireless One Inc. 13 . 0 0 0 10 / 1 5 / 0 3 WI R L . G B Wireless One Inc. 13 . 5 0 0 08 / 0 1 / 0 6 WN R U . G A Winthrop Resources Corp. 9. 5 0 0 07 / 0 1 / 0 3

NASD Notice to Members 99-24 March 1999 147 Sy m b o l Na m e Co u p o n Ma t u r i t y

WP T L . G A Webster Capital Trust II Series B 10 . 0 0 0 04 / 0 1 / 2 7 WS F L . G A Western Financial Bank 8. 8 7 5 08 / 0 1 / 0 7 WS F S . G A WSFS Financial Corp. Series B 11 . 0 0 0 12 / 3 1 / 0 5 WS I N . G A Wesco International Inc. Series B 11 . 1 2 5 06 / 0 1 / 0 8 YO U A . G A Young America Corp. Series B 11 . 6 2 5 02 / 1 5 / 0 6

As of January 21, 1999, the following bonds were deleted from FIPS.

Sy m b o l Na m e Co u p o n Ma t u r i t y

AE N . G D AMC Entertainment Inc. 11 . 8 7 5 08 / 0 1 / 0 0 AF I T . G A Af fi nity Group Inc. 11 . 5 0 0 10 / 1 5 / 0 3 BL E . G A Bradlees Inc. 11 . 0 0 0 08 / 0 1 / 0 2 BL E . G B Bradlees Inc. 9. 2 5 0 03 / 0 1 / 0 3 CA R S . G A Carrols Corp. 11 . 5 0 0 08 / 1 5 / 0 3 CN L P . G F Connecticut Light & Power Co. 5. 5 0 0 02 / 0 1 / 9 9 EL A Y . G A Electro-Audio Dynamics Inc. 12 . 8 7 5 02 / 0 1 / 9 9 FN W H . G C First Nationwide Hldgs Inc. 9. 1 2 5 01 / 1 5 / 0 3 LI R P . G A Liggett Group Inc. Del 11 . 5 0 0 02 / 0 1 / 9 9 MC A B . G A Marcus Cable Co./Cap Corp. III 11 . 8 7 5 10 / 0 1 / 0 5 RD F L . G A RailRoad Finl Corp. 10 . 0 0 0 01 / 3 1 / 9 9 RE B . G A Redwood Empire Bancorp 8. 5 0 0 01 / 1 5 / 0 4 SP R T . G B Sprint Spectrum LP 11 . 0 0 0 08 / 1 5 / 0 6 ST N . G A Station Casinos Inc. 9. 6 2 5 06 / 0 1 / 0 3 ST N . G B Station Casinos Inc. 9. 6 2 5 06 / 0 1 / 0 3 TB O T . G A Texas Bottling Group Inc. 9. 0 0 0 11 / 1 5 / 0 3 WD C P . G A World Color Press Inc. 9. 1 2 5 03 / 1 5 / 0 3 WP S N . G A West Point Stevens Inc. 8. 7 5 0 12 / 1 5 / 0 1 WP S N . G B West Point Stevens Inc. 9. 3 7 5 12 / 1 5 / 0 5

As of January 21, 1999, changes were made to the symbols of the following FIPS bonds:

New Symbol Old Symbol Na m e Co u p o n Ma t u r i t y

IN L P . G A IN S L . G A Insilco Corp. 10 . 2 5 0 08 / 1 5 / 0 7 SS N I . G A SA M C . G A Samsonite Corp. 11 . 1 2 5 07 / 1 5 / 0 5

All bonds listed above are subject to trade-reporting requirements. Questions pertaining to FIPS trade-reporting rules should be directed to Stephen Simmes, Market Regulation, NASD RegulationSM , at (301) 590-6451.

Any questions regarding the FIPS master file should be directed to Cheryl Glowacki, Nasdaq¨ Market Operations, at (203) 385-6310.

© 1999, National Association of Securities Dealers, Inc. (NASD). All rights reserved.

NASD Notice to Members 99-24 March 1999 148 Good Friday: Trade DateÐSettlement Date Schedule NA S D The Nasdaq Stock Market¨ and the securities exchanges will be closed on Good Friday, April 2, 1999. “Regular way” transactions made on the business Notice to days noted below will be subject to the following schedule: Trade Date Settlement Date Reg. T Date*

Members March 29 April 1 April 6 99 - 2 5 30 5 7 31 6 8

April 1 7 9 Good Frid a y: Trad e DateÐSettlement Date 2 Markets Closed — Sc h e d u l e 5 8 12

*Pursuant to Sections 220.8(b)(1) and (4) of Regulation T of the Federal Reserve Board, a bro- Su g gested Routing ker/dealer must promptly cancel or otherwise liquidate a customer purchase transaction in a Senior Management cash account if full payment is not received within five business days of the date of purchase or, pursuant to Section 220.8(d)(1), make application to extend the time period specified. The date Ad v e r t i s i n g by which members must take such action is shown in the column titled “Reg. T Date.” Continuing Education Corporate Finance © 1999, National Association of Securities Dealers, Inc. (NASD). All rights reserved. Government Securities In s t i t u t i o n a l In s u r a n c e Internal Audit Legal & Compliance Mu n i c i p a l Mutual Fund Op e r a t i o n s Op t i o n s Registered Representatives Re g i s t r a t i o n Re s e a r c h Sy n d i c a t e Sy s t e m s Tr a d i n g Tr a i n i n g Variable Contracts

NASD Notice to Members 99-25 March 1999 149 NASD Rule Filing Status through a Market Maker agency NA S D The following is a list of rule filings by id e n t i fi cation symbol. the National Association of Securities Dealers, Inc. (NASD¨ or Association) 99 - 0 8 Ru l e that are pending at the Securities Amend Rules 10201 and 10202, and and Exchange Commission (SEC); adopt new Rule 3080 and new Rule recently have been approved and Series 10210 to enhance the dispute Fi l i n g have not been announced in a resolution process for the handling of Notice to Members; or recently have employment discrimination disputes, been withdrawn. The information is and to expand disclosure to St a t u s current as of March 4, 1999. Copies employees concerning the arbitration of rule filings (and any amendments of all disputes. thereto), the SEC release publishing the rule proposal for comment, and 99 - 0 7 Rule Filing Status As the SEC release approving the rule Submission of proposed Discovery Of March 4, 1999 change are available from the SEC Guide for use in arbitration Public Reference Room at (202) proceedings to improve the 942-8090, or from Christopher Leigh, discovery process in NASD- NASD Office of General Counsel, at sponsored securities arbitrations. (202) 728-8236 or via e-mail at The Discovery Guide consists of le i g h c @ n a s d . c o m (in certain cases a introductory and instructional text, fee may be required). NASD rule and 14 Document Production Lists. changes are not effective until approved by the SEC. 99 - 0 5 Amend Rule 2520 relating to margin Rule Filings That Have Not for exempted borrowers, good faith Been Published For Comment accounts, joint back office By The SEC arrangements and options 99 - 1 2 tr a n s a c t i o n s . Amend Rule 7010 to establish a fee for a voluntary trading data 99 - 0 2 distribution facility, named Nasdaq Amend IM-2110-1 and Rule 2720 to Post DataSM , accessible to NASD clarify the definition of “public members, buy-side institutions offering” to include all offerings of (Q u a l i fi ed Institutional Buyers securities exempt from SEC [Q I B s ] 1) and market data vendors registration under SEC Rule 504. through its “NasdaqTrader.com” Web Site. 99 - 0 1 Amend Schedule A to the NASD By- 99 - 1 1 Laws and Rule 2710 to simplify the Amend Rules 4611, 4613, 4618, fee structure for public offerings file d 4619, 4620, 4632, and Series 4700 under Rules 2710, 2720, and 2810. to re-establish SelectNetSM as an order delivery and negotiation 98 - 9 6 system for Nasdaq National Market¨ Amend Form U-4, the Uniform (NNM) securities and make Application for Securities Industry numerous changes to the current Registration or Transfer, and Form rules relating to the trading of NNM U-5, the Uniform Termination Notice se c u r i t i e s . for Securities Industry Termination. Comments solicited in Notice to 99 - 0 9 Members (NtM) 98 - 1 0 1 . Amend Rule 4613 to permit the separate display of customer orders 98 - 7 4 by Market Makers in Nasdaq¨ Amend Rule 3110 to require

NASD Notice to Members—NASD Rule Filing Status March 1999 151 additional disclosure in pre-dispute amend NASD Rule 6740 to permit Regulation authority to take arbitration agreements regarding the members to submit a certification to expedited disciplinary actions when arbitration process, including the Association that states that the temporary or permanent cease and possible limits on eligibility of claims member has conducted a review of desist orders are violated. and availability of punitive damages; sp e c i fi ed information and has fulfill e d Amendment No. 1 filed with the SEC to require member firms to provide its SEC Rule 15c2-11 obligations for on December 5, 1998. Published for certain information regarding documents that currently reside on comment by the SEC in Release No. arbitration and pre-dispute arbitration the SEC’s EDGAR database. 34-40826 (December 22, 1998); 63 agreements to customers upon Published for comment by the SEC F.R. 71984 (December 30, 1998). request; and to clarify the rule in Release No. 34-41075 (February Comment period expired March 1, regarding use of choice-of-law 19, 1999); 64 F.R. 10037 (March 1, 19 9 9 . provisions in pre-dispute arbitration 1999). Comment period expires ag r e e m e n t s . March 22, 1999. 98 - 6 1 Amend Rule 6420 to eliminate an 98 - 5 5 98 - 9 4 unnecessary provision relating to the Amend Section 8 of Schedule A of Amend Rule 11890 to conform the reporting of transactions in the NASD By-Laws with respect to time frame for requesting a clearly exchange-listed securities traded in the collection of SEC transaction erroneous adjudication for pre- the third market. Published for fees (SEC Fees). opening transactions. Published for comment by the SEC in Release No. comment by the SEC in Release No. 34-40360 (August 21, 1998); 63 F.R. 98 - 4 0 34-40992 (January 28, 1999); 64 46267 (August 31, 1998). Comment Amend Rule 3350 governing short F.R. 5846 (February 5, 1999). period expired September 25, 1998. sales in NNM securities to allow Comment period expired February Market Makers and broker/dealers to 26, 1999. 98 - 5 9 engage in certain customer Amend the trade reporting rules, facilitating, liquidity-providing 98 - 8 8 Rules 4632, 4642, 4652, 6620, with transactions (Facilitation Exemption). Code of Procedures for review of respect to “risk-less” principal Nasdaq Listing Determinations. transactions by Market Makers. 98 - 1 1 Amendment to NASD Rule 4800 Published for comment by the SEC Adopt IM-2210-5, Presentation of Series. Published for comment by in Release No. 34-40382 (August 28, Mutual Fund and Variable Contract- the SEC in Release No. 34-40874 1998); 63 F.R. 47337 (September 4, Related Performance Information, (December 31, 1998); 64 F.R. 1258 1998). Comment period expired and amend Rule 2210 and IM-2210- (January 8, 1999). Comment period September 25, 1998. 2 to permit the presentation of expired January 29, 1999. related performance information 98 - 4 9 (other than manager performance 98 - 8 5 Amend Rule 10335 to make it a information) in mutual fund and Adopt new Rules 4990 through 4998 permanent part of the Code of variable product sales material, to establish the Nasdaq Application, Arbitration. Amendment No. 1 file d subject to certain conditions a new electronic trading system with the SEC on September 9, 1998. designed to make the presentation based on the innovative information Amendment No. 2 filed with the SEC fair, balanced, and not misleading. processing technology provided by on September 10, 1998. Amendment Opti-Mark Technologies, Inc. No. 3 filed with the SEC on Rule Filings That Have Been Published for comment by the SEC December 3, 1998. Published for Pu b lished For Comment But in Release No. 34-40835 (December comment by the SEC in Release No. Ha ve Not Been Approved By 28, 1998); 64 F.R. 549 (January 5, 34-40441 (September 15, 1998); 63 The SEC 1998). Comment period expired F.R. 50611 (September 22, 1998). 99 - 0 4 January 26, 1999. Comment period expired October 13, Adopt new Rule 2315, which 19 9 8 . requires members to review current 98 - 8 0 issuer information prior to Adopt Rule 9800 Series to establish 98 - 4 4 recommending a transaction to a procedures to enable NASD Amend Rule 1060 and create new customer in an over-the-counter Regulation to issue temporary cease Interpretative Material, IM-3010, to (OTC) equity security. Additionally, and desist orders. The proposed rule codify existing practice by exempting the proposed rule change would change also would grant NASD from registration persons whose

NASD Notice to Members—NASD Rule Filing Status March 1999 152 securities business is limited to 98 - 1 7 new trade report modifier to identify certain limited marketing activities Amend Rules 4611, 4613, 4618, trades effected at a prior reference and specify supervisory 4619, 4620, 4632, 4642, and adopt price; 2) eliminate the 10,000-share requirements for members new Rule 4900 Series to establish an limitation on individual trades that concerning such unregistered integrated order delivery and may be “bunched” for trade reporting persons. Published for comment by execution system. The new system purposes; 3) require electronic the SEC in Release No. 34-40784 would replace the existing Small communications networks (ECNs) to (December 15, 1998); 63 F.R. 70173 Order Execution SystemSM (S O E S SM ) be responsible for reporting all trades (December 18, 1998). Comment and SelectNet service, while executed within the ECN; and 4) period expired January 8, 1999. retaining certain features of each in a address risk-less principal trades combined infrastructure. It also will involving exchange-listed securities 98 - 3 2 feature a voluntary limit order book. traded in the Third Market. Published Amend Rule 2210 to exclude In addition, a component of the new for comment by the SEC in Release independently-prepared research system will permit institutions to No. 34-40047 (June 2, 1998); 63 reports from the filing requirements obtain direct electronic access to The F.R. 30791 (June 5, 1998). of Rule 2210. Amendment No. 1 file d Nasdaq Stock Market¨ through a Comment period expired June 26, with the SEC on May 13, 1998. sponsored arrangement with a 19 9 8 . Published for comment by the SEC Nasdaq Market Maker. Amendment in Release No. 34-40074 (June 4, No. 1 filed with the SEC on March 3, 97 - 8 9 1998); 63 F.R. 32690 (June 15, 1998. Published for comment by the Adopt a new interpretation to Rule 1998). Comment period expired July SEC in Release No. 34-39718 2210 to permit the use by members 6, 1998. (March 4, 1998); 63 F.R. 12124 and associated persons of bond (March 12, 1998). Comment period mutual fund volatility ratings in 98 - 2 0 expired April 2, 1998. Comment supplemental sales literature on an Amend Rule 11860 to permit extended in SEC Release No. 34- interim 18-month pilot basis. members to use the facilities of a 39794 (March 25, 1998); 63 F.R. Published for comment by the SEC Qu a l i fi ed Electronic Vendor for 15471 (March 31, 1998). Comment in Release No. 34-40627 (November electronic confirmation and period extended to May 8, 1998. 2, 1998); 63 F.R. 60431 (November af fi rmation of depository eligible 9, 1998). The comment period transactions. Published for comment 98 - 1 4 expired November 30, 1998. by the SEC in Release No. 34-39831 Amend Rules 2820 and 2830 to: (April 6, 1998); 63 F.R. 18057 (April 1) provide maximum aggregate sales 97 - 7 6 13, 1998). Comment period expired charge limits for fund of funds Amend Rule 3230 to: 1) establish May 4, 1998. Comment period arrangements; 2) permit mutual standards for the disposition of extended by the SEC in Release No. funds to charge installment loads; written customer complaints about 34-39944 (May 1, 1998); 63 F.R. 3) prohibit loads on reinvested introducing member firms that are 25531 (May 8, 1998). Comment dividends; 4) impose redemption received by clearing firms; 2) govern period expired June 3, 1998. order requirements for shares how exception reports are made subject to contingent deferred sales available to introducing firms and 98 - 1 8 loads; and 5) eliminate duplicative retained by clearing firms; and 3) Adopt a new membership Rule 1150 prospectus disclosure. Amendment permit introducing firms to write that would provide NASD members No. 1 filed with the SEC on March checks on their clearing firm ’ s with qualified immunity in arbitration 12, 1998. Amendment No. 2 file d account. Amendment No. 1 filed with proceedings for statements made in with the SEC on June 10, 1998. the SEC on November 19, 1997. good faith in certain disclosures file d Published for comment by the SEC Amendment No. 1 filed with the SEC with the NASD on Forms U-4 and U- in Release No. 34-40310 (August 7, on November 19, 1997. Published 5. Published for comment by the 1998); 63 F.R. 43974 (August 17, for comment by the SEC in Release. SEC in Release No. 34-39892 (April 1998). Comment period expired No. 34-39349 (November 21, 1997); 21, 1998); 63 F.R. 23321 (April 28, September 8, 1998. 62 F.R. 63589 (December 1, 1997). 1998). Comment period extended in Comment period expired December SEC Release No. 34-40005 (May 98 - 0 8 22, 1997. 19, 1998); 63 F.R. 29050 (May 27, Amend trade reporting Rules 4623, 1998). Comment period expired 4632, 4652, 6420, and 6620. The 97 - 6 1 June 19, 1998. proposals would: 1) implement a Adopt new IM-2240-2: Application of

NASD Notice to Members—NASD Rule Filing Status March 1999 153 the NASD Mark-Up Policy to 97 - 1 2 published by the SEC in Release No. Transactions in Government and Amend Rule 2340 relating to the 34-41026 (February 8, 1999); 64 Other Debt Securities. Published for disclosure of values for direct F.R. 7223 (February 12, 1999). comment by the SEC in Release No. participation program and real estate Comment period expired March 5, 34-40511 (September 30, 1998); 63 investment trust securities on 19 9 9 . F.R. 54169 (October 8, 1998). customer account statements. Comment period expired December Published for comment by the SEC 99 - 0 6 7, 1998. in Release No. 34-38451 (March 27, Explanation of Nasdaq's decision to 1997); 62 F.R. 15945 (April 3, 1997). cease the practice of using a fift h 97 - 5 8 Comment period expired April 24, character identifier with a symbol of Amend Rule 3350 to implement 1997. Amendment No. 1 filed with foreign securities. Notice of filing and Short Sale Rule on a permanent the SEC on June 26, 1997. immediate effectiveness published by basis. Published for comment by the Submission dated June 26, 1997, the SEC in Release No. 34-41076 SEC in Release No. 34-38979 responds to comments. Amendment (February 19, 1999); 64 F.R. 9552 (August 26, 1997); 62 F.R. 46537 No. 2 filed with the SEC on July 7, (February 26, 1999). Comment (September 3, 1997). Comment 19 9 7 . period expires March 19, 1999. period expired September 24, 1997. 96 - 4 7 98 - 9 9 97 - 4 7 Amend Rule 10304, Code of Amend Rule 7010 to establish a fee Adopt new rule, 10336, to the Code Arbitration Procedure, to establish for a compliance and trading data of Arbitration Procedure to cap interim policy of referring eligibility report distribution facility accessible punitive damages at the lesser of determinations to the arbitrators and to members through the twice compensatory damages or to eliminate eligibility determinations NasdaqTrader.com Web Site. Notice $750,000. Amendment No. 1 file d by the staff pending adoption of fina l of filing and immediate effectiveness with the SEC on October 17, 1997. eligibility rule. Published for comment published by the SEC in Release No. Amendment No. 2 filed with the SEC by the SEC in Release No. 34-38060 34-40983 (January 27, 1999); 64 on November 14, 1997. Published (December 18, 1996); 61 F.R. 68081 F.R. 5329 (February 3, 1999). for comment by the SEC in Release (December 26, 1996). Comment Comment period expired February No. 34-39371 (November 26, 1997); period expired January 16, 1997. 24, 1999. 62 F.R. 64428 (December 5, 1997). Comment period expired December 96 - 4 3 98 - 9 8 29, 1997. Amend Rules 4613, 4623, 4710, Amend Nasdaq’s practices 4730, 6330, and IM-4613 to modify concerning Market Maker quotations 97 - 4 4 SOES and SelectNet to implement in Nasdaq securities that are being Amend Rule 10304 of the Code of the SEC’s Order Handling Rules. quoted for the first time after an initial Arbitration Procedure (Eligibility Published for comment by the SEC public offering (IPO). Under the Rule) to retain current six-year in Release No. 34-38008 (December proposal, the pre-opening period for eligibility rule, provide that all claims 2, 1996); 61 F.R. 64549 (December the initial display of Market Maker shall be eligible for arbitration unless 5, 1996). Comment period expired quotes will be extended to 15 challenged, eliminate involuntary December 26, 1996. Amendment minutes prior to the commencement bifurcation of claims, and eliminate No. 1 filed with SEC on January 9, of trading to permit the development election of remedies. Amendment 1997. Partial approval granted by the of orderly quotations, with provision No. 1 filed with the SEC on July 14, SEC in Release No. 34-38156 for a single additional 15-minute 1997. Amendment No. 2 filed with (January 10, 1997); 62 F.R. 2415 extension of the pre-opening period if the SEC on July 18, 1997. (January 16, 1997). the market is locked or crossed at Amendment No. 3 filed with the SEC the conclusion of the first 15-minute on December 3, 1997. Amendment Rule Filings Approved By The period. Accelerated approval granted No. 4 filed with the SEC on SE C by the SEC in Release No. 34-40968 December 18, 1997. Published for 99 - 1 0 (January 22, 1999); 64 F.R. 4729 comment by the SEC in Release No. Amend the NASDR and Nasdaq By- (January 29, 1999). Comment period 34-39487 (December 23, 1997); 63 Laws to increase from 8 to 10 the expired February 19, 1999. F.R. 588 (January 6, 1998). maximum number of directors on the Comment period expired January boards of those corporations. Notice 98 - 9 7 27, 1998. of filing and immediate effectiveness Amend Rule 10335 of the Code of

NASD Notice to Members—NASD Rule Filing Status March 1999 154 Arbitration Procedure to extend the earliest date to file document and responsibilities when using the effectiveness of the rule for six information requests in arbitration Internet to disseminate material months. Pilot rule now due to expire proceedings from 20 business days news about the company. Published July 3, 1999. Accelerated approval to 45 calendar days after service of for comment by the SEC in Release granted by the SEC in Release No. the Statement of Claim or upon fili n g No. 34-40771 (December 10, 1998); 34-40846 (December 28, 1998); 64 of the Answer, whichever is earlier. 63 F.R. 69701 (December 17, 1998). F.R. 548 (January 5, 1999). Comment Notice of filing and immediate Comment period expired January 7, period expired January 26, 1999. effectiveness published by the SEC 1999. Approved by the SEC in in Release No. 34-40954 (January Release No. 34-40988 (January 28, 98 - 9 5 19, 1999); 64 F.R. 3993 (January 26, 1999); 64 F.R. 5331 (February 3, Amend Schedule A of the NASD By- 1999). Comment period expired 19 9 9 ) . Laws to reduce fees for the February 16, 1999. Regulatory Element of the 98 - 7 8 Continuing Education requirements 98 - 8 7 Amend Rule 2860(b)(3)(A)(vii) to of Rule 1120 and to correct a cross- Amend Schedule A to the NASD By- make permanent the Association’s reference. Notice of filing and Laws and Rule 2710 to delete the Equity Option Hedge Exemption, immediate effectiveness published provision mandating that Corporate which has been operating as a pilot by the SEC in Release No. 34-40851 Financing filing fees be paid in the program since 1990. Published for (December 28, 1998); 64 F.R. 554 form of a check or money order. comment by the SEC in Release No. (January 5, 1999). Comment period Notice of filing and immediate 34-40652 (November 9, 1998); 63 expired January 26, 1999. effectiveness published by the SEC F.R. 63764 (November 16, 1998). in Release No. 34-40706 (November Comment period expired December 98 - 9 3 24, 1998); 63 F.R. 66618 (December 7, 1998. Approved by the SEC in Amend Rule 10333(d) to change the 2, 1998). Comment period expired Release No. 34-40814 (December time when members must pay the December 23, 1998. 21, 1998); 63 F.R. 71534 (December pre-hearing process fee in an 29, 1998). arbitration. The fee now becomes 98 - 8 6 payable when the parties are notified Amend Rules 112, 120, 1060, 1100, 98 - 7 3 of the pre-hearing conference. 3010, 6120, and 10101 and Amend Rule 7010 to make Previously the fee was due and Interpretive Material 2110-4, 2210-4, permanent the $21.25 monthly per payable when the pre-hearing 2420-1, 2420-2, and 2440, to correct port fee for subscribers who receive conference was held. Notice of fili n g cross-references to the NASD By- Nasdaq Level 1 service through and immediate effectiveness Laws. Notice of filing and immediate automated voice response services. published by the SEC in Release No. effectiveness published by the SEC Published for comment by the SEC 34-40933 (January 11, 1999); 64 in Release No. 34-40718 (November in Release No. 34-40547 (October F.R. 3142 (January 20, 1999). 30, 1998); 63 F.R. 67499 (December 15, 1998); 63 F.R. 56055 (October Comment period expired February 7, 1998). Comment period expired 20, 1998). Comment period expired 10, 1999. December 28, 1998. November 10, 1998. Approved by the SEC in Release No. 34-40689 98 - 9 2 98 - 8 4 (November 19, 1998); 63 F.R. 65626 Amend Rule 2860(b)(3)(A) to triple Amend Rule 7010(l) to extend, (November 27, 1998). the position limits on standardized through March 31, 1999, the fees (exchange-traded) equity options currently charged for the execution of 98 - 7 2 and make them equivalent to the transactions in SelectNet. Notice of To extend for one year: 1) the pilot limits on conventional OTC equity filing and immediate effectiveness term of the Nasdaq International options overlying the same security. published by the SEC in Release No. Service; and 2) the effectiveness of Accelerated approval granted by the 34-40783 (December 15, 1998); 63 certain rules (International Rules) SEC in Release No. 34-40932 F.R. 70177 (December 18, 1998). that are unique to the Service. With (January 11, 1999); 64 F.R. 2930 Comment period expired January 8, this filing, the pilot period for the (January 19, 1999). Comment period 1999. Service and the International Rules expired February 9, 1999. would be extended through October 98 - 7 9 8, 1999. Notice of filing and 98 - 9 1 Amend Rule IM-4120-1 regarding immediate effectiveness published Amend Rule 10321 to modify the Nasdaq issuers’ disclosure by the SEC in Release No. 34-40528

NASD Notice to Members—NASD Rule Filing Status March 1999 155 (October 6, 1998); 63 F.R. 55165 (October 30, 1998); 63 F.R. 59819 98 - 5 3 (October 14, 1998). Comment period (November 4, 1998). Amend Rule 6800 to establish expired November 4, 1998. minimum requirements for the 98 - 6 5 inclusion of closed-end mutual funds 98 - 7 0 Amend Rule 7010(l) to extend, in Nasdaq’s MFQS. Amendment No. Amend Rule 7090 to add a logon through November 30, 1998, the 1 filed with the SEC on August 26, id e n t i fi cation fee for subscribers to fees charged for the execution of 1998. Published for comment by the Nasdaq’s Mutual Fund Quotation transactions in SelectNet. Notice of SEC in Release No. 34-40380 System (MFQS or Service) that use filing and immediate effectiveness (August 27, 1998); 63 F.R. 47336 the MFQS to transmit to Nasdaq published by the SEC in Release No. (September 4, 1998). Comment fund-pricing and other required 34-40427 (September 10, 1998); 63 period expired September 25, 1998. information. Amendment No. 1 file d F.R. 49724 (September 17, 1998). Approved by the SEC in Release No. with the SEC on October 1, 1998. Comment period expired October 8, 34-40519 (October 5, 1998); 63 F.R. Published for comment by the SEC 19 9 8 . 54740 (October 13, 1998). in Release No. 34-40543 (October 15, 1998); 63 F.R. 55909 (October 98 - 6 3 98 - 4 7 19, 1998). Comment period expired Amend the current fee schedule in Amend Rules 4632, 4642, 4652, November 9, 1998. Approved by the Rule 7010(h)(2) for subscribers to 5109, 6120, 6140, 6420, 6620, 7010, SEC in Release No. 34-40694 the Nasdaq Workstation II¨ (N W I I ) 11180 to integrate the functionality of (November 19, 1998); 63 F.R. 65832 service who are not NASD members. the Trade Acceptance and (November 30, 1998). Amendment No. 1 filed with the SEC Reconciliation ServiceSM (T A R S SM ) September 12, 1998. Amendment into the ACT and implement certain 98 - 6 8 No. 2 filed with the SEC November enhancements to ACT. Notice of Revise the interpretation of the 17, 1998. Published for comment by filing and immediate effectiveness de fi nition of “ACT Eligible Security” in the SEC in Release No. 34-40521 published by the SEC in Release No. Rule 6110(a) to include all securities (October 6, 1998); 63 F.R. 55167 34-40578 (October 23, 1998); 63 designated as PORTALSM se c u r i t i e s (October 14, 1998). Comment period F.R. 57342 (October 27, 1998). pursuant to Rule Series 5320 (The expired November 14, 1998. Comment period expired November PORTAL Market Rules) to the extent Approved by the SEC in Release No. 17, 1998. transactions in such PORTAL 34-40716 (November 27, 1998); 63 securities are voluntarily submitted to F.R. 66619 (December 2, 1998). 98 - 4 6 Automated Confirmation Transaction Amend IM-1000-4 to make a Se r v i c e SM (A C T SM ) solely for 98 - 6 2 technical correction and amend the reconciliation, comparison, and/or Amend Rule 7010(h)(2) relating to Plan of Allocations and Functions by clearance and settlement. Notice of NWII and network fees. The NASD to Subsidiaries (Delegation filing and immediate effectiveness proposed rule change is intended to Plan) to clarify NASD Regulation's published by the SEC in Release No. amend the current fee schedule for authority to inspect the books and 34-40424 (September 8, 1998); 63 NWII service for NASD members records of The Nasdaq Stock F.R. 49623 (September 16, 1998). only. The NASD and Nasdaq are Market. Notice of filing and Comment period expired October 16, filing a parallel rule filing to effect the immediate effectiveness published 19 9 8 . same amendments to the NWII fee by the SEC in Release No. 34-40252 structure to apply to non-NASD (July 23, 1998); 63 F.R. 40759 (July 98 - 6 7 members (See RF 98-63). The 30, 1998). Comment period expired Statement of two policies regarding NASD and Nasdaq also are August 20, 1998. the NASD’s oversight of American eliminating the Digital Interface Stock Exchange LLC (Amex LLC) Service fees as this service is no 98 - 4 5 and the composition of the Board of longer provided by the Association. Amend Rules 3010 and 3110 to Governors of Amex LLC. Published Effective upon filing. Amendment No. delay the effective date of the for comment by the SEC in Release 1 filed with the SEC on September provision in NtM 98-11 ad d r e s s i n g No. 34-40443 (September 16, 1998); 10, 1998. Published for comment by the review of incoming, non- 63 F.R. 51108 (September 24, the SEC in Release No. 34-40434 electronic correspondence until Sept. 1998). Comment period expired (September 11, 1998); 63 F.R. 49937 30, 1998. The delay will allow October 15, 1998. Approved by the (September 11, 1998). Comment NASDR to address the regulatory SEC in Release No. 34-40462 period expired October 9, 1998. concerns necessitating the review of

NASD Notice to Members—NASD Rule Filing Status March 1999 156 incoming, non-electronic members of NASD Regulation Office payable by Nasdaq market data correspondence and at the same of Hearing Officers to oversee non- distributors and vendors, for data time to respond to concerns raised summary proceedings involving usage, monitoring costs and other by member firms about the difficu l t y membership cancellations and administrative expenses incurred by of conducting such review. Notice of suspensions related to failure to Nasdaq. Once effective, Nasdaq will filing and immediate effectiveness comply with an arbitration award suspend indefinitely its current published by the SEC in Release No. settlement agreement. Amendment contractual requirement that Nasdaq 34-40178 (July 7, 1998); 63 F.R. No. 1 filed with the SEC on May 4, real-time data distributors and 37911 (July 14, 1998). Comment 1998. Published for comment by the vendors provide an annual period expired August 4, 1998. SEC in Release No. 34-39957 (May ac c o u n t a n t - c e r t i fi ed list of its 1, 1998); 63 F.R. 26238 (May 12, subscribers who receive Nasdaq 98 - 4 2 1998). Comment period expired on data. Published for comment by the Amend Rule 10335 to extend the May 27, 1998. Approved by the SEC SEC in Release No. 34-40035 (May effectiveness of the rule for six in Release No. 34-40026 (May 26, 27, 1998); 63 F.R. 30276 (June 3, months to January 3, 1999. 1998); 63 F.R. 30789 (June 5, 1998). 1998). Comment period expired on Accelerated approval granted by the June 24, 1998. Approved by the SEC in Release No. 34-40124 (June 98 - 3 1 SEC in Release No. 34-40454 24, 1998); 63 F.R. 36282 (July 2, Amend Rules 3010 and 3110 to (September 22, 1998); 63 F.R. 1998). Comment period expired on implement the effective date of 51980 (September 29, 1998). July 28, 1998. recently-approved amendments to these rules, with the exception of a 98 - 2 1 98 - 3 7 provision in NtM 98-11 regarding the Amend Rule 4613(a)(1)(C) to Amend rule 7010(l) to extend review of incoming correspondence. permanently allow Market Makers to through August 31, 1998, the fees The amendments allow firms to quote their actual size by reducing currently charged for the execution of develop flexible procedures for the the minimum quotation size transactions in SelectNet. Notice of review of correspondence with the requirement for Market Makers in all filing and immediate effectiveness public. Notice of filing and immediate securities listed on Nasdaq to one published by the SEC in Release No. effectiveness published by the SEC normal unit of trading (Actual Size 34-40050 (June 1, 1998); 63 F.R. in Release No. 34-39866 (April 14, Rule). Published by the SEC in 31254 (June 8, 1998). Comment 1998); 63 F.R. 19778 (April 21, Release No. 34-39760 (March 16, period expired June 29, 1998. 1998). Comment period expired May 1998); 63 F.R. 13894 (March 23, 12, 1998. 1998). Comment period expired April 98 - 3 6 13, 1998. Approved by the SEC in Amend the NASD Regulation By- 98 - 2 7 Release No. 34-40211 (July 15, Laws to permit one or more Industry Adopt Interpretive Material (IM) to 1998); 63 F.R. 39322 (July 22, members of the National NASD Rule 4120 to codify, on a two- 19 9 8 ) . Adjudicatory Council (NAC) to serve year pilot basis, the NASD's as at-large Industry members of the agreement to halt, upon the request 98 - 1 9 NAC, rather than requiring that all of the SEC, all domestic trading in Postpone the effective date of Industry members represent a region both the securities listed on Nasdaq amendments to IM-8310-2 and as is currently provided in the NASD and all equity and equity-related Forms U-4 and U-5 to March 16, Regulation By-Laws. Amendment securities trading in the OTC market 1998. Notice of filing and immediate No. 1 filed with the SEC on May 19, dealing with trading halts. IM-4120-3 effectiveness published by the SEC 1998. Published for comment by the replaces NASD IM-4120-2 which in Release No. 34-39371 (March 6, SEC in Release No. 34-40062 (June expired on December 31, 1997. 1998); 63 F.R. 12558 (March 11, 3, 1998); 63 F.R. 32033 (June 11, Accelerated approval granted by the 1998). Comment period expired April 1998). Comment period expired July SEC in Release No. 34-39846 (April 3, 1998. 2, 1998. Approved by the SEC in 9, 1998); 63 F.R. 18477 (April 15, Release No. 34-40213 (July 15, 1998). Comment period expired on 98 - 1 5 1998); 63 F.R. 39619 (July 23, May 6, 1998. Amend Rule 2860(b) to establish that 19 9 8 ) . NASD member firms and their 98 - 2 5 customers shall have the same 98 - 3 4 Amend Rule 7010 to establish an position and exercise limits for FLEX Amend Rule 9514 to permit annual, scaled administrative fee, Equity Options as the firms that are

NASD Notice to Members—NASD Rule Filing Status March 1999 157 members of the exchange on which SEC in Release No. 34-39865 (April 18, 1997. Amendment No. 1 file d such FLEX Equity Options trade. 14, 1998); 63 F.R. 19992 (April 22, with the SEC on April 1, 1997. Accelerated approval granted by the 1998). Comment period expired May Approved by the SEC in Release No. SEC in Release No. 34-39668 13, 1998. 34-39857 (April 15, 1998); 63 F.R. (February 20, 1998); 63 F.R. 10057 19547 (April 20, 1998). Effective April (February 27, 1998). Comment 97 - 9 6 14, 1998. period expired on April 3, 1998. Amend Rule 10333(d) to adjust the Hearing Process Fee Schedule so Rule Filings That Have Been 98 - 1 0 that the amounts in dispute of the Wi t h d r aw n Amend Rules 3010 and 3110 to lowest brackets in the Rule 10333(d) 98 - 8 3 postpone indefinitely the effective Hearing Process Fee Schedule are Si m p l i fi cation of Corporate Finance date of recently approved consistent with the dollar amount at filing fees. This filing was withdrawn amendments to these rules (See which the Pre-hearing Process Fee on January 22, 1999, and replaced NtM 98-11) and to allow the NASDR is imposed. Notice of filing and by rule filings 99-01 and 98-87. an opportunity to consider comment immediate effectiveness published letters received from the public. by the SEC in Release No. 34-30504 98 - 7 1 Notice of filing and immediate (December 31, 1997); 63 F.R. 1134 Amend Rule 7010 to establish a pilot effectiveness published by the SEC (January 8, 1998). Comment period proprietary trading data distribution in Release No. 34-39665 (February expired January 29, 1998. facility accessible to NASD members 13, 1998); 63 F.R. 9032 (February and qualified institutional buyers 23, 1998). Comment period expired 97 - 7 9 through its NasdaqTrader.com Web March 16, 1998. Amend IM-10104, 10205 and 10332 Site. Under the proposal, NASD of the Code of Arbitration Procedure member firms will be able to obtain 98 - 0 4 to increase the arbitrator honoraria, data, verified for accuracy by ACT, To change the interpretation of the arbitration filing fees, and hearing regarding their trading volume in Code of Arbitration Procedure such session deposits for intra-industry securities in which they report that claims relating to transactions in and public investor arbitrations. The volume as well as disseminate some exempted securities, including proposed rule change will amend the or all of that information to other government and municipal securities, fee schedules to graduate fees users of the system. Published for may be submitted to the Office of further according to the amount in comment by the SEC in Release No. Dispute Resolution for arbitration dispute to reflect more closely the 34-40542 (October 9, 1998), 63 FR under the NASD’s Code of costs associated with resolving 55909 (October 19, 1998). Arbitration Procedure without controversies. Amendment No. 1 Withdrawn on November 5, 1998. limitation. Amendment No. 1 file d filed with the SEC on November 12, Withdrawal announced by the SEC with the SEC on February 6, 1998. 1997. Published for comment by the in Release No. 34-40658 (November Amendment No. 2 filed with the SEC SEC in Release No. 34-39346 10, 1998); 63 F.R. 64136 (November on March 30, 1998. Published for (November 21, 1997); 62 F.R. 63580 18, 1998). comment by the SEC in Release No. (December 1, 1997). Comment 34-39880 (April 16, 1998); 63 F.R. period expired December 22, 1997. 98 - 5 0 20232 (April 23, 1998). Comment Amendment No. 2 filed with the SEC Adopt Rules 2315 and 2360 to period expired May 14, 1998. on December 18, 1997. Approved by require members to review current Approved by the SEC in Release No. the SEC in Release No. 34-41056 issuer information prior to 34-40103 (June 19, 1998); 63 F.R. (February 16, 1999); 64 F.R. 10041 recommending a transaction to a 34951 (June 26, 1998). (March 1, 1999). customer in an OTC equity security and to provide certain disclosure 98 - 0 2 97 - 2 0 information on the trade confirm a t i o n Amend Rule 2860(b)(3)(A)(vii)(c) to Amend Rule 6440 to eliminate for customer transactions in an OTC extend, until December 31, 1999, the restrictions on members to accept equity security. This rule filing was Association’s pilot program for stop orders and certain stop limit withdrawn on January 13, 1999. exemptions from equity option orders in exchange-listed securities. position limits for certain hedged Published for comment by the SEC 98 - 4 1 positions. Amendment No. 1 file d in Release No. 34-38429 (March 21, Amend Rule 4613(a)(5) to permit with the SEC on March 23, 1998. 1997); 62 F.R. 14953 (March 28, Market Makers to decrement their Accelerated approval granted by the 1997). Comment period expired April quoted size by the amount of a

NASD Notice to Members—NASD Rule Filing Status March 1999 158 preferenced SelectNet order if the judgments and arbitration decisions comment by the SEC in Release No. Market Maker has programmed its in securities and commodities 34-39417 (December 9, 1997); 62 trading system to execute disputes involving public customers F.R. 65838 (December 16, 1997). automatically such orders upon and registered persons or member Comment period expired January 6, receipt. This rule filing was firms. This rule filing was withdrawn 1998. This rule filing was withdrawn withdrawn on July 16, 1998. on April 6, 1998. on July 13, 1998.

98 - 3 0 98 - 1 2 97 - 6 7 Amend Rule 3110 to: (1) change the Amend IM-2110-1 and Rules 2710 Amend Rule 2860 to align the de fi nition of “institutional account” to and 2720 to clarify the definition of a NASD’s position limit rules for include the accounts of investment “Public Offering.” Accelerated conventional equity options with the advisers that, under new rules approval requested. This rule fili n g position limit rules for FLEX Equity adopted by the SEC, are now was withdrawn on April 27, 1998. Options. This filing was withdrawn on required to register with the states; February 13, 1998, and replaced by and (2) exclude certain customer 97 - 8 0 rule filing 98-23. accounts from the requirement to Amend Rule 2860(b) to exempt obtain certain tax and employment conventional equity option En d n o t e information from the customer. This transactions that are intermediated 1For purposes of this service, Nasdaq will rely rule filing was withdrawn on May 7, by a member pursuant to Exchange on the definition of “Qualified Institutional 19 9 8 . Act Rule 15a-6(a)(3) from options Buyer” found in Rule 144A of the Securities position limits provided that the Act of 1933. 98 - 2 4 member reports such transactions to Amend IM-8310-2 to clarify that the Association in accordance with © 1999, National Association of Securities Dealers, NASD Regulation will continue to the options position reporting Inc. (NASD). All rights reserved. release information concerning civil requirements. Published for

NASD Notice to Members—NASD Rule Filing Status March 1999 159 NASD Regulation, Inc. (NASD The suspension began with the com- Di s c i p l i n a r y Re g u l a t i o n SM ) has taken disciplinary mencement of business on January actions against the following firms and 30, 1999, and concluded at the close individuals for violations of National of business on February 28, 1999. Actions Association of Securities Dealers, Inc. (N A S D ¨) rules; federal securities laws, rules, and regulations; and the rules of Firms Fined, Individuals the Municipal Securities Rulemaking Sanctioned Board (MSRB). Unless otherwise indi- Howe, Solomon & Hall, Inc. Di s c i p l i n a r y Actions cated, suspensions will begin with the (Miami, Florida) and Ch r i s t o p h e r Re p o r ted For March opening of business on Monday, John Hall (Registered Principal, March 15, 1999. The information Miami, Florida) submitted a Letter of relating to matters contained in this Acceptance, Waiver, and Consent No t i c e is current as of the end of pursuant to which the firm was February 19, 1999. censured, fined $25,000, and required to retain an independent consulting firm mutually agreeable to Firm Suspended, Individual both the firm and the NASD for one Sanctioned year. Hall was censured, fine d First Atlanta Securities, L.L.C. $25,000, suspended from (Atlanta, Georgia) and Ja m e s association with any NASD member Andrew Steinkirchner (Registered in any capacity for two years, and Principal, Marietta, Georgia) su b m i t - barred from association with any ted a Letter of Acceptance, Waiver, NASD member in any principal and Consent pursuant to which they capacity with no right to reapply. Hall were censured and fined $10,000, has the right to continue as a passive jointly and severally. In addition, the investor in the firm, even during the firm was suspended from participating term of the suspension. If it is ever in any contingency offering for 30 determined that the scope of Hall's days and thereafter until such time as involvement with the firm during the it filed satisfactory revised written term of the suspension ever goes supervisory procedures governing the beyond that, he shall immediately, firm’s participation in future contingen- and without notice, be permanently cy offerings with the NASD. Without barred in all capacities. Without admitting or denying the allegations, admitting or denying the allegations, the respondents consented to the the respondents consented to the described sanctions and to the entry described sanctions and to the entry of findings that the firm, acting through of findings that the firm miscalculated Steinkirchner, failed to ensure the its allowable assets thereby causing establishment of a proper escrow the firm to have insufficient net account in connection with its partici- capital. The findings also stated that pation in a best efforts contingency Hall “parked” securities by executing offering and conducted a securities fictitious trades designed to overstate business while failing to maintain its the firm’s net capital thereby enabling required minimum net capital. The the firm to continue in business in findings also stated that the firm, act- ostensible compliance with the net ing though Steinkirchner, participated capital rule. in sales in the offering in an amount exceeding the maximum specified in J.J.B. Hilliard, W.L. Lyons, Inc. the offering documents, and beyond (Louisville, Kentucky), James Reid the time period specified in the offer- Allen (Registered Principal, ing documents, without providing Louisville, Kentucky) and Ro b e r t notice to prior investors, reconfirm i n g Clinton Oliver, Jr. (Registered their purchases or offering them Principal, Louisville, Kentucky) rescission. submitted a Letter of Acceptance, NASD Notices to Members—Disciplinary Actions March 1999 161 Waiver, and Consent pursuant to excessively. The firm, acting through conducted a securities business which the firm was censured and Smith, failed to report trades within while failing to maintain its minimum fined $25,000; Allen and Oliver were 90 seconds of execution without required net capital and filed a each censured, fined $7,500, and employing the requisite “.SLD” FOCUS report with the NASD that suspended from association with the mo d i fi er, incorrectly reported was inaccurate and misleading in NASD in any principal capacity for 10 wholesale trades as retail trades, and that it included a net capital amount days. Without admitting or denying incorrectly reported the price on for the firm that was overstated. In the allegations, the respondents trades. Guerin and Brennan failed to addition, Navillus, acting through consented to the described sanctions supervise adequately the trading in Sullivan, failed to maintain suffici e n t and to the entry of findings that the common stock of Smith and Dyer, records of order entry and execution firm permitted Allen and Oliver to act respectively, and failed to detect that times for securities transactions; in the capacity of a general securities Smith and Dyer were purchasing failed to complete a written training principal prior to their properly stock from the firm’s retail customers plan for its Firm Element training qualifying and becoming registered in subject to excessive markdowns. requirement; and failed to conduct that capacity. Furthermore, the NASD determined and complete its Firm Element that Dyer effected securities training requirement. Keogler, Morgan & Co., Inc. transactions in the accounts of his (Atlanta, Georgia), Chris Stuart customers without the customers’ Firms And Individuals Fined Guerin (Registered Principal, prior knowledge or authorization. Austin Securities, Inc. (Forest Marietta, Georgia), Douglas Albert Hills, New York) and Brian R. Dyer (Registered Representative, Navillus Securities, Inc. (West Mitchell (Registered Principal, Chattanooga, Tennessee), Craig Conshocken, Pennsylvania) an d Yorktown Heights, New York) su b - Robert Smith (Registered William Joseph Sullivan, Jr. mitted a Letter of Acceptance, Waiv- Principal, Duluth, Georgia), an d (Registered Principal, West er, and Consent pursuant to which James Hugh Brennan, III Conshocken, Pennsylvania) they were censured and fine d (Registered Representative, submitted a Letter of Acceptance, $10,000, jointly and severally. The Chattanooga, Tennessee) Waiver, and Consent pursuant to firm was also required to disgorge submitted Offers of Settlement which the respondents were $14,007 in excessive profits to public pursuant to which the firm was censured and fined $60,000, jointly customers. Without admitting or censured, fined $25,000, and and severally. Sullivan was denying the allegations, the respon- required to pay back $63,264 in suspended from association with any dents consented to the described excessive profits to public customers. NASD member in any principal sanctions and to the entry of find i n g s Guerin was censured, fined $10,000, capacity and from performing any that the firm, acting through Mitchell, and suspended from association with functions that require registration as entered into municipal bond sale and any NASD member as a registered a principal for four months, except purchase transactions with public principal for six months; Dyer was that he is permitted to perform duties customers. The findings also stated censured, fined $10,000, and as a financial and operations that bond sales and bond purchases suspended from association with any principal for his firm during the period were conducted with excessive NASD member in any capacity for 60 of suspension. Without admitting or markups and markdowns, respec- days; Smith was censured, fine d denying the allegations, the tively, in light of the circumstances $10,000, and suspended from respondents consented to the surrounding the transactions. In addi- association with any NASD member described sanctions and to the entry tion, the firm, acting through Mitchell, as a registered principal for six of findings that Navillus, acting failed to establish or maintain an ade- months; and Brennan was censured through Sullivan, allowed trades to quate written supervisory procedure and fined $10,000. be entered through the Small Order pertaining to the pricing of municipal Execution SystemSM (S O E S SM ) for se c u r i t i e s . Without admitting or denying the accounts belonging to family allegations, the respondents members of the firm’s registered Butler Larsen Pierce & Company, consented to the described sanctions representatives and failed to Inc. (San Francisco, California), and to the entry of findings that the establish, maintain, and enforce Dane Allan Larsen (Registered firm, acting through Smith and Dyer, proper supervisory procedures Principal, Danville, California), an d effected principal purchases of governing the entry of trades through Eric Hall Zurla (Registered Repre- common stock from public customers SOES. The findings also stated that sentative, Glen Ridge, New Jer- at prices that were marked down Navillus, acting through Sullivan, se y ) submitted an Offer of

NASD Notices to Members—Disciplinary Actions March 1999 162 Settlement pursuant to which they Grote, failed to complete a training fied personnel to perform all the were censured and fined $10,000, needs analysis and to develop writ- duties required to be performed by a jointly and severally. Without admit- ten training plans concerning the financial and operations principal. ting or denying the allegations, the Firm Element of the Continuing Edu- Without admitting or denying the alle- respondents consented to the cation Program and failed to maintain gations, the respondents consented described sanctions and to the entry written supervisory procedures for to the described sanctions and to the of findings that the firm, acting compliance with the Regulatory Ele- entry of findings that the firm, acting through Larsen, permitted individuals ment of the NASD’s Continuing Edu- through Allen, in contravention of its to perform the duties of registered cation requirements. In addition, the Restriction Agreement with the persons when their registrations NASD found that the firm, acting NASD, changed its status to that of a were inactive due to their failure to through Grote, failed to establish, fully computing firm subject to the complete the Regulatory Element of maintain, and enforce proper written provisions of the SEC Customer Pro- the Continuing Education Program. supervisory procedures concerning tection Rule 15c3-3, but failed to The findings also stated that Zurla syndication and selling group partici- obtain prior written approval from the performed, and the firm and Larsen pation, transactions in U. S. govern- NASD and to undertake to comply permitted him to perform, the duties ment securities, the conduct of with the requirements of the Rule. of a registered person when Zurla’s annual compliance meetings, internal Furthermore, the NASD found that registration was inactive due to his inspections to ascertain compliance the firm, acting through Allen, held failure to complete the Regulatory with firm procedures, telephone solic- customer funds and failed to estab- Element of the Continuing Education itations, and insider trading (i. e . , Chi- lish a Special Reserve Bank Account Program. Furthermore, the NASD nese Wall) procedures. for the Exclusive Benefit of Cus- determined that the firm, acting tomers, and failed to make weekly through Larsen, failed to establish J. Alexander Securities, Inc. (Los computations of the amount required and implement adequate written Angeles, California) and Ja m e s to be deposited into the Reserve supervisory procedures to ensure Alexander (Registered Principal, Account due to inadequate fina n c i a l compliance with the definition of Los Angeles, California) su b m i t t e d and operational personnel to identify municipal securities principals or an Offer of Settlement pursuant to the deficiencies. representatives pursuant to MSRB which they were censured and fine d Rule G-3. $20,000, jointly and severally. With- Shamrock Partners, Ltd. (Media, out admitting or denying the allega- Pe n n s y l v a n i a ) and James Thomas Derby Securities, Inc. (New York, tions, the respondents consented to Kelly (Registered Principal, New- New York) and Otto Frederick the described sanctions and to the town Square, Pennsylvania) we r e Grote (Registered Principal, New entry of findings that the firm, acting censured; fined $15,000, jointly and Castle, New Hampshire) su b m i t t e d under the direction and control of severally; required to pay $10,053.13 a Letter of Acceptance, Waiver, and Alexander, allowed an individual to in restitution to customers, jointly and Consent pursuant to which they were become and remain associated with severally; required to demonstrate censured and fined $10,000, jointly the firm as a principal when he was corrective action with regard to their and severally. In addition, the firm barred by the Securities and markup and markdown policy; and to must pay $18,240 in restitution to the Exchange Commission (SEC) from submit to a staff interview. The SEC appropriate parties. Without admitting acting in the capacity of a securities imposed the sanctions following or denying the allegations, the principal for 14 months and required appeal of an August 1997 National respondents consented to the to apply for reinstatement in that Business Conduct Committee described sanctions and to the entry capacity. (NBCC) decision. The sanctions of findings that the firm, acting were based on findings that the firm , through Grote, received checks total- Pa c i fi c Continental Securities Cor- acting through Kelly, effected in a ing $18,240 in selling concessions poration (Beverly Hills, California) principal capacity purchases of com- related to the public distribution of and James Albert Allen (Regis- mon stock for public customers at shares of stock from a member firm . tered Principal, Los Angeles, Cali- prices that were not fair and reason- However, Derby Securities, Inc. was fornia) submitted a Letter of able in that the markdowns on the not entitled to such concessions Acceptance, Waiver, and Consent purchases exceeded five percent. because it did not render any ser- pursuant to which they were cen- vices to the member firm. Further- sured and fined $10,000, jointly and Triumph Securities Corporation more, the NASD determined that severally. The firm was also ordered (New York, New York) and Au b r e y Derby Securities, Inc., acting through to undertake to hire sufficient quali- Theodore Stautberg, Jr. (Regis-

NASD Notices to Members—Disciplinary Actions March 1999 163 tered Principal, New York, New records. The findings also stated that the NASD determined that the firm York) submitted a Letter of Accep- the firm failed to require all covered failed to provide, where it acted as tance, Waiver, and Consent pursuant employees to complete the Firm Ele- principal for its own account, written to which they were censured and ment of the Continuing Education no t i fi cation disclosing the reported fined $14,500, jointly and severally. requirement, to maintain records price to each of its customers. Without admitting or denying the alle- documenting the content of, and gations, the respondents consented completion of, the Firm Element of IFC Holdings, Inc. (dba Invest to the described sanctions and to the the Continuing Education require- Financial Corporation) (Washing- entry of findings that the firm, acting ment, to conduct an annual needs ton, D.C.) submitted a Letter of through Stautberg, failed to establish, analysis, and to develop a Firm Ele- Acceptance, Waiver, and Consent maintain, and enforce written proce- ment Training Plan. Furthermore, the pursuant to which the firm was cen- dures to supervise the types of busi- NASD found that the firm failed to sured, fined $75,000, and required to ness in which it engages, and to indicate the limit order terms and retain an independent consulting firm supervise the activities of registered conditions on order tickets to reflec t to conduct a review for one year of representatives, associated persons, that the customers’ limit orders were the firm’s compliance and written and registered principals that are rea- changed to market orders, to time- supervisory procedures, in particular, sonably designed to achieve compli- stamp the order tickets at the time but not limited to, procedures relating ance with applicable securities laws, the orders were changed, and to to conduct of branch office examina- regulations, the NASD rules, and the record all the order terms and condi- tions. Without admitting or denying Regulatory Element of the Continu- tions of customer limit orders. More- the allegations, the firm consented to ing Education requirement. The find - over, the firm failed to execute limit the described sanctions and to the ings also stated that the firm, acting orders within 60 seconds of complet- entry of findings that it failed to through Stautberg, maintained the ing trades in the firm’s market mak- address, or failed to address ade- registration for individuals while they ing account at prices equal to or quately, written supervisory proce- were not active in the securities busi- better than the customers’ protected dures regarding, among other things, ness, and failed to file its annual prices, and failed to establish, main- insider trading, receipt of customer audit reports on a timely basis. tain, and enforce proper supervisory funds and securities, mutual fund procedures governing the above vio- breakpoints, variable annuities and lations. variable life insurance, option cus- Firms Fined tomer’s background and fina n c i a l Capital Resources, Inc. (Washing- Dean Witter Reynolds Inc. (New information, municipal securities ton, D.C.) submitted a Letter of York, New York) submitted a Letter markups and markdowns, customer Acceptance, Waiver, and Consent of Acceptance, Waiver, and Consent complaint reporting, cold calling, pursuant to which the firm was cen- pursuant to which the firm was cen- sales supervision, and discretionary sured, fined $13,500, and required to sured, fined $15,000, and required to accounts. Also, the firm’s written undertake to review and revise its pay $262.30 in restitution to public supervisory procedures failed to des- written supervisory procedures to customers. Without admitting or ignate a principal responsible for the ensure that procedures are main- denying the allegations, the firm con- review of mutual funds, variable tained, implemented, and enforced sented to the described sanctions products, and unit investment trusts. regarding private placements, contin- and to the entry of findings that it Furthermore, the findings stated that gency offerings, trading practices, executed customer transactions with- the firm failed to inspect each branch and continuing education in a man- out using reasonable diligence to of fi ce according to the cycle set forth ner satisfactory to the NASD. Without ascertain the best prevailing inter- in its written supervisory procedures. admitting or denying the allegations, dealer market for each relevant secu- In addition, the firm failed to super- the firm consented to the described rity so that the resultant price to the vise and enforce its written supervi- sanctions and to the entry of find i n g s customer was as favorable as possi- sory procedures concerning daily that it participated in contingency ble under prevailing market condi- transactions, mutual fund switches, offerings and distributed offering tions. The findings also stated that branch office inspections, advertising materials that contained misleading the firm failed to provide, where it and correspondence, and employ- information, failed to establish a bank acted as principal for its own ees’ accounts at other broker/deal- escrow account, and failed to record account, written notification to its cus- ers. The firm failed to have each receipt of customer funds for pur- tomer disclosing that it acted as a registered representative participate chases of interests in contingency Market Maker when executing the in an annual compliance meeting. offerings on the firm’s books and customer’s transaction. Furthermore, The findings also stated that the firm

NASD Notices to Members—Disciplinary Actions March 1999 164 failed to conduct a periodic examina- R. J. Steichen & Company (Min- Smith Barney Inc. (Chicago, Illi- tion of all customer accounts to neapolis, Minnesota) submitted a no i s ) submitted a Letter of Accep- detect and prevent irregularities or Letter of Acceptance, Waiver, and tance, Waiver, and Consent pursuant abuses, failed to report forgery accu- Consent pursuant to which the firm to which the firm was censured and sations from customers within 10 was censured and fined $12,500. fined $15,000. Without admitting or business days as required by the Without admitting or denying the alle- denying the allegations, the firm con- NASD, and allowed an individual to gations, the firm consented to the sented to the described sanctions function as acting chief administrative described sanctions and to the entry and to the entry of findings that it of fi cer without being properly regis- of findings that it reported transac- failed to enforce written supervisory tered. tions to the Automated Confirm a t i o n procedures, and failed to supervise Transaction ServiceSM (A C T SM ) in vio- adequately and properly a registered Mesirow Financial, Inc. (Chicago, lation of applicable securities laws representative. According to the find - Il l i n o i s ) was fined $15,000. The and regulations regarding trade ings, the firm failed to prevent the sanctions were based on find i n g s reporting. The findings also stated registered representative from mak- that the firm failed to execute con- that the firm failed to establish, main- ing numerous sales of securities (hot temporaneously member-to-member tain, and enforce written supervisory issues) that traded at a premium in customer limit orders to sell shares of procedures reasonably designed to the immediate aftermarket to restrict- stock after it sold shares for its own achieve compliance with the applica- ed persons, in contravention of the market-making account at a price ble securities laws and regulations NASD Board of Governors' Free-Rid- equal to or better than said orders. regarding trade reporting, ACT ing and Withholding Interpretation. Also, the firm failed to establish, reporting, limit orders, books and maintain, and enforce adequate writ- records, registration, locked and Individuals Barred Or ten supervisory procedures to crossed markets, SOES, the order Su s p e n d e d achieve compliance with the rules handling rules, anti-competitive prac- Jerald Fred Albin (Registered Rep- and regulations applicable to limit tices, and best execution. resentative, Independence, Mis- orders. souri) submitted an Offer of SCA Development, Inc. (Birming- Settlement pursuant to which he was PaineWebber Incorporated (Wee- ham, Alabama) submitted a Letter of censured, fined $35,000, and barred hawken, New Jersey) submitted a Acceptance, Waiver, and Consent from association with any NASD Letter of Acceptance, Waiver, and pursuant to which the firm was cen- member in any capacity. Without Consent pursuant to which the firm sured and fined $20,000. Without admitting or denying the allegations, was censured, fined $50,000, and admitting or denying the allegations, Albin consented to the described required to review its supervisory the firm consented to the described sanctions and to the entry of find i n g s procedures regarding registration of sanctions and to the entry of find i n g s that he participated in private securi- personnel and to implement changes that it failed to handle customer funds ties transactions without prior written necessary to ensure that all persons properly in connection with a contin- notice to, and written approval and/or actively engaged in the firm’s invest- gency offering in that it failed to acknowledgment from, his member ment banking or securities business, establish a bank escrow account and firm. The findings also stated that or in the management thereof, are accepted and forwarded investor Albin failed to respond truthfully to properly registered with the NASD. checks directly to the issuer, and NASD requests for information in that Without admitting or denying the alle- closed the offering prior to the sale of he provided the NASD with altered gations, PaineWebber consented to the requisite number of units. The bank statements that contained inac- the described sanctions and to the NASD also determined that the firm curate, false, and misleading infor- entry of findings that it failed to failed to timely file a Form U-5 on ma t i o n . ensure that persons actively behalf of an individual, and failed to engaged in the firm’s investment establish, maintain, and enforce Brian Douglas Angiuli (Registered banking or securities business, or in proper supervisory procedures con- Principal, Port Washington, New the management thereof, were prop- cerning the establishment and use of York) was censured, fined $15,000, erly registered as general securities bank escrow accounts in contingency suspended from association with any representatives or general securities offerings, the extension of contingen- NASD member in any capacity for principals with the NASD. PaineWeb- cy offering periods, proper registra- one year, and ordered to requalify by ber also failed to establish, maintain, tion of principals, and timely exam as a general securities repre- and enforce written supervisory pro- submissions of Forms U-5 for termi- sentative. The National Adjudicatory cedures that would ensure the proper nated individuals. Council (NAC) imposed the sanc- registration of individuals. tions following appeal of a Philadel- NASD Notices to Members—Disciplinary Actions March 1999 165 phia District Business Conduct Com- remit their proceeds to his member ment pursuant to which he was cen- mittee (DBCC) decision. The sanc- firm, and instead, retained the funds sured, fined $15,000, and barred tions were based on findings that for his own use and benefit. from association with any NASD Angiuli executed unauthorized trades member in any capacity with the right in the account of a public customer. Donald Clyde Bozzi (Registered to reapply in three years. Without Representative, Basking Ridge, admitting or denying the allegations, Angiuli has appealed this action to New Jersey) was censured, fine d Bryant consented to the described the SEC and the sanctions are not in $30,000, and barred from associa- sanctions and to the entry of find i n g s effect pending consideration of the tion with any NASD member in any that he received $1,000 from a public ap p e a l . capacity. The NAC affirmed the customer for the purpose of investing sanctions following appeal of a New in the customer's universal life policy Henderson Basco Berberabe York DBCC decision. The sanctions account, failed to invest the funds in (Registered Representative, West were based on findings that Bozzi the account, and retained possession Covina, California) submitted a Let- submitted life insurance applications of the funds until a later date, without ter of Acceptance, Waiver, and Con- that contained false information to his the customer's knowledge or con- sent pursuant to which he was member firm. Bozzi also provided sent. The findings also stated that censured, fined $100,000, and false information to the NASD. Bryant sent correspondence to the barred from association with any customer that was misleading in that NASD member in any capacity. Carol Brantley (Associated Per- it overstated the funds maintained by Without admitting or denying the alle- son, Akron, Ohio) submitted a Let- the customer in the life insurance gations, Berberabe consented to the ter of Acceptance, Waiver, and account by approximately $1,000. described sanctions and to the entry Consent pursuant to which she was of findings that he converted a total censured, fined $2,500, and barred Peter Joseph Cammarano (Regis- of $58,000 from public customers from association with any NASD tered Principal, The Woodlands, through deceptive means. According member in any capacity. Without Te x a s ) submitted a Letter of Accep- to the findings, Berberabe obtained admitting or denying the allegations, tance, Waiver, and Consent pur- the signatures of the customers on Brantley consented to the described suant to which he was censured, blank or incomplete wire authoriza- sanctions and to the entry of find i n g s fined $25,000, and barred from asso- tion forms and later completed the that she submitted a materially false ciation with any NASD member in forms, without the knowledge or con- or inaccurate Form U-4 to her firm any capacity. Without admitting or sent of the customers, in order to that failed to disclose a criminal con- denying the allegations, Cammarano facilitate the unauthorized transfer of vi c t i o n . consented to the described sanctions their funds into a personal brokerage and to the entry of findings that he account at a firm other than his Charles Edward Brown (Associat- failed to respond to an NASD employer. The funds were subse- ed Person, Chicago, Illinois) su b - request to appear and provide testi- quently misused by Berberabe for his mitted a Letter of Acceptance, mony. own benefit. Waiver, and Consent pursuant to which he was censured, fine d Stephen Bruce Carlson (Regis- Philip Allen Bowsher (Registered $5,000, and suspended from associ- tered Principal, Denver, Colorado) Representative, Wapakoneta, ation with any NASD member in any was censured, fined $10,000, jointly Oh i o ) submitted a Letter of Accep- capacity for 60 days. Without admit- and severally, with a member firm tance, Waiver, and Consent pur- ting or denying the allegations, and barred from association with any suant to which he was censured, Brown consented to the described NASD member in any capacity. The fined $235,000, barred from associa- sanctions and to the entry of find i n g s SEC imposed the sanctions following tion with any NASD member in any that he engaged in activities requiring appeal of a September 1997 NBCC capacity, and required to pay registration as a general securities decision. The sanctions were based $45,133.50 in restitution to his mem- representative, general securities on findings that Carlson, acting for ber firm. Without admitting or deny- principal, and municipal securities himself and on behalf of his firm , ing the allegations, Bowsher principal without being registered in attempted to obtain stock at below consented to the described sanctions those capacities. market prices by means of threats, and to the entry of findings that he intimidation, and coercion. endorsed checks received from pub- John Barrett Bryant (Registered lic customers into his own name Representative, Collierville, Ten- Joseph Giulio Chiulli (Registered totaling $45,133.50 and failed to nessee) submitted an Offer of Settle- Principal, Lynbrook, New York)

NASD Notices to Members—Disciplinary Actions March 1999 166 was censured, suspended from Paul Cruz (Registered Representa- out the customer’s knowledge and association with any NASD member tive, Colorado Springs, Colorado) consent, deposited the check in his in any capacity for one year, and and Lee Thomas Duran (Regis- personal account, and used the required to requalify by exam. The tered Principal, Colorado Springs, funds for some purpose other than NAC imposed the sanctions follow- Co l o r a d o ) submitted an Offer of Set- for the benefit of the customer. ing appeal of a New York DBCC tlement pursuant to which they each decision. The sanctions were based were censured, fined $2,000, and Edward Joseph Dorr (Associated on findings that Chiulli failed to pre- suspended from association with any Person, Amityville, New York) wa s serve his member firm’s books and NASD member in any capacity for 45 censured, fined $25,000, and barred records and failed to respond to an days. Without admitting or denying from association with any NASD NASD request for information. the allegations, the respondents con- member in any capacity. The sanc- sented to the described sanctions tions were based on findings that Chiulli has appealed this action to the and to the entry of findings that they Dorr failed to respond to NASD SEC and the sanctions are not in failed to respond to NASD requests requests for information. effect pending consideration of the for information in a timely manner. appeal. Kai Fang (Registered Representa- Robert Henry Deighton, III (Regis- tive, Flushing, New York) su b m i t - Dickie Lynn Connors (Registered tered Representative, Sarasota, ted an Offer of Settlement pursuant Representative, Kansas City, Mis- Florida) submitted a Letter of Accep- to which he was censured, fine d so u r i ) submitted a Letter of Accep- tance, Waiver, and Consent pur- $2,500, and suspended from associ- tance, Waiver, and Consent suant to which he was censured, ation with any NASD member in any pursuant to which she was censured, fined $5,000, and suspended from capacity for 30 days. Without admit- fined $50,000, and barred from asso- association with any NASD member ting or denying the allegations, Fang ciation with any NASD member in in any capacity for 30 days. Without consented to the described sanctions any capacity. Without admitting or admitting or denying the allegations, and to the entry of findings that he denying the allegations, Connors Deighton consented to the described agreed to reimburse a public cus- consented to the described sanctions sanctions and to the entry of find i n g s tomer $2,798.40 for a loss on a and to the entry of findings that she that he sold approximately $155,000 securities trade in the customer’s withdrew funds totaling $22,000 from in chattel mortgages to public cus- account. the accounts of public customers tomers for which he received com- without their knowledge or consent missions totaling $7,775 without Daniel Charles Felter (Registered and converted the funds to her own giving prior written notice to, and Representative, New York, New use and benefit. receiving written approval from, his Yo r k ) submitted a Letter of Accep- member firm . tance, Waiver, and Consent pur- Eugene Joseph Cordano (Regis- suant to which he was censured, tered Principal, Brooklyn, New Joseph Anthony DiMattina (Regis- fined $25,000, and barred from asso- Yo r k ) submitted an Offer of Settle- tered Representative, Glenview, ciation with any NASD member in ment pursuant to which he was cen- Il l i n o i s ) submitted a Letter of Accep- any capacity. Without admitting or sured, fined $25,000, barred from tance, Waiver, and Consent pur- denying the allegations, Felter con- association with any NASD member suant to which he was censured, sented to the described sanctions in any capacity, and ordered to pay fined $5,000, and barred from asso- and to the entry of findings that he $10,000 in restitution to public cus- ciation with any NASD member in failed to respond to NASD requests tomers. Without admitting or denying any capacity. Without admitting or for information. the allegations, Cordano consented denying the allegations, DiMattina to the described sanctions and to the consented to the described sanctions Frederick Ernest Fischer, Jr. (Reg- entry of findings that he executed and to the entry of findings that he istered Representative, Tom’s transactions in the accounts of public received a check issued by his mem- River, New Jersey) submitted a Let- customers without the customers’ ber firm to a public customer in the ter of Acceptance, Waiver, and Con- prior knowledge, authorization, or amount of $432 to refund the cus- sent pursuant to which he was consent. The findings also stated tomer for an initial premium paid on a censured, fined $50,000, and barred that Cordano provided false informa- life insurance policy that was can- from association with any NASD tion to the NASD during the course celed. The findings also stated that member in any capacity. Without of its investigation. DiMattina signed the customer’s admitting or denying the allegations, name on the back of the check with- Fischer consented to the described

NASD Notices to Members—Disciplinary Actions March 1999 167 sanctions and to the entry of find i n g s either refused or failed to execute Island, New York) was censured, that he failed to respond to NASD sell orders put in by public customers fined $129,968.47, and barred from requests for information. and made baseless, unreasonable, association with any NASD member and specific price predictions to pub- in any capacity. The sanctions were Allen D. Fritz (Registered Repre- lic customers as to speculative secu- based on findings that Guglielminetti sentative, Wyandotte, Michigan) rities, often predicting substantial cheated on his Series 7 exam by submitted a Letter of Acceptance, price increases in a specified period having an impostor take the Series 7 Waiver, and Consent pursuant to of time. The findings also stated that in his name. Guglielminetti also failed which he was censured, fine d Gallaer bought or sold securities for to respond truthfully to questions dur- $25,000, suspended from associa- the accounts of public customers ing an NASD interview. tion with any NASD member in any without obtaining the customers’ capacity for two years, and required authorization, and required public Carl John Hagmaier (Registered to pay $4,889.56 in restitution to his customers who desired to purchase Representative, San Luis Obispo, member firm. Without admitting or units in initial public offerings (IPO) to Ca l i f o r n i a ) submitted an Offer of denying the allegations, Fritz con- buy common stock and/or warrants Settlement pursuant to which he was sented to the described sanctions of the issuer in order to be permitted censured and barred from associa- and to the entry of findings that he to buy IPO units. tion with any NASD member in any effected numerous index option capacity. Without admitting or deny- transactions in his personal margin Stephen K. M. Gourlay, Jr. (Regis- ing the allegations, Hagmaier con- account maintained at his member tered Principal, Hicksville, New sented to the described sanctions firm without depositing the required York) submitted an Offer of Settle- and to the entry of findings that he margin, which caused margin call ment pursuant to which he was cen- received checks totaling $120,000 notices to be issued by his firm ’ s sured, fined $20,000, suspended from public customers for invest- clearing firm. The NASD determined from association with any NASD ment, deposited the checks into a that Fritz made a practice of meeting member in any capacity for three bank account that he controlled, and margin calls by liquidating positions months, suspended from acting as a misused the funds himself or permit- in his account. principal or supervisor of a member ted others to misuse the funds. In firm for two years, ordered to pay one instance, Hagmaier fabricated Daniel Scott Fuchs (Registered $38,646.25 in restitution to public an account statement for the cus- Representative, Plainview, New customers, and required to requalify tomer which falsely stated that her Yo r k ) was censured, fined $7,500, by exam as a general securities prin- funds had been invested in a cash and suspended from association with cipal. Without admitting or denying and stock fund. The findings also any NASD member in any capacity the allegations, Gourlay consented to state that Hagmaier received contri- for 10 business days. The sanctions the described sanctions and to the butions totaling approximately were based on findings that Fuchs entry of findings that he made fraud- $539,000 for the creation of a purchased securities for the account ulent misrepresentations and omitted de fi ned benefit plan and misused of a public customer without the material facts in recommending the $68,262.61 of the plan’s funds for knowledge, authorization, or consent purchase of securities to public cus- unrelated business and/or personal of the customer, and, in the absence tomers. The findings also stated that expenses. Hagmaier also of written or oral authorization to Gourlay effected unauthorized trans- approached public customers to pur- Fuchs, exercised discretion in the actions in customer accounts. chase life insurance, took out loans ac c o u n t . totaling $160,000 on the value of the Michael Dylan Gregory (Regis- policies, and forged the signatures of James Michael Gallaer (Regis- tered Representative, Scottsdale, the customers on the loan checks tered Representative, Patchogue, Arizona) was censured, fine d without the knowledge or consent of New York) submitted a Letter of $50,000, and barred from associa- the customers. Hagmaier also failed Acceptance, Waiver, and Consent tion with any NASD member in any to respond to NASD requests for pursuant to which he was censured, capacity. The sanctions were based in f o r m a t i o n . fined $20,000, and barred from asso- on findings that Gregory failed to dis- ciation with any NASD member in close a reportable misdemeanor Andrew Fensmark Harris (Regis- any capacity. Without admitting or charge on Form U-4 applications. tered Representative, Bronx, New denying the allegations, Gallaer con- Yo r k ) was censured, fined $5,000, sented to the described sanctions Kory Evan Guglielminetti (Regis- suspended from association with any and to the entry of findings that he tered Representative, Staten NASD member in any capacity for

NASD Notices to Members—Disciplinary Actions March 1999 168 six months, and ordered to requalify submitted fictitious annuity applica- from association with any NASD by exam as a general securities rep- tions to an insurance company for member in any principal or supervi- resentative. The NAC imposed the people who did not exist and collect- sory capacity, suspended from asso- sanctions following review of a New ed $24,044.58 in advances on com- ciation with any NASD member in York DBCC decision. The sanctions missions to which he was not any capacity for one year, ordered to were based on findings that Harris en t i t l e d . pay $81,705 in restitution to cus- removed a piece of scratch paper on tomers, and required to requalify by which he had written several exam Michael Andrew Kelleher (Regis- exam as a general securities repre- questions and answers from a Series tered Representative, Beverly, sentative. The SEC imposed the 7 exam. Ma s s a c h u s e t t s ) submitted a Letter sanctions following appeal of a July of Acceptance, Waiver, and Consent 1997 NBCC decision. The sanctions Deborah Wertz Henke (Registered pursuant to which he was censured, were based on findings that Krull rec- Representative, Newbury Park, fined $10,000, and suspended from ommended unsuitable mutual fund Ca l i f o r n i a ) was censured, fine d association with any NASD member switches in the accounts of public $61,000, barred from association in any capacity for 30 days. Without customers without having reason- with any NASD member in any admitting or denying the allegations, able grounds for believing that such capacity, and ordered to pay $5,200 Kelleher consented to the described transactions were suitable for the in restitution to a member firm. The sanctions and to the entry of find i n g s customers in view of the frequency of sanctions were based on find i n g s that he provided inaccurate and mis- the transactions, the type of transac- that Henke converted customer leading account information to a pub- tion being recommended, and the securities and failed to respond to lic customer on several occasions. customers’ financial situations, cir- NASD requests for information. cumstances, and needs. Gerald Kurt Kempa (Registered Harold Lee Jenkins (Registered Representative, New York, New On February 3, 1999, the SEC grant- Representative, Bronx, New York) York) submitted a Letter of Accep- ed a stay of the sanctions for 60 was censured, fined $250,000, tance, Waiver, and Consent pur- days based upon Krull’s stated intent barred from association with any suant to which he was censured, to seek review of the SEC's order in NASD member in any capacity, and fined $5,000, suspended from asso- the U.S. Court of Appeals for the ordered to pay $28,751.90 in restitu- ciation with any NASD member in Ninth Circuit. The principal and tion. The sanctions were based on any capacity for five business days, supervisory bars are not included in findings that Jenkins solicited public ordered to disgorge $67.72 in net the stay order. In the event that Krull customers to provide funds for commissions to the NASD, required files a timely appeal, the SEC's order investment in mutual funds and/or to requalify by exam as a general shall be further stayed to that extent insurance products and, instead of securities representative, and pending determination of the appeal investing the customers’ funds on ordered to make full restitution to a to the Court of Appeals. their behalf, deposited the checks public customer in the amount of into his own personal money market $1,100, representing losses incurred Adam Drew Levy (Registered Prin- account. Jenkins also failed to and applicable interest. Failure to cipal, Old Westbury, New York) appear for an NASD on-the-record make complete restitution within 60 submitted a Letter of Acceptance, in t e r v i e w . days will result in Kempa being Waiver, and Consent pursuant to barred from association with any which he was censured, fine d Brian Keith Johnston (Registered member firm in any capacity until $300,000, and barred from associa- Representative, Bremen, Ohio) restitution is complete. Without tion with any NASD member in any submitted a Letter of Acceptance, admitting or denying the allegations, capacity. Without admitting or deny- Waiver, and Consent pursuant to Kempa consented to the described ing the allegations, Levy consented which he was censured, fine d sanctions and to the entry of find i n g s to the described sanctions and to the $120,222.90, barred from associa- that he effected the purchase of entry of findings that he caused his tion with any NASD member in any securities in a public customer’s firm and its representatives to repur- capacity, and ordered to pay account without the customer’s prior chase securities for the firm ’ s $24,044.58 in restitution to an insur- knowledge or consent. account before the completion of IPO ance company. Without admitting or distributions at prices slightly higher denying the allegations, Johnston Kenneth Craig Krull (Registered than the IPO transactions and to consented to the described sanctions Principal, Marysville, Washington) solicit public customers to purchase and to the entry of findings that he was censured, fined $20,000, barred aftermarket securities while the firm

NASD Notices to Members—Disciplinary Actions March 1999 169 was still engaged in the distributions. capacity, and ordered to disgorge New York) submitted a Letter of The findings also stated that Levy $80,000 to public customers. Without Acceptance, Waiver, and Consent caused his member firm and its rep- admitting or denying the allegation, pursuant to which he was censured, resentatives to engage in numerous Lowry consented to the described fined $10,000, and suspended from sales practice abuses including, but sanctions and to the entry of find i n g s association with any NASD member not limited to, baseless price predic- that he engaged in private securities in any capacity for 15 days. Without tions or guarantees, failures to exe- transactions and failed to request, or admitting or denying the allegations, cute customer orders, and customer receive, permission from his member Nerlino consented to the described requirements to purchase aftermar- firm to engage in such transactions. sanctions and to the entry of find i n g s ket shares as a condition of receiving that he engaged in an outside busi- IPO units, and other high pressure Timothy Earl McGill, Sr. (Regis- ness activity by acting as a consul- tactics. Levy caused his firm and its tered Representative, Shrewsbury, tant and by sitting on the Board of registered representatives to manip- Pe n n s y l v a n i a ) was censured, fine d Directors of a company in which his ulate the prices of securities in the $25,000, and barred from associa- wife was a majority shareholder. aftermarket trading of those securi- tion with any NASD member in any ties, which resulted in over $8 million capacity. The sanctions were based Thomas Andrew O’Malley (Regis- in illegal profits for the firm. Further- on findings that McGill failed to tered Representative, East Grand more, the NASD found that Levy respond to NASD requests for infor- Rapids, Michigan) submitted a Let- failed to supervise the activities of mation. ter of Acceptance, Waiver, and Con- the firm’s registered representatives sent pursuant to which he was to ensure compliance with applicable Patrick Thomas McRaith (Regis- censured, fined $193,000, and securities laws, regulations, and tered Representative, Chicago, Illi- barred from association with any NASD rules. nois) submitted a Letter of NASD member in any capacity. Acceptance, Waiver, and Consent Without admitting or denying the alle- Peter Liounis (Registered Repre- pursuant to which he was censured, gations, O’Malley consented to the sentative, Brooklyn, New York) fined $30,500, and barred from asso- described sanctions and to the entry was censured, fined $25,000, and ciation with any NASD member in of findings that he received checks barred from association with any any capacity. Without admitting or totaling $31,546.75 from the securi- NASD member in any capacity. The denying the allegations, McRaith ties account of a public customer, sanctions were based on find i n g s consented to the described sanctions signed the customer’s name to the that Liounis failed to respond to and to the entry of findings that he checks, caused the checks to be NASD requests for information. received a $4,100 check from a pub- deposited in an account in which he lic customer with instructions to use had a beneficial interest, and used Dean Joseph LoBrutto (Registered the funds for a new annuity account. the funds for some purpose other Representative, Rochester, New The NASD found that McRaith failed than the benefit of the customer with- Yo r k ) submitted a Letter of Accep- to follow the customer’s instructions out the customer’s knowledge or tance, Waiver, and Consent pursuant and used the funds for his own use consent. The findings also stated to which he was censured, fine d and benefit by endorsing the check, that O’Malley failed to respond to $25,000, and barred from association depositing the funds into his personal NASD requests for information. with any NASD member in any bank account, and spending the capacity. Without admitting or deny- funds, without the knowledge or con- Dennis Ray Owens (Registered ing the allegations, LoBrutto consent- sent of the customer. Representative, Hamilton, Ohio) ed to the described sanctions and to submitted a Letter of Acceptance, the entry of findings that he failed to David Amin Monawar (Registered Waiver, and Consent pursuant to respond, or to respond truthfully, to Representative, East Hanover, New which he was censured, fine d NASD requests for information. Je r s e y ) was censured, fined $25,000, $25,000, and barred from associa- and barred from association with any tion with any NASD member in any Henry Clay Lowry (Registered NASD member in any capacity. The capacity. Without admitting or deny- Representative, Orlando, Florida) sanctions were based on findings that ing the allegations, Owens consent- submitted a Letter of Acceptance, Monawar failed to respond to NASD ed to the described sanctions and to Waiver, and Consent pursuant to requests for information. the entry of findings that he failed to which he was censured, fine d respond adequately to NASD $25,000, barred from association Vincent Michael Nerlino (Regis- requests for information. with any NASD member in any tered Representative, New York,

NASD Notices to Members—Disciplinary Actions March 1999 170 Calvin Patterson, III (Registered Consent pursuant to which he was the account to pay for personal Representative, Peoria, Illinois) censured, fined $1,000, and sus- expenses, withdrew all the money, submitted a Letter of Acceptance, pended from association with any and closed the account, without Waiver, and Consent pursuant to NASD member in any capacity for 15 reimbursing the customers or deliver- which he was censured, fine d business days. Without admitting or ing shares of stock to the customers. $7,500, and suspended from associ- denying the allegations, Perry con- Raver also engaged in private secu- ation with any NASD member in any sented to the described sanctions rities transactions without giving prior capacity for 10 days. Without admit- and to the entry of findings that he written notice to his member firm and ting or denying the allegations, Pat- failed to disclose misdemeanors failed to respond to NASD requests terson consented to the described involving possession of a false identi- for information. sanctions and to the entry of find i n g s fication and providing false identifica - that he effected numerous options tion to a police officer on his Form Nelson Eric Roseland (Registered transactions on a discretionary basis U-4 that he submitted to his member Representative, Oakland, Califor- in the accounts of public customers firm and the NASD. nia) was censured, fined $67,500, without prior written authorization and barred from association with any from the customers and written Theodore Lester Pittman III (Reg- NASD member in any capacity. The acceptance from his member firm . istered Representative, McFar- sanctions were based on find i n g s The findings also stated that Patter- land, Wisconsin) was censured, that Roseland made unsuitable rec- son effected options transactions fined $20,000, and barred from asso- ommendations to a public customer without the authorization of a public ciation with any NASD member in and exercised discretionary trading customer after the customer request- any capacity. The NAC affirmed the authority in the account of a public ed Patterson liquidate her account. sanctions following appeal of a customer without prior written Chicago DBCC decision. The sanc- approval from the customer and his Lawrence Joseph Penna (Regis- tions were based on finding that member firm. Roseland also failed to tered Principal, Franklin Lakes, Pittman failed to respond to NASD respond to NASD requests for infor- New Jersey) submitted an Offer of requests for information. mation. Settlement pursuant to which he was censured, fined $25,000, and sus- Michael Ploshnick (Registered Robert Lowell Shatles (Registered pended from association with any Principal, Boca Raton, Florida) Principal, Fort Salonga, New York) NASD member in any capacity for was censured, fined $25,000, and submitted a Letter of Acceptance, two years. Without admitting or deny- barred from association with any Waiver, and Consent pursuant to ing the allegations, Penna consented NASD member in any capacity. The which he was censured, fine d to the described sanctions and to the sanctions were based on find i n g s $15,000, and suspended from asso- entry of findings that he failed to that Ploshnick failed to respond to ciation with any NASD member in appear for testimony and failed to NASD requests for information and any capacity for two months. Without respond to NASD requests for infor- to provide testimony. admitting or denying the allegations, mation regarding his justification for Shatles consented to the described failing to appear for scheduled testi- Milson Carroll Raver, Jr. (Regis- sanctions and to the entry of find i n g s mony in a timely manner. tered Representative, Sea Girt, that he allowed a firm to conduct a New Jersey) was censured, fine d securities business by transacting Steven Francis Perdie (Registered $350,000, barred from association with customers and making markets, Principal, Port Jefferson Station, with any NASD member in any while failing to maintain the minimum New York) was censured, fine d capacity, and ordered to pay required net capital. The find i n g s $25,000, and barred from associa- $15,000, plus interest, in restitution also stated that Shatles failed to tion with any NASD member in any to public customers. The sanctions record properly the firm’s deficit net capacity. The sanctions were based were based on findings that Raver capital position on its financial books on findings that Perdie failed to used a fraudulent scheme to sell and records. In addition, Shatles respond to NASD requests for infor- securities in that he deposited failed to transmit notice of the firm ’ s mation. $15,000 of public customers' monies net capital deficiency to the SEC and intended for purchasing securities the NASD and failed to file, and to Sean Michael Perry (Registered into a brokerage account he opened file on a timely basis, the firm ’ s Representative, Rancho Cuca- and controlled. Furthermore, Raver FOCUS reports. monga, California) submitted a Let- failed to segregate or hold the ter of Acceptance, Waiver, and monies in an escrow account, used

NASD Notices to Members—Disciplinary Actions March 1999 171 Robert Vincent Sherman (Regis- addition to the payments from petty issued by his member firm, and con- tered Principal, Wheat Ridge, Col- cash. Smith obtained reimbursement verted the proceeds to his own use or a d o ) submitted an Offer of in the amount of $1,038.47; however, and benefit. The findings also stated Settlement pursuant to which he was due to the nature of the firm’s proce- that Tabone failed to apply funds censured, fined $10,000, and sus- dures for reimbursing branch office given to him by public customers for pended from association with any expenses and its compensation insurance policy premiums, and, NASD member in any capacity for 30 arrangement with Smith, the actual without the knowledge or consent of days. Without admitting or denying be n e fi t to Smith was $951.99. the customers, converted the funds the allegations, Sherman consented to his own use and benefit. Tabone to the described sanctions and to the Timothy Patrick Sullivan (Regis- converted a total of $253,573, of entry of findings that he repeatedly tered Representative, Owings which $24,435.28 was converted failed to make the required “affirm a - Mills, Maryland) submitted a Letter from non-securities insurance prod- tive determination” that certain secu- of Acceptance, Waiver, and Consent ucts. In furtherance of the conversion rities he sold short would be pursuant to which he was censured, of funds, Tabone altered policy state- delivered or available and could be fined $100,000, and barred from ments to reflect fictitious account val- bo r r o w e d . membership with any NASD member ues and gave these altered in any capacity. Without admitting or statements to the customers. Jeremy L. Slovik (Registered Rep- denying the allegations, Sullivan con- resentative, Bayshore, New York) sented to the described sanctions Matthew Lee Towers (Registered submitted an Offer of Settlement pur- and to the entry of findings that he Representative, New York, New suant to which he was censured and submitted applications for life insur- Yo r k ) was censured, fined $25,000, suspended from association with any ance on the lives of public customers and barred from association with any NASD member in any capacity for without their authorization and con- NASD member in any capacity. The two years. Without admitting or deny- sent and affixed signatures purporting sanctions were based on find i n g s ing the allegations, Slovik consented to be the customers to the applica- that Towers failed to respond to to the described sanctions and to the tions and to policy delivery receipts. NASD requests for information. entry of findings that he made mate- The findings also stated that Sullivan rial misrepresentations, omitted caused an insurance policy on the life Sean Martin Towey (Registered material information, and made of a public customer to be surren- Representative, Union City, New fraudulent price predictions in the dered and its cash value applied to Je r s e y ) was censured, fine d offer and sale of securities. The find - purchase an annuity. In connection $25,000, and barred from associa- ings also stated that Slovik executed with the surrender and purchase, tion with any NASD member in any an unauthorized transaction in the Smith affixed the customer’s signa- capacity. The sanctions were based account of a public customer. ture to the application and related on findings that Towey failed to documents without the authorization respond to NASD requests for infor- Thomas W. Smith (Registered or consent of the customer. mation. Principal, Portland, Oregon) su b - mitted a Letter of Acceptance, Waiv- John Anthony Tabone (Registered James Arlie Tyson, Sr. (Regis- er, and Consent pursuant to which Representative, Auburn, New tered Representative, Lake Park, he was censured, fined $10,000, and York) submitted a Letter of Accep- Georgia) submitted a Letter of suspended from association with any tance, Waiver, and Consent pur- Acceptance, Waiver, and Consent NASD member in any capacity for suant to which he was censured and pursuant to which he was censured, two years. Without admitting or deny- barred from association with any fined $100,000, barred from associa- ing the allegations, Smith consented NASD member in any capacity. tion with any NASD member in any to the described sanctions and to the Without admitting or denying the alle- capacity, and ordered to pay entry of findings that he submitted gations, Tabone consented to the $304,399.61 in restitution to public misleading documentation to his described sanctions and the entry of customers. Without admitting or member firm to obtain reimburse- findings that he changed the denying the allegations, Tyson con- ments through the petty cash fund in addresses of public customers to sented to the described sanctions his branch office. The findings also addresses under his control without and to the entry of findings that a stated that Smith charged these the customers’ knowledge or con- public customer gave him checks expenses to his firm’s corporate sent, took unauthorized loans and totaling $20,000 for the purchase of account such that the firm was other disbursements from variable shares in a company “if and when” directly billed for these charges in and non-securities insurance policies the company went public. The find -

NASD Notices to Members—Disciplinary Actions March 1999 172 ings stated that Tyson gave the cus- with the product being advertised. customer complaint and settlement tomer a “debenture” which carried an with the customer on a Form U-4. 11 percent interest rate and purport- Mark Jonathan Weisman (Regis- The findings also stated that Willette edly gave him the right to convert his tered Representative, Basking exercised effective control over cus- investment into shares of stock. Ridge, New Jersey) submitted a tomer accounts and recommended Instead of investing the customer’s Letter of Acceptance, Waiver, and to the customers numerous purchas- funds, Tyson converted them to his Consent pursuant to which he was es and sales of securities without own use and benefit. In addition, censured, barred from association having reasonable grounds for Tyson converted a total of with any NASD member in any believing that such recommenda- $304,399.61 received from other capacity, and ordered to pay restitu- tions were suitable for the customers public customers to his own use and tion in the amount of $465,031.70 to in view of the size and frequency of be n e fi t by telling the customers he his member firms or their insurance the transactions, and the nature of was investing their funds in securities company parent organizations. With- the customers’ accounts. and evidenced the transactions by out admitting or denying the allega- providing them with “Certificates of tions, Weisman consented to the Andrew Scott Zeiger (Registered Direct Participation” he created that described sanctions and to the entry Representative, Fort Lauderdale, sp e c i fi ed an investment amount, an of findings that he effected the unau- Florida) was censured, fine d annual yield, and a maturity date. thorized withdrawal of $465,031.70 $25,000, and barred from associa- in loan checks from the policies of tion with any NASD member in any Rocco Anthony Vignola (Regis- policy holders and public customers capacity. The sanctions were based tered Representative, Bohemia, without their knowledge or consent, on findings that Zeiger failed to New York) was censured, fine d and deposited these funds into his respond to NASD requests for infor- $15,000, and barred from associa- personal bank account. ma t i o n . tion with any NASD member in any capacity. The sanctions were based Kellie Anne Will (Registered Rep- on findings that Vignola forged a resentative, Derby, New York) su b - Individual Fined public customer's signature on an mitted an Offer of Settlement David Madden Shehan (Registered application for an insurance policy in pursuant to which she was censured, Representative, Littleton, the customer's name and submitted fined $25,000, and barred from asso- Colorado) submitted a Letter of the application, without the cus- ciation with any NASD member in Acceptance, Waiver, and Consent tomer's knowledge or authorization; any capacity. Without admitting or pursuant to which he was censured forged the customer's signature on a denying the allegations, Will consent- and fined $12,500. Without admitting check for $908 which reflected the ed to the described sanctions and to or denying the allegations, Shehan customer's credit resulting from the the entry of findings that she failed to consented to the described sanctions cash surrender of a separate insur- respond to NASD requests for infor- and to the entry of findings that he ance policy; and used a portion of mation. sent correspondence to mutual fund the proceeds of that check to pay for wholesalers without prior approval the aforementioned unauthorized Paul Daniel Willette (Registered from his member firm. According to insurance policy. Representative, Eden Prairie, Min- the findings, the correspondence nesota) submitted a Letter of Accep- solicited funds for a firm - s p o n s o r e d Robert Lee Wallace (Registered tance, Waiver, and Consent educational meeting by improperly Principal, Naples, Florida) wa s pursuant to which he was censured, promising access to mutual fund censured, fined $5,000, and sus- fined $5,000, suspended from asso- wholesalers who contributed to the pended from association with any ciation with any NASD member in meeting and denying access to those NASD member in any capacity for 60 any capacity for 15 business days, unwilling to contribute. days. The SEC affirmed the sanc- and required to pay $10,000 in resti- tions following appeal of a January tution to a public customer. Willette Decision Issued 1998 NAC decision. The sanctions must also submit to additional super- The following decisions have been were based on findings that Wallace vision by his member firm for 365 issued by the DBCC or the Office of published an advertisement for viati- days following the suspension. With- Hearing Officers and have been cal settlements in a newspaper that out admitting or denying the allega- appealed to or called for review by contained misleading, unwarranted, tions, Willette consented to the the NAC as of February 12, 1999. and exaggerated statements and described sanctions and to the entry The findings and sanctions imposed failed to disclose the risks associated of findings that he failed to disclose a in the decision may be increased,

NASD Notices to Members—Disciplinary Actions March 1999 173 decreased, modified, or reversed by of manipulative, deceptive, or other ulent price predictions in connection the NAC. Initial decisions whose time fraudulent devices or contrivances. with his recommendations and solici- for appeal has not yet expired will be The complaint alleges that Dalton tations. The complaint alleges that reported in the next Notices to failed to disclose to public customers Hawley effected transactions in pub- Me m b e r s . that the prices at which his member lic customer accounts without the firm was engaging in these transac- prior authorization of the customers. David Charles Baron, Jr. tions with its customers were not rea- The complaint also alleges that Haw- (Registered Principal, Clearwater, sonably related to the prevailing ley failed to execute a public cus- Fl o r i d a ) was censured, fine d market price of these securities. tomer’s sell order. $15,000, and suspended from association with any NASD member Robert Louis Giardina (Registered Ricky Allen Lubinsky (Registered in any capacity for 45 days. The Representative, Staten Island, Principal, Fort Lauderdale, Flori- sanctions were based on find i n g s New York) was named as a respon- da) was named as a respondent in that Baron failed to supervise a dent in an NASD complaint alleging an NASD complaint alleging that he registered representative by allowing that he employed devices to defraud made unsuitable recommendations the individual to effect transactions in a public customer by making untrue to a public customer based on the municipal securities without being statements of material fact or omit- facts the customer disclosed as to re g i s t e r e d . ting to state material facts necessary her tax status, investment objective, to make the statements, in light of and financial situation and needs. Baron has appealed this action to the the circumstances in which they The complaint also alleges that NAC and the sanctions are not in were made, not misleading. The Lubinsky failed to respond to NASD effect pending consideration of the complaint alleges that Giardina made requests for information. ap p e a l . material misrepresentations to a pub- lic customer in order to persuade the Machelle Rene May (Registered Complaints Filed customer not to sell securities. The Principal, San Diego, California) The following complaints were complaint also alleges that Giardina was named as a respondent in an issued by the NASD. Issuance of a failed to respond timely to NASD NASD complaint alleging that she disciplinary complaint represents the requests for information and for on- made unauthorized withdrawals from initiation of a formal proceeding by the-record testimony. her member firm’s bank accounts the NASD in which findings as to the totaling $42,208.67 and converted allegations in the complaint have not Daniel J. Glass (Registered Princi- those funds to her own personal use. been made, and does not represent pal, Lutz, Florida) was named as a a decision as to any of the allega- respondent in an NASD complaint Thomas Robert Sanford (Regis- tions contained in the complaint. alleging that he effected securities tered Principal, Dana Point, Cali- Because these complaints are unad- transactions in a public customer’s fo r n i a ) was named as a respondent judicated, you may wish to contact account without the customer’s in an NASD complaint alleging that the respondents before drawing any authorization and without discre- he effected unauthorized transactions conclusions regarding the allegations tionary authority over the account, in the accounts of public customers, in the complaint. and in response to the customer’s and attempted to effect the purchase complaints, paid the customer a total of securities in the account of another Thomas John Dalton (Registered of $2,124.99 for the losses incurred public customer without the cus- Principal, Levittown, New York) in connection with the unauthorized tomer’s knowledge, authorization, or was named as a respondent in an tr a n s a c t i o n s . consent. The complaint also alleges NASD complaint alleging that he that Sanford initiated unauthorized charged public customers markups Matthew Christopher Hawley wire transfers totaling $21,800 from and markdowns above his member (Registered Principal, Sleepy Hol- the joint account of public customers, firm’s contemporaneous cost, total- low, New York) was named as a forged the customers’ signatures on ing approximately $793,919.97, at respondent in an NASD complaint wire transfer instruction forms, and as prices that were not fair and reason- alleging that he made material mis- a result, caused $21,800 to be trans- able, taking into consideration all of representations and failed to disclose ferred from the customers’ joint the relevant factors. The complaint material information to public cus- account to two bank accounts of also alleges that Dalton effected tomers in order to induce them to which the customers had no benefi- transactions in, or induced the pur- purchase securities. The complaint cial or other interest. chase or sale of, securities by means also alleges that Hawley made fraud-

NASD Notices to Members—Disciplinary Actions March 1999 174 Ronald Franklin Sivak (Registered requests to submit financial informa- DeSanto, Joseph F., Pompano Representative, Mobile, Alabama) tion to the NASD. The actions were Beach, Florida (February 5, 1999) was named as a respondent in an based on the provisions of NASD NASD complaint alleging that he Rule 8210 and Article VII, Section 2 Mazzei, Frank R., Oceanport, New effected a transfer of funds in the of the NASD By-Laws. The date the Jersey (January 29, 1999) amount of $9,000 from the account suspensions commenced is listed of a public customer to the joint after the entry. If the firm has com- Moler, William A., Aurora, Colorado account of other public customers, plied with the requests for informa- (February 5, 1999) without the knowledge or consent of tion, the listing also includes the date the first customer. The complaint the suspension concluded. alleges that in connection with this Individuals Suspended activity, Sivak forged the signature of Barry F. Cohen & Company, Boca Pursuant To NASD Rule Series the first customer on an “Authoriza- Raton, Florida (February 16, 1999) 9510 For Failure To Pay tion to Journal Securities or Funds” Arbitration Awards form, without the customer’s knowl- Grigsby & Associates, San Fran- Cox, Jeffrey L., Lemayne, Pennsyl- edge or consent. The complaint also cisco, California (February 4, 1999) vania (February 1, 1999 - February alleges that Sivak failed to respond 10, 1999) to NASD requests for information. Firms Expelled For Failing To Katz, Michael Alan, Bethpage, New Dale Cochren Trask (Registered Pay Fines, Costs, And/Or York (February 10, 1999) Representative, Swampscott, Mas- Provide Proof Of Restitution In sa c h u s e t t s ) was named as a Connection With Violations Zangara, Frank Jack, Hicksville, respondent in an NASD complaint InterSecurities Limited, Nassau, New York (February 17, 1999) alleging that after having been grant- Bahamas (February 5, 1999) ed power of attorney over the fina n - cial affairs of a public customer Plumwood Securities Corp., Liber- NASD Regulation And The af fl icted with Alzheimer’s and Parkin- tyville, Illinois (February 5, 1999) New York Stock Exchange son’s disease, he improperly con- Jointly Fine Ragen MacKenzie, verted $157,250 of the customer’s Strategic Resource Management, Inc. $125,000 funds for his own use and benefit. In c . , Aurora, Colorado (February 5, NASD Regulation and the New York 19 9 9 ) Stock Exchange, Inc., as a result of a James Mitchell Vaughn (Regis- coordinated examination and investi- tered Representative, Bellport, gation, announced that Ragen New York) was named as a respon- Firm Suspended Pursuant To MacKenzie, Inc., has been censured dent in an NASD complaint alleging NASD Rule Series 9510 For and fined $125,000 for violations that he made material misrepresen- Failing To Pay An Arbitration arising from the processing of cus- tations, omitted to disclose material Award tomer orders and has agreed to an information, and made fraudulent Ash & Co., Inc., a/k/a Ash Finan- appropriate undertaking regarding its price predictions in connection with cial Corp., Great Neck, New York procedures. The actions were his solicitation of public customers to (February 4, 1999) brought by both self-regulatory orga- purchase securities. The complaint nizations and the sanctions are joint- also alleges that Vaughn effected a M.S. Farrell & Company, Inc., New ly assessed. transaction in the account of a public York, New York (January 25, 1999 - customer without the customer’s February 4, 1999) The NYSE found that with respect to authorization. The complaint also two securities listed on the alleges that Vaughn failed to execute Exchange, Ragen MacKenzie aggre- a sale of securities as instructed by a Individuals Whose gated orders for the purchase of public customer. Registrations Were Revoked securities in customer accounts into For Failure To Pay Fines, blocks, and after shares were Costs, And/Or Provide Proof obtained, allocated the shares to Firms Suspended Of Restitution In Connection customers at the average price at The following firms were suspended With Violations which the orders were filled. The from membership in the NASD for Catsos, Jr., James E., Aventura, NYSE found that the firm did not pre- failure to comply with formal written Florida (February 5, 1999) pare order tickets to reflect orders, at

NASD Notices to Members—Disciplinary Actions March 1999 175 or near the time the block orders NASD Regulation Expels engaged in manipulative activity in were entered did not possess docu- Biltmore Securities, Inc., Bars connection with the IPOs of CSI mentation reflecting that the firm dis- Two Principals For Microc a p Computer Specialists, Inc., and Ter- closed to its customers that it Fraud, And Obtains Restitution race Holdings, Inc., underwritten by intended to aggregate orders, and And Funds For Inve s t o r s the firm. This activity violated the then to allocate the shares pur- NASD Regulation announced that it anti-fraud, anti-manipulation, and chased to its customers, after the has expelled Biltmore Securities, other provisions of the federal securi- close of the trading day, at the aver- Inc., of Ft. Lauderdale, Florida, from ties laws and NASD rules. age price at which the shares were membership in the NASD, and per- purchased. manently barred its two principals, During both offerings, which took Elliot Loewenstern and Richard place in 1995, Loewenstern con- NASD Regulation also found that in Bronson, for engaging in fraudulent trolled the distribution of the IPOs June and July of 1997, Ragen conduct and obtaining excessive and placed 31 percent of each offer- MacKenzie aggregated certain cus- underwriting compensation. The firm ing with investors who he expected tomer purchase and sale orders in and its two principals have agreed to would sell the securities back to Bilt- seven Nasdaq stocks and executed settle, without admitting or denying more as quickly as possible after such orders as block trades through the allegations, several disciplinary trading began. Minutes after open its trading desk. After the execution of actions involving the underwriting, market trading began, these shares the block trades was completed, the distribution, or trading of the securi- were sold or "flipped" back to Bilt- firm’s brokers allocated the shares at ties of five different issuers between more at prices between $.75 and $2 the average price among selected November 1993 and December above the IPO price. In addition, customer accounts for which the 1995. while the initial offering was still in orders were placed. Ragen MacKen- progress, Biltmore agreed to pur- zie had no standardized process to As part of the settlement, the firm chase 725,000 shares from "insid- prevent disparate allocations among and its principals have agreed to ers" of Terrace Holdings, for prices customer accounts. NASD Regula- return more than $6 million to cus- well below the price of the offering. tion further found that, in violation of tomers of the firm. Of this, $3.3 mil- NASD rules and federal securities lion has been earmarked for Once the IPO was completed and laws, the firm failed to prepare and customers who have recently after-market trading began in each maintain records reflecting details of reached settlements with the firm. An offering, Biltmore’s sales force began individual customer orders including additional $1.6 million of this money an aggressive effort to sell the secu- price and size of orders, and time of will be used to pay restitution to iden- rities to the firm’s retail customers. receipt and account identifica t i o n ti fi ed customers. The final $1.1 mil- Biltmore and Loewenstern violated information. lion will be used to compensate the securities laws and NASD rules customers of Biltmore who voluntari- by acting as a market maker in the NASD Regulation and the NYSE ly participate in a mediation program aftermarket for each security before also found that the firm failed to pro- sp e c i fi cally designed to mediate their completing a bona-fide distribution of vide for appropriate supervision claims against the firm. these IPOs. As a result of this mis- designed to prevent these violations. conduct, Biltmore illegally profited by Biltmore, Loewenstern, and Bronson almost $1.8 million. Ragen MacKenzie, which neither will also pay fines of $600,000, admitted nor denied NASD Regula- $300,000, and $100,000, respective- Fraudulently Failing to Disclose tion’s and the NYSE’s allegations, ly. NASD Regulation will collect the Adverse Interests. In 1993 and has undertaken to have the audit fines only after all obligations to cus- 1994, Biltmore awarded bonuses of committee of its parent company ver- tomers under the settlement have publicly traded warrants of Health- ify that a review of the firm’s proce- been satisfied . care Imaging Services, Inc., and Unit- dures has been conducted and that ed Restaurant, Inc., to Loewenstern, appropriate new procedures have Violations Bronson (in one instance), and other been implemented to ensure compli- employees of the firm. Warrants enti- ance with applicable self-regulatory The settlement involves the following tle the holder to buy during a speci- organization rules and the federal vi o l a t i o n s : fied period a proportionate amount of securities laws. common stock at a price which is Manipulative Conduct. Bi l t m o r e usually higher than the market price Securities and Loewenstern at the time of issuance of the war-

NASD Notices to Members—Disciplinary Actions March 1999 176 rants. Shortly after the bonuses were stock of Licon International, Inc., tion Department. The program may awarded, the vast majority of the war- from an entity owned by three princi- be used by customers with claims rants were sold back to the firm. At pals of Stratton Oakmont, Inc. Sub- against the firm arising within the past the same time, Biltmore’s brokers, sequently, the firm, acting through six years. Certain limits have been acting under the direction of Loewen- Loewenstern and Bronson, engaged set on the amounts that a particular stern and/or Bronson, aggressively in a public distribution of these investor may recover and the number solicited Biltmore’s public customers shares by selling them to its cus- of customers who benefit from the to purchase these warrants. They tomers. They did not comply with the program will depend on the number failed to disclose to those customers, Corporate Financing Rule under and size of the claims actually medi- as required by federal securities laws, which they would have been entitled ated. All customers with existing the materially important fact that cer- to receive $984,330. Instead, the firm claims against them will be provided tain persons at the firm had a person- received over $640,000 more than it notice of the terms of the mediation al financial interest in the warrants should have received. In 1995, Bilt- program. Customers may still opt to being sold. As a result of purchasing more and Loewenstern again violat- pursue their case in arbitration. these securities, Biltmore’s cus- ed the Corporate Financing Rule in tomers suffered losses of more than connection with the distribution of the Customers who have questions con- $1.6 million, which are being repaid Terrace Holdings securities it cerning the details of this mediation as part of this settlement. obtained from "insiders" of the com- program, may call Elizabeth McCoy, pany in 1995 described above. In Assistant Director of Mediation at Excessive Underwriting Compen- this case, the firm was entitled to 888-NY-MEDI-8 (888-696-3348). sation and Related Misconduct. underwriting compensation of Biltmore made more than $2.6 mil- $755,332. Instead, it obtained more In addition, Biltmore, Loewenstern, lion in illicit profits by collecting than $2 million in excess of that and Bronson have agreed to repay excessive underwriting compensa- am o u n t . customer losses of approximately tion in violation of the NASD’s Corpo- $1.6 million to some 150 customers rate Financing Rule. That Rule Terms Of The Settlement in at least 25 states, who purchased regulates the amount of compensa- United Restaurant warrants tion an underwriter can receive in an In addition to agreeing to the expul- (between November 14-22, 1994 offering; requires firms to file certain sion of Biltmore from the NASD, and and January 5-20, 1995) or Health- information, including the amount of permanent bars from the securities care Imaging warrants (between their proposed compensation, with industry of Loewenstern and Bron- November 23-Decmber 7, 1993). the NASD prior to the commence- son, they have agreed to give up their Customers with questions about this ment of an offering; and requires that illicit profits to pay back some former aspect of the settlement should call the underwriting compensation be customers with claims against the 888-275-7456. disclosed in the offering materials. firm. Some of those funds will be used to finance a specially designed © 1999, National Association of Securities Dealers, During late March 1994, Biltmore voluntary mediation program, spon- Inc. (NASD). All rights reserved. bought more than 7 million shares of sored by NASD Regulation’s Media-

NASD Notices to Members—Disciplinary Actions March 1999 177 Amendments To Guidelines Misprint In 1998 Edition Of For Regarding California NASD Sanction Guidelines Arbitration Proceedings The hard-copy, paper version of Information in NASD Notice to Mem- NASD Sanction Guidelines co n t a i n s You r bers 99-10 (February), which applies a misprint in the guideline for Co m - to NASD Regulation, Inc. (NASD munications with the Public — In f o rm a t i o n Re g u l a t i o n SM ) arbitration proceedings Late Filing; Failing to File; Failing in California, and governs the activi- to Comply with Rule Standards or ties of non-California attorneys, has Use of Misleading Communica- been amended and should be ti o n s (page 75, Sales Practices sec- reviewed by anyone participating tion of the 1998 edition of the NA S D in a California arbitration proceed- Sanction Guidelines). The Internet in g . The original Guidelines became version, on the NASDR Web Site effective on January 1, 1999. (ww w . n a s d r . c o m ) is correct.

Effective February 5, 1999, the Under the column titled “Suspension, NASD Regulation Office of Dispute Bar, or Other Sanctions,” for “Failure Resolution (ODR) amended its to File,” the second paragraph should Guidelines for non-California attor- read: “Also consider suspending the neys seeking to represent parties in responsible individual in any or all arbitration proceedings in California. capacities for up to 10 bu s i n e s s Non-California attorneys now must days.” The current version inaccu- fu l fi ll their obligations under the rately states “five business days.” Guidelines, that is, associate with California counsel and file a Certifica - Under the column titled “Suspension, tion Form, no later than 20 days Bar, or Other Sanctions,” for “Late before the first scheduled hearing Filing,” the second paragraph should on the merits. The prior deadline read: “Also consider suspending the was 45 days after service of the responsible individual in any or all Statement of Claim. This means that capacities for up to five bu s i n e s s non-California attorneys may partici- days.” The current version inaccu- pate fully in the arbitration proceed- rately states “10 business days.” ing without associating with local counsel or filing the Certifica t i o n © 1999, National Association of Securities Dealers, Form until 20 days before the firs t Inc. (NASD). All rights reserved. scheduled hearing on the merits, when they must comply with the Guidelines or be barred from repre- senting their clients in the arbitration case. This change is consistent with Cal. Civ. Proc. Code ¤ 1282.4.

Questions concerning this communi- cation or Notice to Members 99-10 may be addressed to Terri L. Reich- er, Assistant General Counsel, Office of General Counsel, National Associ- ation of Securities Dealers, Inc. (N A S D ¨), at (202) 728-8967, or by e- mail at re i c h e r t @ n a s d . c o m .

NASD Notice to Members—For Your Inform a t i o n March 1999 179

Executive Summary the Form 211 application by providing NASD The purpose of this Notice to additional explanation and/or informa- Me m b e r s is to advise member firm s tion that addresses those concerns, that Form 211 applications, member firms frequently fail to Notice to submitted by member firms to respond to the letter in any manner. demonstrate compliance with As a result of a member firm’s failure Securities and Exchange to respond, the information relied Members Commission (SEC) Rule 15c2-11 upon by the member firm in making and National Association of its application becomes stale and it is 99-26 Securities Dealers, Inc. (NASD¨ or no longer possible to approve the Association) Rule 6740, will be application under Rule 6740. treated as abandoned and the NASD Will Terminate Association will close its files on the In order to address the lack of current Form 211 Applications If matter if a submitting member firm information in these circumstances, has not responded to a defici e n c y as of the date of the publication of Applicants Do Not letter sent to it by the Market this Notice to Members, any Form Respond To NASD Regulation Department staff within 211 application for which the mem- Deficiency Letters Within 180 calendar days of the date of the ber firm has not addressed a defi- 180 Calendar Days de fi ciency letters.1 ciency letter within 180 calendar days of the date of that letter will be Questions concerning this No t i c e treated as withdrawn and the appli- Suggested Routing may be directed to Ken Worm, cant’s file will be closed.2 If the mem- Senior Management Assistant Director, Market Regulation ber firm still desires to initiate or Department, NASD Regulation, Inc. resume quotations of the subject Ad v e r t i s i n g (NASD RegulationSM ) at (301) 208- non-Nasdaq security after the file is Continuing Education 28 6 2 . closed, it must file a new Form 211 application along with current issuer Corporate Finance Background in f o r m a t i o n . Executive Representatives Pursuant to Rule 6740, prior to initiat- Government Securities ing or resuming quotation of a non- Endnotes Na s d a q ¨ security in any quotation 1Six months is the longest period of time that In s t i t u t i o n a l medium, a member firm must submit an application can remain current without In s u r a n c e a Form 211 application to the Market being supplemented with more timely docu- Internal Audit Regulation Department for its review ments. See SEC Rule 15c2-11(g). and a determination that the member Legal & Compliance firm has demonstrated compliance 2All Form 211 applications currently main- Mu n i c i p a l with SEC Rule 15c2-11. Within three tained in the staff’s files for which member days of the receipt of the Form 211 firms have failed to respond to deficiency let- Mutual Fund application, the staff will either clear ters for 180 calendar days or longer will be Op e r a t i o n s the application, allowing the member closed. All Form 211 applications currently Op t i o n s firm to initiate or resume quotations maintained in the staff’s files for which this of the non-Nasdaq security in the 180-calendar day period has not yet run and Registered Representatives sp e c i fi ed quotation medium, or send all Form 211 applications received subse- Re g i s t r a t i o n the member firm a deficiency letter quent to the publication of this Notice to Re s e a r c h explaining that it cannot clear the Members will be processed according to this application because of certain speci- procedure. Sy n d i c a t e fied deficiencies and setting forth Sy s t e m s what the firm must do to address © 1999, National Association of Securities Dealers, those specified concerns. Inc. (NASD). All rights reserved. Tr a d i n g Tr a i n i n g While a member firm is provided an Variable Contracts opportunity to cure any deficiencies in

NASD Notice to Members 99-26 Ap r il 1999 183 Executive Summary another entity during Phases 2 and 3 NASD In accordance with National are required to complete Sections 1 Association of Securities Dealers, through 4 of the revised registration Inc. (NASD¨) Rules 6950 through form and return it to the NASD prior Notice to 6957 (the OATS Rules), the NASD to the date when they intend to begin has established a registration reporting. process for member firms and third Members parties that will begin reporting to the The completed form must be Order Audit Trail SystemSM (O A T S SM ) accompanied by a request for an 99-27 in Phase 2 (August 1, 1999) and initial user account. The request Phase 3 (July 31, 2000). In Phase 2, must be on letterhead, and contain NASD member firms are required to the organization’s name, address, report all electronic orders for broker/dealer number (if Order Audit Trail System Na s d a q ¨ securities. All manual orders appropriate), and the user’s name, Phase 2 Firms Required for Nasdaq securities must be telephone number, and fax number. To Register; Firms reported by Phase 3. Should Register By All member firms and third parties that Organizations reporting to OATS will report to OATS in Phase 2 or 3, April 1, 1999 should complete registration including those that have previously approximately 120 days before they registered but do not intend to report are required to report (April 1, 1999, to OATS in Phase 1, should refer to for Phase 2; April 1, 2000, for Phase the Registration Activity Checklist Suggested Routing 3) in order to allow sufficient time for contained in the registration form to Senior Management familiarization and testing. NASD ensure that they have performed all member firms that handle orders in required registration activities, Ad v e r t i s i n g Nasdaq securities and fail to including requesting an initial user Continuing Education complete and return the OA T S account. Any party that intends to Subscriber Initiation and Registration use the OATS private network to Corporate Finance Fo r m or fail to perform all required report to OATS by Phase 2 via File Executive Representatives registration activities will not be able Transfer Protocol (FTP) or Government Securities to report OATS data to the NASD; CONNECT:Direct, formerly known failure to report order information by as Network Data Mover or NDM, In s t i t u t i o n a l the specified OATS implementation must complete a contract with In s u r a n c e date is a violation of NASD Rules MCIWorldCom by April 1, 1999. Internal Audit 6955 and 3110. Questions regarding OATS or the Legal & Compliance Registration for Phase 1 (March 1, OATS Subscriber Initiation and Mu n i c i p a l 1999) began in September 1998. Registration Form may be directed to Parties registered for Phase 1 have NASD Business and Technology Mutual Fund begun reporting order data to OATS. Support Services via phone at (800) Op e r a t i o n s (See NASD Notices to Members 98- 321-NASD, via fax at (888) 345- Op t i o n s 33 , 98 - 7 3 , and 99 - 0 4 for a complete 6275, or via e-mail at description of the OATS Rules, su p p o r t s e r v i c e s @ n a s d . c o m . Registered Representatives OATS Registration process for Business Support is available from Re g i s t r a t i o n Phase 1, and OATS Rules 8 a.m. to 6 p.m. Monday through Re s e a r c h am e n d m e n t s . ) Friday, Eastern Time (ET). Technical Support is available from 8 a.m. Sy n d i c a t e For Phase 2 and Phase 3 Monday through 7:30 a.m. Saturday, Sy s t e m s registration, the NASD has revised ET. Information about OATS and the existing OATS Subscriber copies of the revised registration Tr a d i n g Initiation and Registration Form. The form and other OATS-related Tr a i n i n g form is available at publications are available on the Variable Contracts ww w . n a s d r . c o m / 3 3 7 0 . h t m . Member NASD Regulation, Inc. (NASD firms and third parties that will be Re g u l a t i o n SM ) Web Site transmitting to OATS directly or via (ww w . n a s d r . c o m ). NASD Notice to Members 99-27 Ap r il 1999 185 Background that the member firm or non-mem- The completed form and the request The OATS Rules were approved by ber third party will use to transmit for initial user account should be the Securities and Exchange Com- directly to OATS. The available mailed or faxed to: mission (SEC) in March 1998 and mechanisms include FTP, CON- amended in July 1998. The OATS NECT:Direct, e-mail, and the OATS NASD Regulation, Inc. Rules require that all electronic Web interface. Member firms that Business & Technology Support orders for Nasdaq securities, includ- will not be transmitting directly to Se r v i c e s ing SmallCapSM and Nasdaq National OATS are asked to identify the third ATTN: OATS Registration Ma r k e t ¨ securities, and convertible parties that will be reporting on their 9513 Key West Avenue bonds, received at the trading desk behalf and the Phase when report- Rockville, MD 20850 by Market Makers and Electronic ing will begin. Fax: (888) 345-6275 Communication Networks (ECNs) be reported to OATS by March 1, 1999 The registration form also contains a Other registration activities include (Phase 1); all electronic orders for Registration Activity Checklist, which obtaining from the NASD an Order Nasdaq securities received by mem- should be used to ensure that the Sending Organization ID, a Report- ber firms be reported to OATS by organization has completed all of the ing Date to begin transmitting to August 1, 1999 (Phase 2); and all steps required to begin reporting to OATS, and the initial User ID and non-electronic, or manual, orders for OATS. (Firms should already have Password; using the OATS Web Nasdaq securities received by mem- used the OATS Reporting Technical interface to create and update OATS ber firms be reported to OATS by Sp e c i fic a t i o n s , OATS Subscriber contact information for an OSO July 31, 2000 (Phase 3). Ma n u a l , and OATS Frequently Administrator, Technical Contact, Asked Questions to prepare a sys- and Compliance Contact; ordering a tem to report order information to connection to the OATS private Discussion OATS. Alternatively, they should network (if submitting to OATS via Registration For OATS have contracted with one or more FTP or CONNECT:Direct); and re- Reporting third parties to provide this service. porting to the OATS production No member firm or third party may environment. Information requested on the OA T S begin transmitting data to the OATS Subscriber Initiation and Registration production environment on its imple- Organizations that intend to transmit Fo r m is necessary to register mem- mentation date unless it has already to OATS using either FTP or CON- ber firms and non-member third par- successfully transmitted to the OATS NECT:Direct must submit to MCI- ties to report order information to testing environment.) WorldCom a completed order for a OATS. NASD member firms that fail connection to the OATS private net- to complete and return this form or Registration activities include return- work. The completed circuit orders fail to perform all required registration ing the completed registration form, are due by April 1, 1999, for orga- activities will not be able to report accompanied by a request for an ini- nizations that must transmit to the OATS data to the NASD; failure to tial user account, to the NASD. The OATS production environment by report order information by the speci- request for an initial user account August 1, 1999 (Phase 2) and by fied OATS implementation date is a must be on letterhead, and contain April 1, 2000, for organizations violation of NASD Rules 6955 and the organization’s name, address, that must transmit to the OATS 3110. Organizations reporting to broker/dealer number (if appropri- production environment by July OATS should complete registration ate), the name of the user who is 31, 2000 (Phase 3). This deadline approximately 120 days before they requesting the account, and that provides time for testing. Any delay are required to report in order to user’s telephone number and fax may limit the amount of time avail- allow sufficient time for familiarization number. The initial user account will able for testing via the private net- and testing. provide the organization access to work. No member firm or third party the OATS Web interface, which can will be allowed to transmit data to the The registration form includes a be used to create and update OATS OATS production environment until it question regarding the Phase when contact information, view the status has successfully transmitted to the the member firm is required to report of submitted files, view reporting OATS testing environment. For infor- to OATS or the non-member entity statistics, view and repair record mation about obtaining a connection will begin transmitting to OATS and rejections, submit new records, and to the private network or an OATS a question regarding the mechanism request additional user accounts. Service Order Package, contact

NASD Notice to Members 99-27 Ap r il 1999 186 MCIWorldCom at (800) 825-9196. NECT:Direct, should not obtain a Organizations that will be submitting connection to the private network. to OATS via e-mail, the OATS Web interface, or one or more third par- © 1999, National Association of Securities Dealers, ties, and will not use FTP or CON- Inc. (NASD). All rights reserved.

NASD Notice to Members 99-27 Ap r il 1999 187 Executive Summary related or under common control to NASD This Notice to Members su p e r s e d e s determine whether a sale is long or Notice to Members 98-65, restates short and subject to the Short-Sale the views of NASD Regulation, Inc. Rule requirements. NASD Notice to (NASD RegulationSM ) and The Regulation is committed to ensuring Nasdaq Stock Market¨ (N a s d a q ¨) strict adherence to the Short-Sale concerning National Association of Rule and will carefully review Members Securities Dealers, Inc. (NASD¨) whether firms have engaged in the Rule 3350 (Short-Sale Rule) that conduct described in this Notice in 99-28 were discussed in Notice to examinations and investigations. Members 98-65, and corrects a Violations of the Short-Sale Rule will statement concerning the use of be vigorously pursued. cross-guaranteed accounts for NASD Reminds Regulation T purposes. Questions concerning this No t i c e Members Of Obligations should be directed to the Office of Relating To The Short- In 1994, the Short-Sale Rule was General Counsel, The Nasdaq Stock adopted to stop market-destabilizing Market, Inc., at (202) 728-8294; or Sale Rule speculative short sales in Nasdaq the Legal Section, Market National Market¨ (NNM) securities. Regulation, NASD Regulation, at To prevent this conduct, the Short- (301) 590-6410. Sale Rule prohibits member firm s Suggested Routing from executing customer short sales Overview Senior Management and non-Market Maker proprietary The NASD adopted the Short-Sale short sales in an NNM security at or Rule to prevent speculative short Ad v e r t i s i n g below the current inside bid when the selling in NNM securities from accel- Continuing Education current inside bid is lower than the erating a decline in the price of a previous inside bid. security and to stop a form of manip- Corporate Finance ulation known as “bear raiding” or Executive Representatives It has come to the attention of NASD “piling on.” Bear raiding or piling on Government Securities Regulation and Nasdaq that certain occurs when short sellers exert pres- NASD members may be assisting sure on a stock’s price, forcing the In s t i t u t i o n a l customers in the circumvention of price to drop precipitously, frequently In s u r a n c e this Rule. Specifically, these within a single trading day. The Internal Audit members are failing to net security Short-Sale Rule prohibits member positions of accounts for customers firms from executing customer short Legal & Compliance who maintain accounts in their name sales and non-Market Maker propri- Mu n i c i p a l and exercise control over, or operate etary short sales in an NNM security in concert with, other accounts with a at or below the current inside bid Mutual Fund strategy designed to circumvent the when the current inside bid is lower Op e r a t i o n s Short-Sale Rule. The failure to net than the previous inside bid.1 Op t i o n s these positions has permitted these customers, who operate the two To determine whether a sale is long Registered Representatives accounts with a single investment or short, members must look to the Re g i s t r a t i o n strategy, to avoid application of the de fi nition of a “short sale” contained Re s e a r c h Short-Sale Rule. Members are in Securities and Exchange Commis- expected to establish and maintain sion (SEC) Rule 3b-3, which is incor- Sy n d i c a t e supervisory procedures to detect and porated into the NASD’s Short-Sale Sy s t e m s deter this improper trading activity. Rule as Rule 3350(k)(1). Under SEC Rule 3b-3 and NASD Rule 3350, the Tr a d i n g The purpose of this Notice is to term “short sale” means any sale of a Tr a i n i n g highlight for members that, security that the seller does not own Variable Contracts depending on the facts and or any sale that is consummated by circumstances, they may be required the delivery of a security borrowed to net positions for accounts that are by, or for the account of, the seller.

NASD Notice to Members 99-28 Ap r il 1999 189 To determine whether the seller is and flat positions in the securities Members must take steps to develop long or short overall, the seller must in the long account. When the compliance procedures to guard net all positions in the security. This two accounts are appropriately against such abusive trading prac- includes netting positions held in combined and treated as one, tices. Members should also instruct accounts that are under common short sales occur on a regular their associated persons not to control or traded with a single invest- basis and often result in transac- accept orders for execution where ment strategy. tions occurring on down-bids in customers are operating two or more violation of the NASD’s Short- accounts in order to circumvent the Sale Rule. Rule. A finding of such abuses may Rule Prohibits Circumvention result in the imposition of NASD dis- The Short-Sale Rule also prohibits a NASD Regulation will conduct a facts ciplinary action against the member member from knowingly, or with rea- and circumstances analysis in mak- and its associated persons and a son to know, effecting sales for the ing a determination as to whether referral of such trading conduct by account of a customer or for its own customer accounts should be netted persons outside the jurisdiction of the account for the purpose of circum- for purpose of compliance with the NASD to other appropriate regulatory venting the rule.2 With this No t i c e , Short-Sale Rule. When conducting authorities. NASD Regulation and Nasdaq are such analysis, NASD Regulation will, clarifying that the following would be among other things, consider: Endnotes a violation of the Short-Sale Rule if a 1NASD Rule 3350(a). member and its associated persons (1) whether a single person exer- were found to have assisted cus- cises discretion over both 2NASD Rule 3350(e). tomers in the following manner: accounts; 3Cross-guaranteed accounts refer to an ¥ A customer maintains one (2) whether the accounts are agreement where one account is guaranteed account (a “long account”) that is cross guaranteed for margin pur- by another account to enable their consoli- used to buy and sell various poses; dation for the purpose of allowing the margin securities several times in a sin- that must be maintained in those accounts to gle day. The long account typical- (3) whether the accounts belong be determined on the net positions of both ly begins and ends each day with to a family member or related accounts. Such a guarantee must be in writ- a long position of 1,000 shares in person or were opened contem- ing and permit the member carrying the each security held in that poraneously (e. g . , on the same account to use the money and securities in account. The customer also cross day); or the guaranteeing account to carry the guar- guarantees for margin purposes a anteed account or to pay any deficit therein. second account (a “short (4) whether a similar pattern is See NASD Rule 2520(f)(4) and Notice to account”), usually held by a family occurring in other customer Members 98-102 (December 1998). Notice member or related person.3 Th a t accounts at a firm. This analysis to Members 98-65 may have led members to account holds offsetting short will consider all the facts and cir- believe that margin accounts may be cross positions of 1,000 shares in the cumstances concerning the guaranteed to satisfy Regulation T require- same securities that are held in establishment, maintenance, and ments. This is an incorrect statement. Regu- the long account. In contrast to trading of these accounts. lation T provides, in pertinent part, the long account, the short “Guarantee of accounts. No guarantee of a account generally does not The presence or absence of any sin- customer’s account shall be given any effect change positions in the securities. gle factor reflected above does not for purposes of this part.” Reg. T, Section At the beginning and end of each necessarily lead to the conclusion 220.3(d). day, the combined positions in that such accounts should, or should both accounts for each of the not, be netted. © 1999, National Association of Securities Dealers, securities are flat. During the trad- Inc. (NASD). All rights reserved. ing day, the customer buys and NASD Regulation will closely watch sells securities out of the long for the above-described conduct and account, creating the false for similar schemes that attempt to appearance of alternating long circumvent application of the Rule.

NASD Notice to Members 99-28 Ap r il 1999 190 Executive Summary to submit erroneous transaction NASD On March 17, 1999, the Securities complaints. Under the 1998 rule and Exchange Commission (SEC) changes, market participants were approved changes to National given 30 minutes to request Notice to Association of Securities Dealers, adjudication of erroneous trans- Inc. (NASD¨) Rule 11890 regarding actions occurring at or after 10:00 the handling of clearly erroneous a.m. Because of the volume Members tr a n s a c t i o n s . commencing at the 9:30 a.m. opening, however, Nasdaq provided 99-29 NASD Rule 11890, as now additional time Ð up to an hour Ð to amended, limits the time period to submit adjudication requests for request an adjudication of an trades that occurring prior to 10:00 erroneous transaction to 30 minutes a.m. Thus, Nasdaq market SEC Approves Changes for transactions that occur prior to participants have until 10:30 a.m. to To Clearly Erroneous 9:30 a.m. For erroneous transactions request adjudication for trades that Trade Adjudication that occur between 9:30 a.m. and occur between 9:30 a.m. and 9:59 Procedures; Changes 9:59 a.m., market participants will still a.m. The language of the 1998 Rule have up to one hour Ð until 10:30 amendments, however, only made Ef fe c t i v e April 26, 1999 a.m. Ð to request adjudication of reference to trades that occur at or erroneous transactions. The NASD before 10:00 a.m., and did not and The Nasdaq Stock Market¨ separately address trades that occur (N a s d a q ¨) believe that the process before the 9:30 a.m. opening. As a Suggested Routing for resolving erroneous transaction consequence, a literal reading of the Senior Management complaints will become more fair, Rule unintentionally accords ef fi cient, and timely, thereby additional time to all trades that occur Ad v e r t i s i n g promoting the maintenance of fair before 10:00 a.m., including those Continuing Education and orderly markets and exposing trades that occur prior to 9:30 a.m. the parties to an allegedly erroneous Corporate Finance transaction to less market risk. This After some experience with the Rule, Executive Representatives Notice is being issued to alert Nasdaq determined it would be Government Securities members to the changes involved, appropriate to amend NASD Rule which will become effective on April 11890 to limit to 30 minutes the time In s t i t u t i o n a l 26, 1999.1 to request adjudication for trades In s u r a n c e occurring before 9:30 a.m., as well Internal Audit Questions concerning this No t i c e as those trades occurring at or after may be directed to Richard Bush, 10:00 a.m. Nasdaq is concerned that Legal & Compliance Associate Director, Nasdaq Market there are potential abuses and risks Mu n i c i p a l Operations, at (203) 385-6242; or associated with affording market John Malitzis, Assistant General participants additional time to file a Mutual Fund Counsel, Office of General Counsel, clearly erroneous appeal when there Op e r a t i o n s The Nasdaq Stock Market, Inc., at is no compelling reason (such as Op t i o n s (202) 728-8245. heavy volume) for doing so. In particular, for trades occurring prior Registered Representatives Ba ck g ro u n d to 9:30 a.m., market participants Re g i s t r a t i o n NASD Rule 11890 (Rule) sets forth have the opportunity to observe the Re s e a r c h the process through which Nasdaq direction of the market at the opening may review certain transactions and and for an extended period of time Sy n d i c a t e declare them null and void or thereafter, and then determine Sy s t e m s otherwise modify their terms. In early whether to file an erroneous trade 1998, the SEC approved changes to appeal by 10:30 a.m. While Nasdaq Tr a d i n g the Rule to make the adjudication still believes that it is appropriate to Tr a i n i n g process more efficient and fair.2 provide additional time to request an Variable Contracts Among other things, the Rule was adjudication for trades that occur amended to shorten the time period immediately following the opening,

NASD Notice to Members 99-29 Ap r il 1999 191 based on the concerns outlined Text Of Amendments complaints must be submitted by above, Nasdaq does not believe (Note: New text is underlined; deletions are 10:30 a.m., Eastern Time; and members should be provided with br a c k e t e d . ) this additional time for pre-opening (B) for transactions occurring [on ] transactions. 11890. Clearly Erroneous prior to 9:30 a.m., Eastern Time and Transactions those occurring at or after 10:00 Accordingly, on March 17, 1999, the a.m., Eastern Time, complaints must SEC approved a proposal to limit the (a) No Change be submitted within thirty minutes. time period to appeal an erroneous transaction to 30 minutes for (b) Procedures for Reviewing Trans- transactions that occur prior to 9:30 ac t i o n s Endnotes a.m., as well as those that occur at 1See Exchange Act Release No. 34-41180 or after 10:00 a.m.3 Under the SEC- (1) Any member or person associat- (Mar. 17, 1999)(Order approving SR-NASD- approved proposal, market ed with a member that seeks to have 98-94). participants will still have until 10:30 a transaction reviewed pursuant to a.m. to request adjudication of paragraph (a) hereof, shall submit a 2See Exchange Act Release No. 39550 trades that occur between 9:30 a.m. written complaint, via facsimile or (January 14, 1998)(Order approving SR- and 9:59 a.m. otherwise, to Nasdaq Market Opera- NASD-96-51). tions in accordance with the following Finally, the changes to the Rule time parameters: 3See Exchange Act Release No. 34-41180 announced in this Notice wi l l (Mar. 17, 1999)(Order approving SR-NASD- become effective on April 26, 1999. (A) for transactions occurring at or 98-94). after 9:30 a.m., Eastern Time, but prior to 10:00 a.m., Eastern Time, © 1999, National Association of Securities Dealers, Inc. (NASD). All rights reserved.

NASD Notice to Members 99-29 Ap r il 1999 192 As of February 19, 1999, the following bonds were added to the Fixed NA S D Income Pricing SystemSM (F I P S ¨). Notice to Sy m b o l Na m e Co u p o n Ma t u r i t y AA I F . G A AAI Fostergrant Inc. 10 . 7 5 0 07 / 1 5 / 0 6 AC P I . G A Allied Corp. 0. 0 0 0 08 / 0 1 / 0 9 Members AD L A . G M Adephia Communications Corp. 7. 7 5 0 01 / 1 5 / 0 4 AD L A . G N Adephia Communications Corp. 7. 7 5 0 01 / 1 5 / 0 9 99 - 3 0 AH Y C . G A Anthony Crane rental LP Series B 10 . 3 7 5 08 / 0 1 / 0 8 AI F T . G A Aircraft Service Intl Group Inc. 11 . 0 0 0 08 / 1 5 / 0 5 AK N I . G A AKI Inc. 10 . 5 0 0 07 / 0 1 / 0 8 AM H G . G A AMM Holdings Inc. 13 . 5 0 0 07 / 0 1 / 0 9 AP G R . G B Arch Communication Group Inc. 12 . 7 5 0 07 / 0 1 / 0 7 Fi x ed Income Pric i n g AQ C H . G A Aqua Chemical Inc. 11 . 2 5 0 07 / 0 1 / 0 8 System Additions, AS . G H Armco Inc. 8. 8 7 5 12 / 0 1 / 0 8 Ch a n g e s , And Deletions AW A S . G B Allied Waste North America Inc. 7. 3 7 5 01 / 0 1 / 0 4 As Of Feb ru a r y 19, 1999 AW A S . G C Allied Waste North America Inc. 7. 8 7 5 01 / 0 1 / 0 9 BE P A . G C BE Aerspace Inc. 9. 5 0 0 11 / 0 1 / 0 8 CD I U . G A Canandaigua Brands Inc. 8. 5 0 0 03 / 0 1 / 0 9 CL M U . G A Columbia Healthcare Corp. 6. 1 2 5 12 / 1 5 / 0 0 CL M U . G B Columbia Healthcare Corp. 7. 5 0 0 12 / 1 5 / 2 3 Su g gested Routing CO L . G B Columbia/HCA Healthcare Corp. 7. 1 5 0 03 / 3 0 / 0 4 Senior Management CO L . G C Columbia/HCA Healthcare Corp. 8. 3 6 0 04 / 1 5 / 2 4 CO L . G D Columbia/HCA Healthcare Corp. 7. 1 9 0 11 / 1 5 / 1 5 Ad v e r t i s i n g CO L . G E Columbia/HCA Healthcare Corp. 7. 0 5 0 12 / 0 1 / 2 7 Continuing Education CO L . G F Columbia/HCA Healthcare Corp. 7. 2 5 0 05 / 2 0 / 0 8 CO L . G G Columbia/HCA Healthcare Corp. 7. 0 0 0 07 / 0 1 / 0 7 Corporate Finance CX L C . G A Coaxial LLC/Finl Corp. 12 . 8 7 5 08 / 1 5 / 0 8 Government Securities CX P X . G A Coaxial Comm/Phoenix Assoc. 10 . 0 0 0 08 / 1 5 / 0 0 In s t i t u t i o n a l DS U O . G C Doe Run Resources Corp. 11 . 2 5 0 03 / 1 5 / 0 5 EG C S . G A Empire Gas Corp. 7. 0 0 0 07 / 1 5 / 0 4 In s u r a n c e ES C R . G B Echostar DBS Corp. 9. 2 5 0 02 / 0 1 / 0 6 Internal Audit ES C R . G C Echostar DBS Corp. 9. 3 7 5 02 / 0 1 / 0 9 Legal & Compliance GP I . G A Group I Automotive Inc. 10 . 8 7 5 03 / 0 1 / 0 9 HP H . G A Harnischfeger Industry Inc. 8. 9 0 0 03 / 0 1 / 2 2 Mu n i c i p a l HP H . G B Harnischfeger Industry Inc. 7. 2 5 0 12 / 1 5 / 2 5 Mutual Fund HP H . G C Harnischfeger Industry Inc. 6. 8 7 5 02 / 1 5 / 2 7 HP H . G D Harnischfeger Indus Inc. 8. 7 0 0 06 / 1 5 / 2 2 Op e r a t i o n s HT H O . G A Health Trust Inc. The Hospital Co. 8. 7 5 0 03 / 1 5 / 0 5 Op t i o n s HT H O . G B Health Trust Inc. The Hospital Co.10 . 2 5 0 04 / 1 5 / 0 4 Registered Representatives HX L . G A Hexcel Corp. 9. 7 5 0 01 / 1 5 / 0 9 IE E . G A Integrated Electrical Svcs Inc. 9. 3 7 5 02 / 0 1 / 0 9 Re g i s t r a t i o n IF O U . G A Infousa Inc. 9. 5 0 0 06 / 1 5 / 0 8 Re s e a r c h KI N G . G A King Pharmaceuticals Inc. 10 . 7 5 0 02 / 1 5 / 0 9 Sy n d i c a t e KN E . G A KN Energy Inc. 9. 9 5 0 04 / 0 1 / 2 0 KN E . G B KN Energy Inc. 9. 6 2 5 08 / 0 1 / 2 1 Sy s t e m s KN E . G C KN Energy Inc. 8. 3 5 0 09 / 1 5 / 2 2 Tr a d i n g KN E . G D KN Energy Inc. 7. 8 5 0 09 / 0 1 / 2 2 KN E . G E KN Energy Inc. 8. 7 5 0 10 / 1 5 / 2 4 Tr a i n i n g KN E . G F KN Energy Inc. 6. 5 0 0 09 / 0 1 / 1 3 Variable Contracts KN E . G G KN Energy Inc. 7. 3 5 0 08 / 0 1 / 2 6 KN E . G H KN Energy Inc. 6. 6 7 0 11 / 0 1 / 2 7 KN E . G I KN Energy Inc. 6. 4 5 0 03 / 0 1 / 0 3

NASD Notice to Members 99-30 Ap r il 1999 193 Sy m b o l Na m e Co u p o n Ma t u r i t y

KN E . G J KN Energy Inc. 6. 6 5 0 03 / 0 1 / 0 5 KN E . G K KN Energy Inc. 6. 8 0 0 03 / 0 1 / 0 8 KN E . G L KN Energy Inc. 7. 2 5 0 03 / 0 1 / 2 8 KN E . G M KN Energy Inc. 6. 3 0 0 03 / 0 1 / 2 1 LC M U . G A Loral Space & Communication Ltd. 9. 5 0 0 01 / 1 5 / 0 6 LT H R . G C L-3 Communications Corp. 8. 0 0 0 08 / 0 1 / 0 8 MA K . G A Group Maintenance Amer Corp. 9. 7 5 0 01 / 1 5 / 0 9 MC L D . G D McLeod USA Inc. 9. 5 0 0 11 / 0 1 / 0 8 MI D U . G A Moll Industries Inc. 10 . 5 0 0 07 / 0 1 / 0 8 MP T C . G A Mid-Penn Telephone Corp. 7. 7 5 0 03 / 1 5 / 0 2 MT L I . G A MTL Inc. 10 . 0 0 0 06 / 1 5 / 0 6 PN H I . G A Penhall International Corp. 12 . 0 0 0 08 / 0 1 / 0 6 PP P . G B Pogo Producing Co. 10 . 3 7 5 02 / 1 5 / 0 9 RE G L . G C Regal Cinemas Inc. 8. 8 7 5 12 / 1 5 / 1 0 RM C R . G A Romacorp Inc. 12 . 0 0 0 07 / 0 1 / 0 6 RR I C . G A Renters Choice Inc. 11 . 0 0 0 08 / 1 5 / 0 8 RS L U . G C RSL Communications Plc 10 . 5 0 0 11 / 1 5 / 0 8 SF P . G A Salton Inc. 10 . 7 5 0 12 / 1 5 / 0 5 TE X . G B Terex Corp. 8. 8 7 5 04 / 0 1 / 0 8 TL L P . G F Toll Corp. 9. 5 0 0 03 / 1 5 / 0 3 UH . G F US Home Corp. 8. 8 7 5 02 / 1 5 / 0 9 UR I . G C United Rentals Inc. Series B 8. 8 0 0 08 / 1 5 / 0 8 WL W H . G A Woolworth Corp. 7. 0 0 0 06 / 0 1 / 0 0

As of February 19, 1999, the following bonds were deleted from FIPS.

Sy m b o l Na m e Co u p o n Ma t u r i t y

AE S . G A AES Corp. 9. 7 5 0 06 / 1 5 / 0 0 AI L T . G A Atlas Air Inc. 12 . 2 5 0 12 / 0 1 / 0 2 AK S . G A AK Steel Corp. 10 . 7 5 0 04 / 0 1 / 0 4 AL L A . G A All-American Bottling Corp. 13 . 0 0 0 08 / 1 5 / 0 1 AS . G F Armco Inc. 9. 3 7 5 11 / 0 1 / 0 0 AW A S . G A Allied Waste North America Inc. 10 . 2 5 0 12 / 0 1 / 0 6 AW I N . G A Allied Waste Industries Inc. 12 . 0 0 0 02 / 0 1 / 0 4 AW I N . G B Allied Waste Industries Inc. 11 . 3 0 0 06 / 0 1 / 0 7 BC C . G A Boise Cascade Corp. 9. 8 7 5 02 / 1 5 / 0 1 BC E G . G E Bank of New England Corp. 8. 8 5 0 03 / 0 1 / 9 9 BS . G A Bethlehem Steel Corp. 6. 8 7 5 03 / 0 1 / 9 9 CL K S . G A Clark-Schwebel Inc. 10 . 5 0 0 04 / 1 5 / 0 6 CW B I . G A Clark-Schwebel Inc. 12 . 5 0 0 07 / 1 5 / 0 7 DR B H . G A Dr. Pepper Bottling Hldgs Inc. 11 . 6 2 5 02 / 1 5 / 0 3 FL T W . G A Florist Transworld Del Inc. 14 . 0 0 0 12 / 1 5 / 0 1 FO H O . G A Fort Howard Corp. 9. 0 0 0 02 / 0 1 / 0 6 GN F C . G A GNF Corp. 10 . 6 2 5 04 / 0 1 / 0 3 HH I . G A Home Holdings Inc. 8. 6 2 5 12 / 1 5 / 0 3 HT H O . G A Healthtrust Inc. The Hospital Co. 8. 7 5 0 03 / 1 5 / 0 5 IS P T . G A ISP Chem/ISP Tech 9. 0 0 0 03 / 0 1 / 9 9 MA C A . G B Macandrews & Forbes Hldgs Inc. 13 . 0 0 0 03 / 0 1 / 9 9 MA L R . G A Malrite Communication Group Inc.15 . 2 5 0 02 / 1 5 / 9 9 ML W L . G A Mail-Well Corp. 10 . 5 0 0 02 / 1 5 / 0 4

NASD Notice to Members 99-30 Ap r il 1999 194 Sy m b o l Na m e Co u p o n Ma t u r i t y

MP T C . G A Mid-Penn Telephone Corp. 7. 7 5 0 03 / 1 5 / 0 2 NM K . G I Niagara Mohawk Power Corp. 8. 7 7 0 01 / 0 1 / 1 8 PA R A . G C Paramount Communications Inc. 7. 5 0 0 01 / 1 5 / 0 2 PA R A . G D Paramount Communications Inc. 8. 2 5 0 08 / 0 1 / 2 2 PA R A . G E Paramount Communications Inc. 5. 8 7 5 07 / 1 5 / 0 0 PA R A . G F Paramount Communications Inc. 7. 5 0 0 07 / 1 5 / 2 3 PL N T . G A Plantronics Inc. 10 . 0 0 0 01 / 1 5 / 0 1 RA P A . G I Rapid American Corp. Del 0. 0 0 0 03 / 0 1 / 9 9 SP F . G A Standard Pacific Corp. 10 . 5 0 0 03 / 0 1 / 0 0 TC O M . G A Telecommunications Inc. 11 . 1 2 5 10 / 0 1 / 0 3 TR A M . G A Transamerican Refining Corp. 18 . 5 0 0 02 / 1 5 / 0 2 TR A M . G B Transamerican Refining Corp. 16 . 5 0 0 02 / 1 5 / 0 2 UI S . G B Unisys Corp. 9. 7 5 0 09 / 1 5 / 1 6 VL I N . G C Valassis Inserts Inc. 9. 3 7 5 03 / 1 5 / 9 9 WM A S . G D Western Mass Electric Co. 6. 2 5 0 03 / 0 1 / 9 9 WS F S . G A WSFS Financial Corp. 11 . 0 0 0 12 / 3 1 / 0 5 WX . G B Westinghouse Electric Corp. 8. 8 7 5 06 / 0 1 / 0 1 WX . G C Westinghouse Electric Corp. 8. 3 7 5 06 / 1 5 / 0 2 WX . G D Westinghouse Electric Corp. 8. 6 2 5 08 / 0 1 / 1 2 WX . G E Westinghouse Electric Corp. 6. 8 7 5 09 / 0 1 / 0 3 WX . G F Westinghouse Electric Corp. 7. 8 7 5 09 / 0 1 / 2 3

As of February 19, 1999 changes were made to the symbols of the following FIPS bonds:

New Symbol Old Symbol Na m e Co u p o n Ma t u r i t y

EM R E . G A EG C S . G B Empire Inc. 9. 0 0 0 12 / 3 1 / 0 7 FS T . G B FO I L . G B Forest Oil Corp. 11 . 2 5 0 09 / 0 1 / 0 3 FS T . G C FO I L . G C Forest Oil Corp. 10 . 5 0 0 01 / 1 5 / 0 6 PN F T . G B PN F . G B Penn Traffic Co. New 10 . 3 7 5 10 / 0 1 / 0 4 PN F T . G C PN F . G C Penn Traffic Co. New 9. 6 2 5 04 / 1 5 / 0 5 PN F T . G D PN F . G D Penn Traffic Co. New 8. 6 2 5 12 / 1 5 / 0 3 PN F T . G F PN F . G F Penn Traffic Co. New 10 . 2 5 0 02 / 1 5 / 0 2 PN F T . G G PN F . G G Penn Traffic Co. New 11 . 5 0 0 04 / 1 5 / 0 6 PN F T . G H PN F . G H Penn Traffic Co. New 10 . 6 5 0 11 / 0 1 / 0 4

All bonds listed above are subject to trade-reporting requirements. Questions pertaining to FIPS trade-reporting rules should be directed to Stephen Simmes, Market Regulation, NASD RegulationSM , at (301) 590-6451.

Any questions regarding the FIPS master file should be directed to Cheryl Glowacki, Nasdaq¨ Market Operations, at (203) 385-6310.

© 1999, National Association of Securities Dealers, Inc. (NASD). All rights reserved.

NASD Notice to Members 99-30 Ap r il 1999 195 Memorial Day: Trade Date-Settlement Date Schedule NA S D The Nasdaq Stock Market¨ and the securities exchanges will be closed on Monday, May 31, 1999, in observance of Memorial Day. “Regular way” trans- actions made on the business days noted below will be subject to the follow- Notice to ing schedule: Members Trade Date Settlement Date Reg. T Date* 99 - 3 1 May 25 May 28 June 2 26 June 1 3

27 2 4

Me m o r ial Day: Trad e 28 3 7 DateÐSettlement Date Sc h e d u l e 31 Markets Closed —

June 1 4 8

Su g gested Routing *Pursuant to Sections 220.8(b)(1) and (4) of Regulation T of the Federal Reserve Board, a bro- Senior Management ker/dealer must promptly cancel or otherwise liquidate a customer purchase transaction in a cash account if full payment is not received within five business days of the date of purchase or, Ad v e r t i s i n g pursuant to Section 220.8(d)(1), make application to extend the time period specified. The date Continuing Education by which members must take such action is shown in the column titled “Reg. T Date.” Corporate Finance

Government Securities © 1999, National Association of Securities Dealers, Inc. (NASD). All rights reserved. In s t i t u t i o n a l In s u r a n c e Internal Audit Legal & Compliance Mu n i c i p a l Mutual Fund Op e r a t i o n s Op t i o n s Registered Representatives Re g i s t r a t i o n Re s e a r c h Sy n d i c a t e Sy s t e m s Tr a d i n g Tr a i n i n g Variable Contracts

NASD Notice to Members 99-31 Ap r il 1999 197 NASD Regulation, Inc. (NASD Furthermore, the respondents partic- Di s c i p l i n a r y Re g u l a t i o n SM ) has taken disciplinary ipated in the underwriting of several actions against the following firms and “hot issues” without obtaining individuals for violations of National required information from the pur- Actions Association of Securities Dealers, Inc. chasers of the hot issues, and failed (N A S D ¨) rules; federal securities laws, to complete a training needs analysis rules, and regulations; and the rules and to develop written training plans of the Municipal Securities Rulemak- concerning the Firm Element of the Di s c i p l i n a r y Actions ing Board (MSRB). Unless otherwise Continuing Education Requirements. Re p o r ted For April indicated, suspensions will begin with In addition, the firm, acting through the opening of business on Monday, Alton, failed to maintain written April 19, 1999. The information supervisory procedures relating to relating to matters contained in this the customer complaint reporting No t i c e is current as of the end of re q u i r e m e n t . March 22, 1999. L.H. Alton & Company and Alton have appealed this action to the U.S. Firms And Individuals Barred Court of Appeals and the sanctions Or Suspended are not in effect pending considera- L.H. Alton & Company (San Fran- tion of the appeal. cisco, California) and Lewis Hunt Alton (Registered Principal, San La Jolla Capital Corporation (San Francisco, California) were cen- Diego, California), Harold Bailey sured and fined $40,000, jointly and Gallison (Registered Principal, severally. In addition, the firm was Las Vegas, Nevada), Christopher suspended from participation in S. Knight (Registered Principal, underwriting activities for 30 busi- Forest Hills, New York), and Gr e - ness days, and ordered to hire an gory Karl Mehlmann (Registered independent consultant to audit the Principal, Englewood, Colorado). firm’s compliance and written super- The firm and Gallison were cen- visory policies, procedures, and sured, barred from engaging in practices and to comply with the penny stock transactions in any requirements in the consultant’s writ- capacity, fined $297,380, jointly and ten report. Alton was suspended severally, and fined $50,000 each from association with any NASD individually, and required to present member in any principal capacity for proof of restitution or rescission to 30 days, and ordered to comply with their damaged customers, jointly and the consultant’s recommendations severally. Gallison was also barred in before acting again in any principal all principal and supervisory capaci- capacity. Alton must also requalify by ties, and suspended in all capacities examination before acting in any for 30 days. Knight was censured, principal capacity. The Securities fined $95,854.55, barred in all princi- and Exchange Commission (SEC) pal and supervisory capacities, af fi rmed the sanctions following the barred from engaging in penny stock appeal of a December 1997 National transactions in any capacity, and Business Conduct Committee suspended in all capacities for 15 (NBCC) decision. The sanctions days. Mehlmann was censured, were based on findings that the firm , fined $10,000, suspended in all prin- acting through Alton, conducted a cipal and supervisory capacities for securities business while maintaining 10 days, and required to requalify as in s u f fi cient net capital, filed false and a general securities principal. inaccurate FOCUS Parts I and II Reports, and permitted an unregis- The National Adjudicatory Council tered person to act as a representa- (NAC) imposed the sanctions follow- tive and principal of the firm . ing appeal of a Los Angeles District NASD Notices to Members—Disciplinary Actions Ap r il 1999 199 Business Conduct Committee Letter of Acceptance, Waiver, and Sturdivant’s suspension will com- (DBCC) decision. The sanctions Consent pursuant to which the firm mence April 19, 1999, and will con- were based on findings that the firm , was censured and fined $25,000; clude at the close of business on Gallison, and Knight violated the Travis was censured, fined $10,000, May 18, 1999. DeKrafft’s suspension SEC’s penny stock rules by failing to and barred from association with any will commence May 19, 1999, and make adequate disclosure to their NASD member in a supervisory will conclude at the close of business customers who purchased penny capacity with a right to re-apply after on July 16, 1999. stocks. In addition, the firm, Gallison, one year. Without admitting or deny- Mehlmann, and Knight failed to ing the allegations, the respondents establish, maintain, and enforce pro- consented to the described sanctions Firms And Individuals Fined cedures reasonably designed to and to the entry of findings that the Auerbach, Pollak & Richardson, detect and prevent violations of the firm and Travis failed to supervise Inc. (Stamford, Connecticut) an d penny stock rules. Knight also per- adequately the activities of a regis- Harry Nathaniel Bloch II (Regis- mitted unregistered personnel to tered representative resulting in the tered Principal, Stamford, Con- engage in the securities business at individual engaging in unsuitable and necticut) submitted a Letter of the firm’s New York office while he excessive trading, including exces- Acceptance, Waiver, and Consent managed that office. sive mutual fund and annuity switch- pursuant to which they were cen- ing activity in the accounts of public sured and fined $17,500, jointly and La Jolla Capital Corporation and Gal- cu s t o m e r s . severally, and the firm was fined an lison have appealed this action to the additional $1,000. Without admitting SEC and the sanctions, other than Sturdivant & Co., Inc. (Clementon, or denying the allegations, the their bars, are not in effect pending New Jersey), Harvey Richard respondents consented to the consideration of the appeal. DeKrafft (Registered Principal, described sanctions and to the entry Mount Laurel, New Jersey), an d of findings that the firm split a cus- Strategic Resources Management, Albert Anzael Sturdivant (Regis- tomer’s 4,000-share order for a sin- Inc. (Aurora, Colorado) an d tered Principal, West Orange, New gle security into four separate William Arthur Moler (Registered Je r s e y ) . The firm and Sturdivant 1,000-share orders for entry into the Principal, Aurora, Colorado) su b - were censured and fined $7,500, Small Order Execution mitted an Offer of Settlement pur- jointly and severally, and the firm Sy s t e m SM (S O E S SM ). In addition, the suant to which they were censured was fined $3,500, individually. Sturdi- NASD found that the firm, acting and fined $7,500, jointly and several- vant was suspended from acting in through Bloch, failed to report to the ly, and both the firm and Moler were the capacity of general securities NASD statistical and summary infor- suspended from membership in the principal for 30 days, and DeKrafft mation regarding customer com- NASD for six months. In addition, was censured, fined $10,000, and plaints, and the firm failed to report Moler must requalify as a Series 24 suspended from acting in his capaci- customer complaints. The find i n g s general securities principal prior to ty as a principal for 60 days. Sturdi- also stated that the firm, acting resuming duties that require registra- vant’s and DeKrafft’s suspensions through Bloch, failed to report, in a tion as a principal. Without admitting will be served consecutively. The timely manner, the settlement of a or denying the allegations, the sanctions were based on find i n g s customer’s claim against one of its respondents consented to the that DeKrafft operated as a principal registered representatives, failed to described sanctions and to the entry at the firm without being properly reg- develop a written training plan for of findings that the firm and Moler istered. In addition, the firm conduct- continuing education, failed to main- failed to file an amended Form U-5 ed a general securities business tain records documenting the imple- for an individual to disclose the fili n g while only having one registered mentation and completion of its of an arbitration claim against the general securities principal when a continuing education plan, and failed individual. minimum of two was required. The to establish, maintain, and enforce firm and Sturdivant failed to conduct written supervisory procedures rea- a training needs analysis and failed sonably designed to achieve compli- Firms Fined, Individuals to provide the firm’s registered per- ance with the applicable securities Sanctioned sons with the required Firm Element laws, regulations, and NASD rules Royal Alliance Associates, Inc. training. In addition, the firm failed to relating to continuing education and (New York, New York) and Ka t h r y n file MSRB Form G-37 in a timely the reporting of customer com- Travis (Registered Principal, Lat- manner. pl a i n t s . tingtown, New York) submitted a

NASD Notices to Members—Disciplinary Actions Ap r il 1999 200 Pond Securities Corp. (Brooklyn, the firm consented to the described orders that showed the time of New York) and Ezra Yehuda Birn- sanctions and to the entry of find i n g s receipt of the order. The firm also baum (Registered Principal, that it failed to provide, in connection failed to use reasonable diligence to Brooklyn, New York) submitted a with transactions where the firm ascertain the best inter-dealer market Letter of Acceptance, Waiver, and acted as principal, written notifica t i o n for the subject securities and failed to Consent pursuant to which they were to its customer of the reported trade buy and sell in such market so that censured and fined $10,000, jointly price of the transaction. The find i n g s the resultant prices to the customers and severally, and the firm was fine d also stated that the firm failed to were as favorable as possible under an additional $7,500. Without admit- report the correct price to ACT in the prevailing market conditions. The ting or denying the allegations, the transactions in NNM securities, and findings also stated that the firm respondents consented to the failed to report the correct price to failed to contemporaneously execute described sanctions and to the entry ACT in one transaction in Nasdaq customer limit orders after it traded of findings that the firm reported SmallCap securities. The NASD also each subject security for its own mar- transactions in Nasdaq National Mar- determined that the firm failed to ket-making account at a price that ke t ¨ (NNM), Nasdaq SmallCapSM , establish, maintain, and enforce writ- would satisfy each customer limit OTC equity securities, listed securi- ten supervisory procedures reason- order and failed to immediately dis- ties executed over-the-counter, and ably designed to achieve compliance play customer limit orders when the in the Automated Confirm a t i o n with applicable securities laws, regu- orders were at a price that would Transaction ServiceSM (A C T SM ), in vio- lations, and NASD rules relating to have improved the firm’s bid or offer lation of applicable securities laws the designation of supervisory per- in each security related to those and regulations regarding trade sonnel, trade reporting, best execu- orders. reporting. The finding also stated that tion, the Limit Order Protection the firm failed to prepare written Interpretation, the Order Handling GVR Company, Inc. (Chicago, Illi- supervisory procedures which ade- Rules, the registration of persons nois) submitted a Letter of Accep- quately covered the firm’s trade with the NASD, the use of SOES, tance, Waiver, and Consent pursuant reporting requirements, in that they and anti-competitive practices. to which the firm was censured and did not specify the procedures that a fined $12,500. Without admitting or qu a l i fi ed principal of the firm would Barron Chase Securities, Inc. denying the allegations, the firm con- follow to ensure compliance with all (Boca Raton, Florida) submitted an sented to the described sanctions relevant rules. Furthermore, the Offer of Settlement pursuant to which and to the entry of findings that it NASD determined that the firm the firm was censured and fine d failed to use reasonable diligence to effected transactions in municipal $40,743.76. Without admitting or ascertain the best inter-dealer market securities without paying an initial fee denying the allegations, the firm con- and failed to buy or sell in such mar- to the MSRB, effected transactions in sented to the described sanctions ket so that the resultant price to the municipal securities without qualify- and to the entry of findings that it per- customer was as favorable as possi- ing an individual at the firm as a mitted an individual to function as a ble under prevailing market condi- municipal securities principal, and general securities representative and tions. In addition, NASD determined failed to abide by the terms and con- execute transactions on behalf of that the firm failed to immediately dis- ditions agreed to in the firm’s restric- public customers when the individual play customer limit orders when the tive agreement with the NASD. The was not registered as a general orders were at a price that would firm also failed to complete a training securities representative. have improved the firm’s bid or offer needs analysis and to develop writ- in each security related to those ten training plans concerning the Everen Securities, Inc. (Chicago, orders, or when the full size of the Firm Element of the Continuing Edu- Illinois) submitted a Letter of Accep- orders was priced equal to the firm ’ s cation Program. tance, Waiver, and Consent pursuant bid or offer, and the national best bid to which the firm was censured, fine d or offer and the orders represented $13,000, and required to pay restitu- more than a de minimis charge in Firms Fined tion and interest to public customers. relation to the size associated with ABN-AMRO Incorporated (Chica- Without admitting or denying the alle- the firm’s bid or offer in each security. go, Illinois) submitted a Letter of gations, the firm consented to the The findings also stated that the firm Acceptance, Waiver, and Consent described sanctions and to the entry failed to establish and maintain writ- pursuant to which the firm was cen- of findings that it failed to preserve ten supervisory procedures relating sured and fined $13,500. Without for a period of not less than three to the SEC Order Execution Rules, admitting or denying the allegations, years memoranda of brokerage best execution, books and records,

NASD Notices to Members—Disciplinary Actions Ap r il 1999 201 the Limit Order Protection Interpreta- another fund of the same class. Arm- any capacity. Without admitting or tion, trade reporting rules, and locked strong utilized new account applica- denying the allegations, Carstens and crossed markets. tions that generated sales charges of consented to the described sanctions at least $103,661 of which he was and to the entry of findings that he Wien Securities Corporation (Jer- paid commissions totaling approxi- participated in private securities sey City, New Jersey) submitted a mately $71,076, in lieu of submitting transactions by selling limited part- Letter of Acceptance, Waiver, and exchanges at net asset value with no nership interests without giving writ- Consent pursuant to which the firm sales charges. ten notice to, and receiving written was censured, fined $23,500, and approval from, his member firms with ordered to pay $356.25 in restitution James Edward Bickle (Registered which he was registered at the time. plus interest to the public customers Representative, Freeport, Illinois) whose orders did not receive best submitted a Letter of Acceptance, Jeffrey Michael DeForest (Regis- execution. Without admitting or deny- Waiver, and Consent pursuant to tered Representative, Medway, ing the allegations, the firm consent- which he was censured, fine d Ma s s a c h u s e t t s ) submitted a Letter ed to the described sanctions and to $25,000, and barred from association of Acceptance, Waiver, and Consent the entry of findings that it reported with any NASD member in any pursuant to which he was censured, transactions to ACT, in violation of capacity. Without admitting or deny- fined $15,000, and suspended from applicable securities laws and regu- ing the allegations, Bickle consented association with any NASD member lations. The findings also stated that to the described sanctions and to the in any capacity for five days. Without the firm failed to establish, maintain, entry of findings that he participated, admitting or denying the allegations, and enforce written supervisory pro- for compensation, in private securi- DeForest consented to the described cedures reasonably designed to ties transactions by participating in sanctions, and to the entry of find i n g s achieve compliance with the applica- the sale of promissory notes to public that he recommended and sold secu- ble securities laws and regulations customers, and failed to give written rities to a public customer without regarding trade reporting, ACT notice of his intention to, and receive having reasonable grounds for deter- reporting, books and records, locked written approval from, his member mining this activity to be suitable for and crossed markets, SOES, the firm prior to engaging in such activi- his customer. order handling rules, anti-competitive ties. practices, and best execution. Robert Alan Denton (Registered Ronald Tolbert Braswell (Regis- Principal, Parkland, Florida), Lee tered Representative, Winter- Michael Rough (Registered Princi- Individuals Barred Or springs, Florida) submitted a Letter pal, Aventura, Florida), and Ma r c Suspended of Acceptance, Waiver, and Consent David Siden (Registered Principal, Gary Leroy Armstrong (Registered pursuant to which he was censured, New York, New York) su b m i t t e d Representative, Binghamton, New fined $60,000, and barred from asso- Offers of Settlement pursuant to Yo r k ) submitted a Letter of Accep- ciation with any NASD member in which Denton was censured, fine d tance, Waiver, and Consent pursuant any capacity. Without admitting or $10,000, and suspended from asso- to which he was censured, fine d denying the allegations, Braswell ciation with any NASD member in $20,000, and barred from association consented to the described sanctions any capacity for 30 days. Rough was with any NASD member in any and to the entry of findings that he censured, fined $10,000, and sus- capacity. Without admitting or deny- misused and mishandled a public pended from association with any ing the allegations, Armstrong con- customer’s funds by holding $10,000 NASD member in any capacity for 45 sented to the described sanctions of the customer’s funds for over two days; and Siden was censured, fine d and to the entry of findings that, with- months and failing to timely purchase $10,000, and suspended from asso- out the knowledge or consent of his mutual funds as requested by the ciation with any NASD member in member firm or numerous public cu s t o m e r . any capacity for 15 days. Without customers, Armstrong fraudulently admitting or denying the allegations, effected mutual funds transactions at Michael Howard Carstens (Regis- Denton, Rough, and Siden consent- a time when any exchanges between tered Representative, New York, ed to the described sanctions and to two firms were to be done at net New York) submitted a Letter of the entry of findings that they solicit- asset value with no sales charge and Acceptance, Waiver, and Consent ed public customers to purchase customers who made redemptions or pursuant to which he was censured, warrants while knowingly or reckless- received distributions were allowed fined $10,000, and barred from asso- ly failing to disclose to the customers to reinvest the funds at net asset to ciation with any NASD member in that they were selling warrants from

NASD Notices to Members—Disciplinary Actions Ap r il 1999 202 their personal accounts, or accounts received compensation, and failed to Williamsville, New York) was cen- which they controlled, at or about the provide his member firm with prompt sured, fined $30,000, and barred same time as they were making rec- written notification of these activities. from association with any NASD ommendations to public customers. member in any capacity. The sanc- Jawahar Keshavlal Doshi (Regis- tions were based on findings that Joseph Vincent Detrano (Regis- tered Principal, Bayside, New Federowicz failed to respond to tered Representative, Nesconset, York) was censured, fined $22,500, NASD requests for information. New York) submitted a Letter of and barred from association with any Acceptance, Waiver, and Consent NASD member in any capacity. The Sandy Charles Giglio (Registered pursuant to which he was censured, NAC imposed the sanctions following Representative, Palm Coast, Flori- fined $10,000, suspended from asso- appeal of a New York DBCC deci- da) was censured, fined $20,000, ciation with any NASD member in sion. The sanctions were based on suspended from association with any any capacity for two years, and findings that Doshi guaranteed a cus- NASD member in any capacity for required to requalify by exam as a tomer against loss and gave untruth- five days, and required to requalify by Series 6 investment company and ful testimony during an on-the-record taking and passing the Series 7 variable contract representative. interview conducted by the NASD. exam. The sanctions were based on Without admitting or denying the alle- findings that Giglio forged the signa- gations, Detrano consented to the Paul Ian Dratel (Registered Repre- tures of public customers on forms to described sanctions and to the entry sentative, Flushing, New York) move their accounts from his former of findings that, during the sale of an submitted a Letter of Acceptance, member firm to his current member insurance product to a policyholder, Waiver, and Consent pursuant to firm . Detrano commingled the policyhold- which he was censured, fine d er’s check in the amount of $14,000 $20,000, and barred from association Kenneth Edward Grant (Regis- with his own personal funds. with any NASD member in any tered Representative, Oxford, capacity. Without admitting or deny- Michigan) submitted an Offer of Set- Daniel Joseph DiPoalo (Regis- ing the allegations, Dratel consented tlement pursuant to which he was tered Representative, Matawan, to the described sanctions and to the censured, fined $11,000, and barred New Jersey) was censured, fine d entry of findings that he executed from association with any NASD $75,000 and barred from association unauthorized transactions in the member in any capacity. Without with any NASD member in any account of a public customer without admitting or denying the allegations, capacity. The sanctions were based the knowledge or consent of the cus- Grant consented to the described on findings that DiPoalo received tomer and in the absence of written sanctions and to the entry of find i n g s $144,850.58 in funds from public or oral authorization to exercise dis- that he received checks totaling customers for investment purposes, cretion in the customer’s account. $2,622 made payable to insurance and contrary to the customers’ customers which included the repay- instructions, deposited their checks in Gale Lynne Fairbrother (Regis- ments for insurance policies can- his own bank account or otherwise tered Representative, Novato, Cali- celed by the customers, but also diverted their funds. DiPoalo also fornia) submitted an Offer of included a mistaken overpayment for failed to respond to NASD requests Settlement pursuant to which she insurance policies purchased for the for information. was censured, fined $50,000, and customers. According to the find i n g s , barred from association with any Grant endorsed the checks by writing Dale Andrew Diskant (Registered NASD member in any capacity. With- the customers’ names on the checks, Representative, Huntington out admitting or denying the allega- without the customers’ knowledge or Beach, California) submitted a Let- tions, Fairbrother consented to the consent, cashed the checks, and ter of Acceptance, Waiver, and Con- described sanctions and to the entry used $2,185 for some purpose other sent pursuant to which he was of findings that she participated in pri- than the benefit of his member firm censured and suspended from asso- vate securities transactions without or the customers, and later paid his ciation with any NASD member in providing prior written notification to firm $2,165. any capacity for 10 business days. her member firm. Fairbrother also Without admitting or denying the alle- provided false testimony to the Maximo Justo Guevara (Regis- gations, Diskant consented to the NA S D . tered Representative, Philadel- described sanctions and to the entry phia, Pennsylvania) was censured, of findings that he participated in out- Mark Joseph Federowicz (Regis- fined $100,000, barred from associa- side business activities for which he tered Representative, tion with any NASD member in any

NASD Notices to Members—Disciplinary Actions Ap r il 1999 203 capacity, and ordered to pay ciation with any NASD member in accounts. Hirsch also purchased $13,992, plus interest, in restitution any capacity. Without admitting or securities for the account of a limited to a public customer. The NAC denying the allegations, Hillard con- partnership without the knowledge imposed the sanctions following sented to the described sanctions or consent of the partnership or its appeal of a Philadelphia DBCC deci- and to the entry of findings that he agent. The findings also stated that sion. The sanctions were based on improperly converted at least Hirsch purchased shares of securi- findings that Guevara made unsuit- $65,000 belonging to a client for his ties from his firm but failed to pay for able recommendations in connection own use and benefit. the securities, Simone failed to fol- with sales of partnership interests to low a customer’s instructions to sell retail customers. Guevara also Brett Elliot Hirsch (Registered securities, and Wolynez and McAn- engaged in private securities trans- Representative, New York, New dris failed to establish, maintain, or actions outside the regular course or York), Richard Paul Simone (Reg- enforce written supervisory proce- scope of his employment without istered Representative, New York, dures or to otherwise supervise providing written notice to his mem- New York), William Patrick Rose- Hirsch, Rosemond, Simone, and ber firm. mond (Registered Representative, Lucia properly to prevent the occur- New York, New York), Jack Jay rence of such violations. Guevara has appealed this action to Wolynez (Registered Principal, the SEC and the sanctions, other Jericho, New York), John James The NASD also determined that than the bar, are not in effect pend- McAndris (Registered Principal, Wolynez and McAndris participated ing consideration of the appeal. Montvale, New Jersey), and Fr a n k in an initial public offering (IPO) of Michael Lucia, Jr. (Registered common stock and warrants to the Matthew Edward Haggerty (Regis- Representative, Robbinsville, New public on a best efforts, tered Principal, Overland Park, Jersey) submitted Offers of Settle- minimum/maximum basis, and Kansas) submitted a Letter of ment pursuant to which Hirsch was induced the purchase of stocks by Acceptance, Waiver, and Consent censured, fined $110,000, and means of manipulative, deceptive, pursuant to which he was censured, barred from association with any and/or other fraudulent devices or fined $60,000, barred from associa- NASD member in any capacity. contrivances. Moreover, the find i n g s tion with any NASD member in any Simone was censured, fine d stated that Wolynez and McAndris capacity, and required to pay $4,000, $104,000, and barred from associa- continued to receive investor funds, plus interest, in restitution to entitled tion with any NASD member in any and failed to return promptly to public parties. Without admitting or denying capacity, and Rosemond was cen- customers $9 million in excess of the the allegations, Haggerty consented sured, fined $5,000, and suspended stated maximum for the offering, and to the described sanctions and to the from association with any NASD commenced trading securities in the entry of findings that he requested member in any capacity for 10 busi- secondary market, without the con- checks totaling $10,000 from the ness days. Wolynez was censured, sent of the customers. securities accounts of public cus- fined $100,000, and barred from tomers, and converted the funds to association with any NASD member Richard Dean Holloway (Regis- his own use and benefit by endors- in any capacity, and McAndris was tered Representative, Tulsa, Okla- ing the checks and depositing them censured, fined $50,000, and barred ho m a ) was censured, fined $85,000, into his personal bank account, with- from association with any NASD and barred from association with any out the knowledge or consent of the member in any capacity. Lucia was NASD member in any capacity. The customers. Furthermore, the NASD censured, fined $5,000, and sus- sanctions were based on find i n g s determined that Haggerty did not pended from association with any that Holloway received insurance return any portion of the funds until NASD member in any capacity for refund checks issued by his member he journaled $6,000 of funds from his 10 business days. Without admitting firm totaling $1,991.65 payable to personal securities account to one of or denying the allegations, the public customers, failed to deliver the the customer's securities account. respondents consented to the refund checks to the customers, and described sanctions and to the entry instead, converted the funds to his Daniel Richard Hillard (Registered of findings that Hirsch, Simone, own use and benefit by forging Representative, White River Junc- Rosemond, and Lucia engaged in endorsements on the checks without tion, Vermont) submitted a Letter of unauthorized transactions in the the public customers’ knowledge or Acceptance, Waiver, and Consent accounts of public customers and in consent. In addition, Holloway failed pursuant to which he was censured, the absence of written or oral autho- to respond to NASD requests for fined $50,000, and barred from asso- rization to exercise discretion in the in f o r m a t i o n .

NASD Notices to Members—Disciplinary Actions Ap r il 1999 204 Frank John Ingersoll (Registered other than the benefit of the cus- Warren Benjamin Minton, Jr. (Reg- Principal, San Antonio, Texas) tomer until he returned the funds to istered Representative, Helmetta, submitted an Offer of Settlement pur- her with interest. New Jersey) was censured, fine d suant to which he was censured, $25,000, and barred from associa- fined $388,535, barred from associa- Michael Andrew Maher (Regis- tion with any NASD member in any tion with any NASD member in any tered Representative, Portland, capacity. The sanctions were based capacity, and ordered to pay Oregon) submitted an Offer of Set- on findings that Minton failed to $301,088 in restitution to public cus- tlement pursuant to which he was respond to NASD requests for infor- tomers. The NAC imposed the sanc- censured, fined $60,000, and barred mation. tions following a review of a Dallas from association with any NASD DBCC decision. Without admitting or member in any capacity. Without Keith Laurence Mohn (Registered denying the allegations, Ingersoll admitting or denying the allegations, Representative, West Bloomfiel d , consented to the described sanctions Maher consented to the described Mi c h i g a n ) was censured, fine d and to the entry of findings that he sanctions and to the entry of find i n g s $52,222, and barred from associa- effected transactions in securities that he withdrew at least $12,097.97 tion with any NASD member in any through an entity without providing from a scholarship fund operated by capacity. The NAC affirmed the prior written notice to his member employees of his member firm, with- sanctions following appeal of a firm, and acted as an unregistered out the knowledge or approval of the Chicago DBCC decision. The sanc- broker/dealer by failing to register scholarship fund board of directors, tions were based on findings that either himself or the entity as a secu- and used the funds for his own per- Mohn participated in private securi- rities broker/dealer with the SEC or sonal use and benefit. ties transactions without giving writ- the NASD. The findings also stated ten notice of his intention to engage that Ingersoll caused misleading Jerri Marlene Masley (Registered in such activities to his member firm sales literature in the form of Representative, Killeen, Texas) and receiving prior written approval research reports to be distributed to submitted an Offer of Settlement pur- from his member firm . the public, and failed to disclose a suant to which she was censured, material adverse interest in connec- fined $25,000, and barred from asso- Mohn has filed an appeal to the tion with the sale of securities. Fur- ciation with any NASD member in SEC, and the sanctions, other than thermore, the NASD determined that any capacity. Without admitting or the bar, are not in effect pending Ingersoll effected sales of shares of denying the allegations, Masley con- consideration of the appeal. stock, and failed to disclose to cus- sented to the described sanctions tomers and to his member firm the and to the entry of findings that she Siva Kumar Pemmaraju (Regis- total remuneration he received in failed to respond to NASD requests tered Representative, Minneapo- connection with those sales. for information and to provide docu- lis, Minnesota) submitted a Letter of mentation. Acceptance, Waiver, and Consent Lawrence Ralph Kassl (Registered pursuant to which he was censured, Representative, Danville, Illinois) Gerald Cash McNeil (Registered fined $55,000, and barred from asso- submitted an Offer of Settlement pur- Representative, North Bergen, ciation with any NASD member in suant to which he was censured, New Jersey) was censured, fine d any capacity. Without admitting or fined $53,000, and barred from asso- $20,000, suspended from associa- denying the allegations, Pemmaraju ciation with any NASD member in tion with any NASD member in any consented to the described sanctions any capacity. Without admitting or capacity for two years, ordered to and to the entry of findings that he denying the allegations, Kassl con- pay restitution in the amount of transferred funds from public cus- sented to the described sanctions $3,712.50 plus interest, and required tomer accounts into accounts that he and to the entry of findings that he to requalify by examination in all controlled, and converted $9,015.92 received checks totaling $10,500 capacities prior to associating with a to his own use and benefit, without with instructions to deposit the funds member firm. The NAC imposed the the knowledge or consent of the cus- in a variable annuity and, contrary to sanctions following appeal and to m e r s . the customer's instructions, and with- review of a New York DBCC deci- out the customer's knowledge or sion. The sanctions were based on Michael John Price (Registered consent, Kassl deposited the checks findings that McNeil executed trans- Principal, Atlanta, Georgia) su b m i t - in a bank account in which he either actions in the accounts of public cus- ted an Offer of Settlement pursuant had an interest or controlled, and tomers without their prior to which he was censured, fine d used the funds for some purpose authorization or consent. $22,500, suspended from associa-

NASD Notices to Members—Disciplinary Actions Ap r il 1999 205 tion with any NASD member in any tomer and requested the proceeds the secondary market and was con- capacity for 30 days, and barred totaling $950,331.25 be wired to a sidered a “hot issue” for purposes of from association with any NASD nominee account. The findings also the NASD's Free-Riding and With- member in any proprietary, principal stated that Rebonati failed to holding Interpretation. Furthermore, and/or supervisory capacity. Without respond to NASD requests for infor- the NASD determined that Royer co- admitting or denying the allegations, ma t i o n . signed a membership agreement for Price consented to the described another member firm, held a 40 per- sanctions and to the entry of find i n g s John Joseph Rogers (Associated cent ownership stake in the firm, and that he gave false or misleading Person, Rochester, New York) during the first and only examination statements to an NASD examiner as submitted a Letter of Acceptance, of the firm, the NASD discovered that to the whereabouts of an individual, Waiver, and Consent pursuant to the firm had failed to comply with the and failed to disclose that the individ- which he was censured, fine d membership agreement, with two of ual had resigned. The findings also $25,000, and barred from associa- the noted violations attributable to stated that Price failed to establish, tion with any NASD member in any Ro y e r . implement, and enforce reasonable capacity. Without admitting or deny- supervisory procedures designed to ing the allegations, Rogers consent- Daniel Charles Sanders (Regis- ensure compliance with NASD rules ed to the described sanctions and to tered Representative, Martinez, and federal securities laws. the entry of findings that, while taking California) submitted a Letter of the Series 7 exam, he brought unau- Acceptance, Waiver, and Consent David Irving Proctor, Jr. (Regis- thorized study materials into the test- pursuant to which he was censured, tered Principal, Indianapolis, Indi- ing area, despite being informed that fined $20,000, and barred from asso- an a ) submitted a Letter of unauthorized materials were prohibit- ciation with any NASD member in Acceptance, Waiver, and Consent ed, and referred to those materials any capacity. Without admitting or pursuant to which he was censured, during the exam. denying the allegations, Sanders fined $30,000, and barred from asso- consented to the described sanctions ciation with any NASD member in Freddie Joe Royer, Jr. (Registered and to the entry of findings that he any capacity. Without admitting or Principal, Dallas, Texas) su b m i t t e d failed to appear for an NASD on-the- denying the allegations, Proctor con- a Letter of Acceptance, Waiver, and record interview. sented to the described sanctions Consent pursuant to which he was and to the entry of findings that he censured, fined $50,000, and barred Tobin Joseph Senefeld (Regis- engaged in private securities trans- from association with any NASD tered Principal, Crestwood, Ken- actions and failed to give written member in any capacity with a right tucky) submitted a Letter of notice to, and receive written to reapply after two years. Without Acceptance, Waiver, and Consent approval from, his member firm prior admitting or denying the allegations, pursuant to which he was censured, to engaging in such activities. The Royer consented to the described fined $5,000, and suspended from findings also stated that Proctor sanctions and to the entry of find i n g s association with any NASD member engaged in outside business activi- that he engaged in private securities in any principal capacity for 20 days. ties and failed to give prompt written transactions and business activities Without admitting or denying the alle- notice of his engagement in such outside the scope of his employment gations, Senefeld consented to the activities to his member firm . without giving his member firm prior described sanctions and to the entry written notice of his activities, and he of findings that, as branch manager, Michel Andre Rebonati (Regis- failed to notify his member firm of he failed to take appropriate action tered Representative, Kilchberg, securities accounts he maintained or that was reasonably designed to Switzerland) submitted an Offer of established at other member firm s supervise a registered representative Settlement pursuant to which he was for a non-member firm. The find i n g s and prevent unsuitably excessive censured, fined $50,000, and barred also stated that Royer failed to notify trading in a customer’s account by from association with any NASD the firms holding the accounts of his the individual. member in any capacity. Without association with his member firm. In admitting or denying the allegations, addition, Royer opened a securities Ronald Adam Stewart (Registered Rebonati consented to the described brokerage account with an NASD Representative, Mahopac, New sanctions and to the entry of find i n g s member, omitted to disclose that he Yo r k ) submitted an Offer of Settle- that he falsified a client instruction was associated with a member firm , ment pursuant to which he was cen- letter that authorized the sale of and purchased shares in an IPO that sured, fined $10,000, and barred bonds belonging to a public cus- traded at an immediate premium in from association with any NASD

NASD Notices to Members—Disciplinary Actions Ap r il 1999 206 member in any capacity. Without NASD member in any capacity for 90 NASD member in any capacity. admitting or denying the allegations, days, and required to requalify by Without admitting or denying the alle- Stewart consented to the described exam as a representative. Without gations, Yeggy consented to the sanctions and to the entry of find i n g s admitting or denying the allegations, described sanctions and to the entry that he forged contract withdrawal Wilson consented to the described of findings that he submitted a falsi- forms requesting partial liquidations sanctions and to the entry of find i n g s fied application for insurance for a from a public customer’s annuity that he purchased securities for the public customer and a falsified deliv- contracts and then converted the accounts of a public customer, in ery receipt for the insurance policy $19,500 in proceeds to his personal which he had a beneficial interest, in for this customer to his member firm . use. The findings also stated that violation of the Board of Governors’ The findings also stated that Yeggy Stewart caused $10,108 to be with- Free-Riding and Withholding Inter- transmitted to a client falsified Com- drawn from customers’ accounts and pr e t a t i o n . mon Remitter Billing Notices that converted the proceeds to his own overstated amounts due and owing use. Stewart converted a total of Richard Allan Yaksic (Registered on the client’s insurance policies and, $29,608 from public customers with- Representative, Pitcairn, Pennsyl- submitted a falsified insurance appli- out their knowledge or consent. va n i a ) submitted a Letter of Accep- cation for another public customer to tance, Waiver, and Consent his member firm . Igor Eric Stolyar (Registered Rep- pursuant to which he was censured, resentative, Brooklyn, New York) fined $925,000, and barred from was censured, fined $35,000, sus- association with any NASD member Individuals Fined pended until he pays an arbitration in any capacity. Without admitting or Nicholas Robert Marino (Regis- settlement, plus an additional 30 denying the allegations, Yaksic con- tered Principal, Brooklyn, New business days, and barred from sented to the described sanctions York) submitted an Offer of Settle- association with any NASD member and to the entry of findings that he ment pursuant to which he was cen- in any capacity. The sanctions were caused a total of $142,348.52 to be sured and fined $15,000. Without based on findings that Stolyar failed withdrawn from policies and mutual admitting or denying the allegations, to execute an order from a public fund accounts owned by public cus- Marino consented to the described customer to sell certain securities in tomers and converted the funds to sanctions and to the entry of find i n g s the customer’s account. Stolyar also his own use and benefit. The find - that a member firm, acting through failed to pay a $10,300 arbitration ings also stated that Yaksic failed to Marino, effected, as principal, sales settlement, and failed to respond to remit approximately $10,425 in pre- of warrants to public customers at an NASD request for information and miums received from public cus- prices that were unfair and unrea- to appear for an interview. tomers, retaining them for his own sonable taking into consideration all use and benefit, and improperly relevant circumstances in that the Dale Cochren Trask (Registered caused a total of $6,439.17 to be prices charged to customers were Representative, Swampscott, Mas- withdrawn from their policies and not reasonably related to the prevail- sachusetts) submitted an Offer of converted the monies to his own use ing market price. Settlement pursuant to which he was and benefit. In addition, the NASD censured, fined $250,000, and found that Yaksic failed to remit David Carmichael Montano (Reg- barred from association with any $5,642.49 in premiums received istered Principal, Orange, Califor- NASD member in any capacity. from a public customer and convert- nia) was censured, fined $10,000, Without admitting or denying the alle- ed such monies to his own use and and ordered to requalify by exam as gations, Trask consented to the be n e fi t. Yaksic also converted to his a general securities principal. The described sanctions and to the entry own use and benefit $1,081.48 of a NAC affirmed the sanctions following of findings that he improperly con- public customer’s funds intended to a July 1998 SEC decision remanding verted $157,250 of customer funds be used for the purchase of an annu- the matter to the NASD. The sanc- for his own use and benefit. ity by the customer. tions were based on findings that Montano appeared on a television Stephen James Wilson (Regis- Jay Alan Yeggy (Registered Rep- program and made recommenda- tered Representative, Grand resentative, Boise, Idaho) su b m i t - tions regarding a stock while failing Haven, Michigan) submitted an ted a Letter of Acceptance, Waiver, to provide a sound basis for evaluat- Offer of Settlement pursuant to which and Consent pursuant to which he ing the stock’s financial prospects or he was censured, fined $25,000, was censured, fined $25,000, and his recommendation to sell the stock suspended from association with any barred from association with any short. Montano also failed to

NASD Notices to Members—Disciplinary Actions Ap r il 1999 207 describe market conditions while Florida) was named as a respon- chase of IPO securities upon an highlighting the success of past rec- dent in an NASD complaint alleging agreement to purchase additional ommendations. The findings also that he forged a public customer’s securities in the secondary market stated that Montano made exagger- signature on an insurance policy when it commenced, which resulted ated and unwarranted claims; made refund check for $7,500, deposited in an economic detriment to the pub- improper comparisons by referring to the customer’s refund check into his lic customer and an economic bene- previous specific recommendations personal account, and used at least fit to Cardaci. and implied comparable future a portion of the funds for his own use results for his current recommenda- and benefit, all without the knowl- John Mike Dabal (Registered Prin- tion; and made specific predictions edge or authorization of the cus- cipal, Smithtown, New York) wa s and projections concerning future tomer. The complaint alleges that named as a respondent in an NASD investment results. after the customer contacted Argo- complaint alleging that he made maniz several times questioning the unsuitable recommendations to pub- whereabouts of the refund check, lic customers. The complaint alleges Complaints Filed Argomaniz wired $7,500 from his that Dabal made statements that The following complaints were personal bank account to the cus- were materially false, misleading or issued by the NASD. Issuance of a tomer’s bank account. exaggerated, and/or made state- disciplinary complaint represents the ments for which there was no rea- initiation of a formal proceeding by Bradford Lee Brinton (Registered sonable basis in fact, and failed to the NASD in which findings as to the Representative, St. Joseph, Mis- disclose material facts to public cus- allegations in the complaint have not souri) was named as a respondent tomers. The complaint also alleges been made, and does not represent in an NASD complaint alleging that that Dabal effected transactions in a decision as to any of the allega- he forged the signature of a public the accounts of public customers tions contained in the complaint. customer on a dividend check without the customers’ knowledge or Because these complaints are unad- payable to the customer, in the authorization and without having judicated, you may wish to contact amount of $1,695.23, without the been granted discretionary authority, the respondents before drawing any customer’s knowledge or consent. orally or in writing, to effect transac- conclusions regarding the allegations The complaint alleges that Brinton ti o n s . in the complaint. then deposited the $1,695.23 check into a bank account he controlled, Charles John Distefano (Regis- David Alvarado (Registered Princi- and converted the funds to his own tered Representative, Medford, pal, Commack, New York) wa s use and benefit, without the cus- New York) was named as a respon- named as a respondent in an NASD tomer’s knowledge or consent. dent in an NASD complaint alleging complaint alleging that he made that he made material misrepresen- material misrepresentations and Emanuele Robert Cardaci (Regis- tations and failed to disclose material omitted to disclose material informa- tered Principal, Farmingville, New information to public customers in tion to public customers. The com- Yo r k ) was named as a respondent in connection with his solicitation of plaint also alleges that in connection an NASD complaint alleging that he customers to purchase securities. with his solicitation of customers to made material misrepresentations The complaint also alleges that Dis- purchase securities, Alvarado made and omitted to disclose material tefano failed to execute a public cus- future price predictions of securities information to public customers, and, tomer’s sell order, and effected when he knew, or should have in connection with his solicitation of transactions in public customer known, that he did not have a rea- customers to purchase securities, accounts without the prior authoriza- sonable basis for his predictions. The Cardaci made future price predic- tion of the customers. The complaint complaint also alleges that Alvarado tions when he knew, or should have also alleges that Distefano failed to effected transactions in the accounts known, that he did not have a rea- appear for an on-the-record interview of public customers without the cus- sonable basis for his predictions. The with the NASD. tomers’ prior authorization. The com- complaint also alleges that Cardaci plaint alleges that Alvarado also effected transactions in the accounts Averell Golub (Registered Repre- failed to execute a public customer’s of public customers without the cus- sentative, Brooklyn, New York) sell order. tomers’ prior authorization, and failed was named as a respondent in an to execute a public customer’s sell NASD complaint alleging that in con- Alberto Enrique Argomaniz (Reg- order. The complaint also alleges nection with inducements for the istered Representative, Miami, that Cardaci conditioned the pur- offer, sale, and purchases of securi-

NASD Notices to Members—Disciplinary Actions Ap r il 1999 208 ties, Golub employed devices, Landmark International Equities, customers that their interests would schemes, contrivances, and artifice s Inc. (Westbury, New York), be diluted by the secondary distribu- to defraud. The complaint alleges Howard Brett Berger (Registered tion and that the IPO was not a bo n a that Golub made material misrepre- Principal, Roslyn Heights, New fide public distribution. In addition, sentations and omitted to state mate- York), Eric Jay Aronson (Regis- the complaint alleges that the firm , rial facts necessary to make the tered Representative, Muttontown, acting through Nunziato, failed to statements made, in light of the cir- New York), and William Nunziato supervise Aronson adequately and cumstances under which they were (Registered Principal, Fresh Mead- properly with respect to the flip p e r made, not misleading, and engaged ows, New York) were named as transactions described above and in acts, practices, or courses of busi- respondents in an NASD complaint failed to take any steps to discharge ness that operated as a fraud or alleging the firm, acting through his supervisory responsibilities with deceit upon public customers. Aronson, a controlling person of the respect to these transactions, and firm, and through its registered repre- the firm, acting through Berger, failed Mark Edwin Gort (Registered Prin- sentatives, engaged in the preselling to establish and maintain adequate cipal, Wyoming, Michigan) wa s of the aftermarket by soliciting cus- written supervisory procedures to named as a respondent in an NASD tomers to purchase securities in prevent the above violations and to complaint alleging that he executed aftermarket trading as a requirement address compliance with the securi- transactions in the account of a pub- to purchase in the IPO and failed to ties laws and regulations relating to lic customer without the knowledge inform the firm’s customers that the the underwriting and distribution of or consent of the customer, and in IPO was not a bona fide public distri- securities. Also, the complaint the absence of written or oral autho- bution. The complaint also alleges alleges that the firm, acting through rization to exercise discretion in the that the firm, acting through Berger Berger, allowed unregistered repre- account. The complaint also alleges and Aronson, entered into prear- sentatives to enter aftermarket that Gort failed to respond to NASD ranged agreements with their cus- trades while not registered and failed requests for information. tomers to sell units of the IPO back to supervise adequately the registra- to the firm in the immediate aftermar- tion of its representatives. Further- Patrice Roberto Harris (Registered ket trading of the security (flip p i n g ) more, Aronson and Nunziato each Representative, Brooklyn, New and should have been aware that failed to respond to an NASD York) was named as a respondent in these “flippers” did not have bo n a request to appear for an on-the- an NASD complaint alleging that he fide investment intent and did not record interview. executed transactions in the constitute the investing public for pur- accounts of public customers without poses of completing a bona fide pu b - Edwin Leslie Lawrence, Jr. (Regis- the knowledge or consent of the cus- lic distribution. The firm acted as a tered Representative, Dix Hills, tomers, and in the absence of written Market Maker in the securities while New York) was named as a respon- or oral authorization to exercise dis- units were redistributed, and attempt- dent in an NASD complaint alleging cretion in the accounts. ed to induce other persons to pur- that he executed securities transac- chase such securities before the tions in the accounts of public cus- Dean Llewellyn Kroenke (Regis- initial distribution was completed. tomers without the knowledge or tered Representative, Rochester, The firm, acting through Berger and consent of the customers, and in the Minnesota) was named as a Aronson, failed to tell its non-flip p i n g absence of written or oral authoriza- respondent in an NASD complaint customers that the IPO was not a tion to exercise discretion in the alleging that he received a check in bona fide public distribution and ac c o u n t s . the amount of $1,440 from a public engaged in a secondary distribution customer for the purpose of investing using special selling efforts and sell- Mario J. Liriano (Registered Prin- in a variable life insurance policy, ing methods. Furthermore, the com- cipal, Bronx, New York) wa s and without the knowledge or con- plaint alleges the firm, acting through named as a respondent in an NASD sent of the customer, cashed or Berger, Aronson, and Nunziato, pur- complaint alleging that he improperly deposited the check in a bank chased common stock from former used and converted $5,000 he account he controlled, and converted af fi liates at a purchase price that was received from public customers to the funds to his own use and benefit. below the firm’s contemporaneous invest in mutual funds. The complaint The complaint also alleges that sales of common stock to its cus- alleges that, instead of submitting the Kroenke failed to respond to NASD tomers and engaged in a secondary check to his firm, he presented the requests for information. distribution using special efforts and check for payment to a third party, selling methods and failed to tell its converted the funds to his own use,

NASD Notices to Members—Disciplinary Actions Ap r il 1999 209 used some of the money to pay his have known, he did not have a rea- also includes the date the suspen- personal expenses, and deposited sonable basis for his predictions. The sion concluded. the remainder into his personal bank complaint also alleges that Siegel account. The complaint alleges that failed to execute a public customer’s Brownstone Capital Corp., New Liriano attempted to conceal his con- sell order. York, New York (March 8, 1999) version from his member firm by sending his firm the customers’ appli- Andrew Frank Soldo, Jr. (Regis- Greig Middleton, Inc., Boston, Mas- cation and his own personal check tered Representative, East Islip, sachusetts (March 8, 1999) that was dated the same day he New York) was named as a respon- received the funds from the cus- dent in an NASD complaint alleging Kronos Investments Limited, Okla- tomers, and thereby attempted to that he made material misrepresen- homa City, Oklahoma (March 8, mislead his employer into believing tations and omitted to disclose mate- 19 9 9 ) that the customers’ funds were sub- rial information to public customers, mitted contemporaneously with the and made future price predictions of Parker Bromley Ltd., Garden City, investment application and not securities to public customers when New York (March 8, 1999) improperly used by Liriano. The com- he knew, or should have known, that plaint also alleges that Liriano pre- he did not have a reasonable basis Pellett Investments, Inc., Missoula, sented his member firm with a for his predictions. The complaint Montana (March 8, 1999) personal check that was rejected for also alleges that Soldo effected “i n s u f fi cient funds,” when he knew, or transactions in the accounts of public should have known, that he did not customers without the prior autho- Firms Expelled For Failing To have the funds in his account to rization of the customers. The com- Pay Fines, Costs, And/Or cover his personal check at the time plaint alleges that when a public Provide Proof Of Restitution In it was presented to his firm . customer informed Soldo that he Connection With Violations would not pay for a transaction Biltmore Securities, Inc., Ft. Laud- Jeffrey Tod Marshall (Registered because it had not been authorized erdale, Florida (March 1, 1999) Representative, Atlanta, Georgia) by the customer, Soldo represented was named as a respondent in an to the customer that other securities H.J. Meyers & Co., Inc., Rochester, NASD complaint alleging that he in the customer’s account would be New York (March 1, 1999) received an application from an indi- sold to pay for the transaction and vidual to become associated with that a judgment would be entered Hunter International Securities, Ft. Marshall’s member firm, as well as a against the customer that would ruin Lauderdale, Florida (February 26, personal check made out to Marshall his credit rating if he did not pay for 19 9 9 ) for $150 to cover her licensing fees, the transaction. As a result of these and rather than submitting the appli- alleged representations, the cus- Kentucky Eagle Financial Group, cation and check to his firm, Marshall tomer borrowed funds from a bank to In c . , Louisville, Kentucky (March 1, cashed the applicant’s check and pay for the transaction. 19 9 9 ) converted the proceeds to his own use and benefit. The complaint also Westhagen & Westhagen, Inc., alleges that Marshall failed to Firms Suspended/Canceled Ripon, Wisconsin (March 11, 1999) respond to NASD requests for infor- The following firms were suspend- ma t i o n . ed/canceled from membership in the NASD for failure to comply with for- Suspension Lifted Scott Jason Siegel (Registered mal written requests to submit fina n - The NASD has lifted the suspension Representative, Dix Hills, New cial information to the NASD. The from membership on the dates York) was named as a respondent in actions were based on the provisions shown for the following firm because an NASD complaint alleging that he of NASD Rule 8210 and Article VII, it has complied with formal written made material misrepresentations Section 2 of the NASD By-Laws. The requests to submit financial informa- and omitted to disclose material date the suspensions/cancellations ti o n . information to public customers, and commenced is listed after the entry. made future price predictions of If the firm has complied with the Barry F. Cohen & Company, Inc., securities when he knew, or should requests for information, the listing Boca Raton, Florida (March 1, 1999)

NASD Notices to Members—Disciplinary Actions Ap r il 1999 210 Individuals Whose formed. At various times from June Corp., from selling penny stocks. In Registrations Were Revoked 1989 to August 1998, those employ- addition, three of its senior offici a l s For Failure To Pay Fines, ees acted as general securities prin- have been sanctioned for violating Costs, And/Or Provide Proof cipals or representatives and were federal securities laws governing the Of Restitution In Connection not properly registered as such. trading of penny stocks. Penny With Violations NASD Regulation also found that stocks are unlisted securities that Beasley, Jr., Jere L., Montgomery, PaineWebber failed to establish, trade over-the-counter and are typi- Alabama (March 1, 1999) maintain, and enforce written super- cally priced under $5 per share. visory procedures to ensure the Clark, William H., Staten Island, proper registration of certain per- The decision was issued by NASD New York (March 1, 1999) so n s . Regulation’s NAC following an appeal of an earlier decision by its Curran, Gregory J., Springfield, Illi- Under NASD rules, individuals Los Angeles DBCC. nois (March 1, 1999) engaged in the investment banking or securities business as representa- The NAC upheld the earlier decision Dabo, Jr., Mitchell J., Hollister, Cali- tives must pass a qualifications test that Pacific Cortez President Harold fornia (February 26, 1999) and be registered with the member B.J. Gallison, and Branch Manager firm. Individuals who are actively Christopher S. Knight be permanent- Hannan, Joseph P., Newport engaged in the management of a ly barred from the penny stock indus- Beach, California (March 1, 1999) firm’s investment banking or securi- try for participating in a 17 ties business, including supervisory month-long scheme promoting Lerner, Bernice L., New York, New activities, must be appropriately reg- unlawful sales of penny stocks to York (February 26, 1999) istered as “principals” of the firm. unsuspecting investors. They were also ordered to pay fines of more McAdoo, Duane S., Yonkers, New As part of its settlement, PaineWeb- than $500,000. Separately, the firm York (February 26, 1999 - March 16, ber, which neither admitted nor and Gallison are jointly responsible 19 9 9 ) denied the allegations, agreed to for repaying more than 100 investors conduct a review of its supervisory throughout the country almost Nizza, Jr., Louis N., Deerfiel d procedures regarding registration of $4 0 0 , 0 0 0 . Beach, Florida (February 26, 1999) personnel within 90 days. After com- pletion of the review, PaineWebber The NAC also found that Pacific Schulz, Marc W., Rockford, Illinois will implement changes necessary to Cortez Securities implemented a (February 26, 1999) ensure that all persons engaged in system to circumvent the SEC penny the firm’s investment banking or stock rules designed to ensure that Westhagen, Eric P., Ripon, Wiscon- securities business, or in the man- investors receive honest and candid sin (March 11, 1999) agement thereof, are properly regis- information about risk disclosure and tered, and will submit a report to the suitability issues before they invest. staff detailing its review procedures The firm had investors sign a mis- NASD Regulation Fines and any revised supervisory proce- leading document that purported to PaineWebber for Registration du r e s . exempt the transactions from the Violations rules’ requirements. The letters were NASD Regulation announced that it portrayed to investors as a “formali- has censured and fined PaineWeb- NASD Regulation Bars Pacific ty,” and in some cases investors’ sig- ber, Inc., $50,000 in connection with Cortez Securities, Formerly La natures were forged. Pacific Cortez violations of NASD rules requiring Jolla Capital Corp., From also was found to have implemented registration of individuals engaged in Penny Stock Transactions de fi cient supervisory policies and the securities business. procedures designed to foster the Firm Ordered to Pay Fines improper claim of this exemption. An examination of PaineWebber by and Restitution in Excess of NASD Regulation’s District staff in $900,000 The sales practice abuses at Pacific New Orleans revealed that the firm NASD Regulation announced that it Cortez were uncovered after a failed to ensure that certain employ- has censured and barred San Diego- lengthy investigation by NASD Regu- ees held all the proper registrations based Pacific Cortez Securities, for- lation’s District Offices in Los Ange- required for the functions they per- merly known as La Jolla Capital les, San Francisco, and Denver. The

NASD Notices to Members—Disciplinary Actions Ap r il 1999 211 NAC found that from January 1994 In related disciplinary actions the firm had simply “run out” of them. through May 1995, Pacific Cortez between February 1996 and October On those occasions when prospec- and certain of its senior officials cir- 1996, 22 other Pacific Cortez brokers tuses were delivered, the brokers cumvented investor protection laws and supervisors, without admitting or actively discouraged customers from in approximately 140 transactions denying liability, were fined and disci- reading them. involving 15 separate securities. All plined in connection with this case. of the transactions involve penny Pa c i fi c Cortez Securities employs 53 The Committee further found that, stocks. The violations occurred at the brokers in six offices in California, instead of revealing the true fina n - firm’s offices in San Diego, CA; New New York, Georgia, and Nevada. cial condition of the company, bro- York, NY; Las Vegas, NV; and kers at Sterling Foster sold Bethesda, MD. Advanced Voice securities by repre- NASD Regulation Sanctions senting to customers that the IPO The following senior officials were And Fines 10 Sterling Foster was “oversold” or “oversubscribed” sanctioned: Brokers For Fraudulent “Boiler and that there would be a huge, Room” Sales Practices; un s a t i s fi ed demand for the stock ¥ Harold B.J. Gallison, President, Orders $1.1 Million Restitution once trading began, causing the and Pacific Cortez Securities NASD Regulation announced that price to soar. Customers frequently were fined a total of $397,380, the use of “abusive” “high-pressure” were urged to “act immediately or plus costs ($8,260.75). Gallison “boiler room” sales practices else [they] would miss out on this was also suspended in all capaci- designed to defraud investors were incredible opportunity to get rich.” In ties for 30 days; permanently among the grounds for a disciplinary some instances, brokers told cus- barred from participating in penny action that resulted in seven brokers tomers that “it didn’t matter if the stock transactions; permanently being barred from the industry and company made screen doors for barred from acting as a supervi- suspensions for three others. The 10 submarines.” Brokers also, at times, sor; and censured. former brokers of Sterling Foster & misrepresented to customers that Co., Inc., a defunct Melville, New they were privy to inside information ¥ Gregory K. Mehlmann, National York broker/dealer, were ordered to about the company. Branch Compliance Officer, was pay investors a total of $1,138,517 in fined $10,000 plus costs restitution and fined a total of Although Advanced Voice began ($3,500); suspended as a super- $837,500. The violations of NASD trading at a substantial premium, ris- visor for 10 business days; rules and federal securities laws relat- ing as high as $18.00 per share, the ordered to retake the qualifying ed to the sales of the securities of stock never came close to matching examination to become a supervi- Advanced Voice Technologies, Inc. the brokers’ unsubstantiated predic- sor; and censured. tions. The NASD also found that the This brings the total number of Ster- Sterling Foster brokers effected ¥ Christopher S. Knight, Branch ling Foster brokers disciplined by the numerous unauthorized transactions Manager, was fined $95,854, NASD in the past year to 31 and in customer accounts, buying many plus costs ($6,500.00); perma- increases the total amount of fine s more shares than the customers had nently barred from acting as a and restitution imposed to authorized or could afford. supervisor; permanently barred $4,256,393. Several more cases are from participating in penny stock pe n d i n g . The Market Regulation Committee transactions; suspended in all also noted that, for the most part, the capacities for 15 days; and cen- According to the findings issued by customers who purchased Advanced sured. the NASD Market Regulation Com- Voice securities comprised a rela- mittee, the Sterling Foster brokers tively sophisticated group. Many had The NAC dismissed all charges used a variety of high-pressure sales previous experience investing, against Robert C. Weaver, Chief tactics, including: aggressive cold- almost all were well-educated, and a Legal Counsel and Gerald J.R. calling, fraudulent misrepresenta- surprising number were owners of Budke, Branch Manager. The firm tions, and baseless predictions of their own successful businesses. has appealed the decision to the dramatic price increases. In many Yet, they still succumbed to the Ster- SEC. As a result, the findings may instances, customers requested, but ling Foster brokers’ combination of be modified or reversed. Gallison is were never sent, copies of the relentless tactics and outlandish still employed by Pacific Cortez Advanced Voice offering prospectus. promises. Se c u r i t i e s . Customers were sometimes told that

NASD Notices to Members—Disciplinary Actions Ap r il 1999 212 The NASD also found that, as a Vincent Carella - Censure; Per- days, unless the matter is appealed group, the Sterling Foster brokers manent Bar; $100,000 Fine; to the NAC, or called for review by embraced the firm’s stated philoso- $135,983 Restitution; the NAC. The sanctions are not phy of “Buy or Die,” meaning “never effective during this period. If the take ‘no’ for an answer” when selling William Scuteri - Censure; Per- decision is appealed or called for securities to a customer. Each broker manent Bar; $100,000 Fine; review, the sanctions against Vacar- was expected to make hundreds of $223,200 Restitution; ro or Carella may be increased, calls per day. Once a sale was decreased, modified, or reversed. made, however, the brokers simply Robert Paulson - Censure; Per- The decisions and sanctions ignored their customers’ calls and manent Bar; $100,000 Fine; imposed against the remaining eight frequently refused to accept sell $82,006 Restitution; brokers are the result of settlements orders. One customer-witness who submitted and approved after the had placed approximately 25 calls to Brian Kearney - Censure; Perma- disciplinary hearing was completed, the firm, testified that these were the nent Bar; $100,000 Fine; $64,410 and as such, they are now fina l . “most evasive people I ever saw.” In Re s t i t u t i o n ; another instance, a customer who This matter was investigated and tried repeatedly to sell his shares, Timothy Matthews - Censure; prosecuted by NASD Regulation’s was told that the firm’s “legal depart- Permanent Bar; $100,000 Fine; Denver District Office and Enforce- ment” first had to approve the sale $135,706 Restitution; ment Department in Washington, because the customer “had a short D.C. Assistance was also provided history with the firm.” A former Ster- Michael Cohn - Censure; Perma- by NASD Regulation’s Corporate ling Foster broker who testified at the nent Bar; $100,000 Fine; $94,341 Finance Department. NASD Regula- hearing, corroborated the customer- Re s t i t u t i o n ; tion wishes to express its apprecia- witnesses’ accounts, and stated that tion to the U.S. Attorney’s Office for when customers could not be dis- Diana Coblin - Censure; Two- the Southern District of New York suaded from selling, the order tickets Year Suspension; $100,000 Fine; and the Northeast Regional Office of would sometimes disappear, unexe- $152,347 Restitution; the SEC for their cooperation and cuted, into the sales manager’s assistance in this matter. “magic drawer.” Joseph Ferrante - Censure; Six- Month Suspension; $25,000 Fine; © 1999, National Association of Securities Dealers, The names of the 10 brokers disci- $75,577 Restitution; Inc. (NASD). All rights reserved. plined by the NASD, and the sanc- tions imposed against them, are as Claudia Silver - Censure; 30-Day fo l l o w s : Suspension; $12,500 Fine; $13,323 Restitution. Vincent Vaccaro - Censure; Per- manent Bar; $100,000 Fine; The Committee’s decision regarding $161,624 Restitution; Vaccaro and Carella is final after 45

NASD Notices to Members—Disciplinary Actions Ap r il 1999 213 Member Firms Now May computer disk, in lieu of two paper For Submit EDGAR Documents On copies of the EDGAR documents. Computer Disks To Meet The EDGAR documents should be pro- Information Requirements Of vided on 3.5 inch computer disks and You r SEC Rule 15c2-11 And NASD should be in .TXT format. When doc- Marketplace Rule 6740 uments containing the required infor- In f o rm a t i o n Member firms may now demonstrate mation are not available through compliance with Securities and EDGAR, the member firm must con- Exchange Commission (SEC) Rule tinue to provide two paper copies of 15c2-11 and National Association of the requisite documents. Securities Dealers, Inc. (NASD¨) Marketplace Rule 6740 by submitting © 1999, National Association of Securities Dealers, one copy of EDGAR documents on Inc. (NASD). All rights reserved.

NASD Notice to Members—For Your Inform a t i o n Ap r il 1999 215 Ex ecutive Summary without this sophistication, the risk of NASD Regulation, Inc. (NASD loss can be even higher. Special ¨ Re g u l a t i o n ) is requesting comment from members and other interested To address these concerns, NASD NASD parties on proposed rules that would Regulation is soliciting comment on require a firm that has two proposed rules that would clarify recommended a day-trading strategy and enhance the responsibilities of Notice to to an individual to approve the members that recommend day individual’s account for day trading. trading to individuals. The text of the Members As part of the account approval proposed rules follows this Sp e c i a l process, the firm would be required No t i c e . to determine that the strategy is 99-32 appropriate for the customer and to Proposed Approval provide a disclosure statement to the Procedures For Day-Trading NASD Regulation Requests customer discussing the risks of day Accounts Comment On Proposed Rules tr a d i n g . The proposed rules would require a Regarding Approval member that has recommended an Procedures For Day- T rad i n g A companion Special Notice to “intra-day trading strategy” to a Me m b e r s issued today, Sp e c i a l customer who is a natural person to Ac c o u n t s , Including Notice to Members 99-33, discusses approve that customer’s account for Ap p r o p ri a t e n e s s current margin requirements and day trading prior to effecting an initial De t e rm i n a t i o n s , And steps that firms are taking to day-trading transaction for the Disclosure Of Risks Of Day- increase maintenance margin customer. The proposed rules would Trading Activities; Co m m e n t requirements for certain volatile de fi ne an “intra-day trading strategy” Period Expires May 31, 1999 stocks. Special Notice to Members as “an overall trading strategy 99 - 3 3 also solicits comment on the characterized by the regular use of margin during volatile market transmission by a customer of Suggested Routing conditions, as well as the use of multiple intra-day electronic orders to Senior Management margin by individuals engaging in effect both purchase and sale day-trading activities. transactions in the same security or Ad v e r t i s i n g securities.” The account approval Continuing Education Questions concerning this Sp e c i a l would be required to be in a written Corporate Finance Notice may be directed to Patrice M. document, which would be subject to Executive Representatives Gliniecki, Assistant General Counsel, the National Association of Securities Of fi ce of General Counsel, NASD Dealers, Inc. (NASD¨ or Association) Government Securities Regulation, at (202) 728-8014. general recordkeeping requirements. In s t i t u t i o n a l In s u r a n c e Di s c u s s i o n To approve a customer’s account for Internal Audit The increased popularity of day day trading, the member would be trading by individuals poses unique required to determine that an intra- Legal & Compliance investor protection concerns. day trading strategy is appropriate for Mu n i c i p a l Individuals engaging in day-trading the customer. In making this Mutual Fund activities often trade their accounts determination, the member would be Op e r a t i o n s aggressively, hoping to profit from required to “exercise diligence to intra-day price movements in ascertain the essential facts relative Op t i o n s securities. However, the ability to to the customer.” This would Registered Representatives engage effectively in day trading expressly include a review of the Re g i s t r a t i o n requires not only sufficient capital, customer’s financial situation, Re s e a r c h but also a sophisticated investment experience, and understanding of securities markets investment objectives. For purposes Sy n d i c a t e and trading techniques. Even of the proposed rules, day trading Sy s t e m s sophisticated investors engaging in generally would not be appropriate Tr a d i n g day-trading activities should be for someone of limited resources and Tr a i n i n g aware that the risk of loss of capital investment or trading experience, can be very high. For persons and low risk tolerance. Variable Contracts NASD Notice to Members 99-32 Ap r il 15, 1999 217 Proposed Risk Disclosure Alternative Approa ch e s 2. Should the proposed rules Statement NASD Regulation is interested in address a broader scope of firm The proposed account approval receiving views as to alternative activities? For example, should all procedures also would require the approaches to addressing the firms that advertise or promote day member, prior to effecting an initial investor protection concerns raised trading in any manner be subject to day-trading transaction, to provide a by individuals engaging in day- the proposal, regardless of whether a disclosure statement to the customer trading activities. For example, the particular individual engages in day discussing the unique risks posed by proposal could be revised to apply to trading in response to the firm ’ s this activity. The disclosure a broader range of firms. In actions? statement would include several particular, the proposed points that a customer should requirements could apply to any firm 3. Should the proposed rules require consider before engaging in day that promotes day trading in any that any representations as to the trading, including that the customer manner, rather than be limited to pr o fi tability of an intra-day trading should be prepared to lose all of the those firms that have strategy be reasonably based on funds that he or she uses for day “recommended” an intra-day trading actual prior historical results? trading and that day trading on strategy to an individual. margin may result in losses beyond 4. Should the proposed rules reach the initial investment. The proposed In addition, the proposal could be a broader range of individuals? For rules also would allow a firm to revised to reach additional example, should any individual that develop an alternative risk disclosure categories of customers, such as any expresses an intent to engage in day statement, provided that the customer that indicates an intent to trading be covered by the rules? alternative statement was engage in day-trading activities. The substantially similar to the mandated scope of the proposal also could be 5. Should the proposed rules (or disclosure statement and was file d restricted to reach only those similar rules) apply only to new with, and approved by, the NASD’s persons that a firm individually customers? How should existing Advertising Department. solicits to engage in a day-trading customers be treated? strategy. Moreover, an alternative to The proposed rules do not define the the proposal would be to require that 6. Should the proposed rules set term “recommendation” in the risk disclosure statements be forth a definition of “recommen- context of day-trading activities. In provided to every individual who dation”? If so, what types of activities general, a member would be opens an on-line trading account. should constitute a recommendation recommending a day-trading in the context of day trading? strategy for purposes of the Request For Comment proposed rules if it affirm a t i v e l y NASD Regulation encourages 7. Is the proposed definition of an promoted day trading through members and other interested “intra-day trading strategy” advertising, training seminars, or parties to comment on all aspects of ap p r o p r i a t e ? direct outreach programs, and an the proposed rules. We also individual engaged in day trading in sp e c i fi cally solicit comment on the 8. Should the proposed rules response to these solicitations. The following issues: prescribe with greater specificity the fact that customers of a firm actions that a firm needs to take in generally were engaged in day 1. Do the proposed rules target the order to fulfill its obligations under the trading would reinforce a appropriate activity given that they rules? Are there additional elements determination that the firm had are directed at firms that that a firm should consider in order to promoted itself in this way. However, recommend, through general assess the appropriateness of a day- merely providing general investment advertisements, seminars, etc., day- trading strategy for an individual? For research or having a Web site that trading strategies to individuals? To example, should a member be allows the multiple entry of intra-day what extent are individuals engaging required to determine the source of purchases and sales of the same in day trading as a result of efforts by funds that an individual intends to securities would not constitute a firms to promote this activity? By use for day-trading activities? recommendation under the proposal. what other means are individuals being persuaded, or otherwise 9. Are there additional issues that electing, to engage in day trading? should be addressed in the proposed risk disclosure statement? Should customers be required to sign or

NASD Notice to Members 99-32 Ap r il 15, 1999 218 otherwise acknowledge receipt of the procedures set forth in paragraph trading activities. For purposes of risk disclosure statement? Should (b); and this notice, “day trading” means the proposed rules permit a firm to the transmission by you of prepare its own disclosure statement (2) provided the customer with a multiple intra-day electronic regarding the risks of day trading? copy of the disclosure statement orders to effect both purchase required by Rule 2361. and sale transactions in the same 10. Are there other alternative security or securities. approaches that would achieve the (b) In order to approve a customer’s regulatory goal of addressing the account for an intra-day trading ¥ Day trading is extremely investor protection concerns raised strategy, a member shall determine ri s k y . You should be prepared to by day trading? that the intra-day trading strategy is lose all of the funds that you use appropriate for the customer. In for day trading. In particular, you Comments should be mailed to: making this determination, the should not fund day trading member shall exercise diligence to activities with retirement savings, Joan C. Conley ascertain the essential facts relative student loans, second mortgages, Of fi ce of the Corporate Secretary to the customer, including his or her emergency funds, funds set aside NASD Regulation, Inc. financial situation, investment for purposes such as education 1735 K Street, NW experience, and investment or home ownership, or funds Washington, DC 20006-1500 ob j e c t i v e s . required for current income to meet your living expenses. or e-mailed to: (c) Each member subject to this rule pu b c o m @ n a s d . c o m shall make a record setting forth the ¥ Be cautious of claims of large basis on which the member pr o fi ts from day trading. Yo u Important Note: The only comments approves the customer’s account should be wary of advertisements that will be considered are those under paragraph (a) and shall or other statements that submitted in writing or via e-mail. preserve such record in accordance emphasize the potential for large with Rule 3110(a). pr o fi ts in day trading. Day trading Comments must be received by Ma y can also lead to large and 31, 1999. Before becoming effective, (d) For purposes of this rule, the term immediate financial losses. any rule change must be adopted by “intra-day trading strategy” means an the NASD Regulation Board of overall trading strategy characterized ¥ Day trading requires Directors, may be reviewed by the by the regular transmission by a knowledge of securities NASD Board of Governors, and must customer of multiple intra-day ma r k e t s . Day trading requires in- be approved by the Securities and electronic orders to effect both depth knowledge of the securities Exchange Commission. purchase and sale transactions in markets and trading techniques the same security or securities. and strategies. In attempting to Text Of Proposed Rules pr o fi t through day trading, you Rule 2361. Intra-Day Trading must compete with professional, Rule 2360. Approval Strategy Disclosure Statement licensed traders employed by Procedures for Intra-Day securities firms. You should have Trading Accounts (a) Except as provided in paragraph appropriate experience be f o r e (b), no member that has engaging in day trading. (a) No member that has recommended an intra-day trading recommended an intra-day trading strategy to a customer who is a ¥ Day trading requires strategy to a customer who is a natural person shall effect a knowledge of a firm ’ s natural person shall effect a transaction for or on behalf of such op e r a t i o n s . You should be transaction for or on behalf of such customer for this purpose, unless, familiar with a securities firm ’ s customer for this purpose, unless, prior to effecting the first of such business practices, including the prior to effecting the first of such transactions, the member has operation of the firm’s order transactions, the member has: provided to the customer, in writing execution systems and or electronically, the following procedures. You should confirm (1) approved the customer’s disclosure statement: that a firm has adequate systems account for an intra-day trading You should consider the following capacity to permit customers to strategy in accordance with the points before engaging in day engage in day trading activities.

NASD Notice to Members 99-32 Ap r il 15, 1999 219 ¥ Day trading may result in you may have to purchase a Department may allow in your paying large stock at a very high price in order particular circumstances) for co m m i s s i o n s . Day trading may to cover a short position. approval and, if changes are require you to trade your account recommended by the aggressively, and you may pay (b) In lieu of providing the Association, shall be withheld commissions on each trade. The disclosure statement specified in from use until any changes total daily commissions that you paragraph (a), a member that has sp e c i fi ed by the Association have pay on your trades may add to recommended an intra-day been made or, if expressly your losses or significantly reduce trading strategy to a customer disapproved, until the alternative your earnings. who is a natural person may disclosure statement has been provide to the customer, in writing re fi led for, and has received, ¥ Day trading on margin or or electronically, prior to effecting Association approval. The short selling may result in the first of such transactions, an member must provide with each losses beyond your initial alternative disclosure statement, filing the anticipated date of firs t in v e s t m e n t . When you day trade provided that: us e . with funds borrowed from a firm or someone else, you can lose (1) The alternative disclosure (c) For purposes of this rule, the term more than the funds you originally statement shall be substantially “intra-day trading strategy” means an placed at risk. A decline in the similar to the disclosure overall trading strategy characterized value of the securities that are statement specified in paragraph by the regular transmission by a purchased may require you to (a); and customer of multiple intra-day provide additional funds to the electronic orders to effect both firm to avoid the forced sale of (2) The alternative disclosure purchase and sale transactions in those securities or other statement shall be filed with the the same security or securities. securities in your account. Short Association’s Advertising selling as part of your day trading Department (Department) for © 1999, National Association of Securities Dealers, strategy also may lead to review at least 10 days prior to Inc. (NASD). All rights reserved. extraordinary losses, because use (or such shorter period as the

Special Notices to Members are published on an accelerated basis and distributed independently of monthly Notices to Members newsletters. Numerical sequencing may thus appear to contain gaps during a given monthly publication cycle. Such temporary gaps reflect a priority in the production process and will disappear at the conclusion of monthly electronic posting and print distribution.

© 1999, National Association of Securities Dealers, Inc. (NASD). All rights reserved. NASD is a registered service mark of the National Association of Securities Dealers, Inc. Central Registration Depository (CRD) is a service mark of the NASD and the North American Securities Administrators Association, Inc. (NASAA). NASD Regulation is a service mark of NASD Regulation, Inc. NASD Notices to Members is published monthly by NASD Corporate Communications, Kim Dineen, Editor, NASD Editorial Services Department, 1735 K Street, NW, Washington, DC 20006-1500, (202) 728-8370. No portion of this publication may be copied, photocopied, or duplicated in any form or by any means, except as described below, without prior written consent of the NASD. Members of the NASD are authorized to photocopy or otherwise duplicate any part of this publication without charge only for internal use by the member and its associated persons. Nonmembers of the NASD may obtain permission to photocopy for internal use through the Copyright Clearance Center (CCC) for a $3-per-page fee to be paid directly to CCC, 222 Rosewood Drive, Danvers, MA 01923. NOTE: As of January 1999, there has been a change in Notices to Members di s t r i b u t i o n : Members no longer receive complimentary copies of Notices to Members. Each Executive Representative is entitled to one annual subscription at cost ($15 per year). Additional annual subscriptions are available for $225; single issues cost $25. Send a check or money order (payable to the National Association of Securities Dealers, Inc.) to NASD MediaSource, P.O. Box 9403, Gaithersburg, MD 20898-9403, or to phone in an order using American Express, MasterCard, or Visa charge, call (301) 590-6142, Monday to Friday, 9 a.m. to 5 p.m., Eastern Time. Back issues may be ordered by calling MediaSource at (301) 590-6142. NASD Notices to Members (December 1996 to current) are also available on the Internet at ww w . n a s d r . c o m .

NASD Notice to Members 99-32 Ap r il 15, 1999 220 Executive Summary to the development of these market Special During the past several months, conditions, one significant factor is many stocks, particularly of the role played by rapid advances in companies that sell products or technology, which have provided NASD services via the Internet (Internet customers with easier and less costly issuers), have experienced sharp access to the securities markets. increases in both price volatility and Customers are now able to trade Notice to trading volume. These extreme their accounts far more actively than market conditions raise concerns in the past, and members are often regarding the use of margin accounts flooded with customer orders for Members by individuals to trade volatile stocks. certain individual stocks or groups of NASD Regulation, Inc. (NASD stocks (e. g . , stocks of Internet 99-33 Re g u l a t i o n ¨) is issuing this Sp e c i a l issuers). Notice to provide members, as well NASD Regulation Advises as investors, with information about To address concerns raised by Members About current margin requirements and current market conditions, NASD Maintenance Margin steps taken by the industry to Regulation recently issued Notice to Requirements For Certa i n increase maintenance margin Members 99-11, which suggests Volatile Stocks And Solicits requirements for certain volatile disclosures that firms can make to Comment On Margin stocks. This Special Notice al s o educate customers about the risk of solicits comment from members and price and volume volatility, and Pr actices; Comment Per i o d other interested parties on issues Expires May 31, 1999 discusses steps that have been relating to the use of margin during taken by some firms to respond to volatile market conditions, as well as this volatility.1 In a companion No t i c e Suggested Routing the use of margin by individuals to Members, Notice to Members engaging in day-trading activities. Senior Management 99 - 1 2 , NASD Regulation provided guidance to firms on the operation of Ad v e r t i s i n g In a companion Special Notice to their order execution systems and Continuing Education Members issued today, Sp e c i a l procedures during extreme market Notice to Members 99-32, NASD 2 Corporate Finance co n d i t i o n s . Regulation solicits comment on two Executive Representatives proposed rules that would require a As volatile market conditions Government Securities member that has recommended a continue, questions are raised day-trading strategy to an individual In s t i t u t i o n a l regarding the risks posed to firm s to approve the individual’s account and to investors, and the relationship In s u r a n c e for day trading, including determining of margin to those risks. A sudden Internal Audit that the strategy is appropriate for the change in the market value of a individual, and to deliver a disclosure Legal & Compliance security may result in an unexpected statement on the risks of day trading. margin call, and a customer’s failure Mu n i c i p a l to meet the call may cause the firm Mutual Fund Questions concerning this Sp e c i a l to liquidate the securities in the Notice may be directed to Patrice M. Op e r a t i o n s account. The financial consequences Gliniecki, Assistant General Counsel, of a margin call or an account Op t i o n s Of fi ce of General Counsel, NASD liquidation may be most severe to Registered Representatives Regulation, at (202) 728-8014. customers with small accounts, and Re g i s t r a t i o n small accounts may be more likely to Discussion be subject to liquidation. In addition, Re s e a r c h In recent months, there has been a the forced sale of securities in margin Sy n d i c a t e sharp increase in the price volatility accounts may further contribute to of many stocks, particularly those of Sy s t e m s volatility. Internet issuers. This volatility in price Tr a d i n g has been coupled with record trading Questions regarding investor Tr a i n i n g volumes in many of these stocks. protection and disclosure practices While many factors have contributed Variable Contracts also arise as firms become involved

NASD Special Notice to Members 99-33 Ap r il 15, 1999 221 in the extension of credit between National Association of Securities Members also may establish their customers. In some instances, Dealers, Inc. (NASD¨) Rule 2520 own margin requirements (referred to customers are making loans to other imposes additional margin as “house” requirements), provided customers to finance securities requirements on customer that they are at least as stringent as trades, and some customers are ac c o u n t s . 5 Rule 2520 generally the requirements under Regulation T guaranteeing each other’s margin requires maintenance margin of 25 and Rule 2520. Members also may accounts. Member firms sometimes percent of the current market value temporarily raise their margin arrange for these loans or for all long positions in marginable requirements in response to market guarantees between customers or equity securities, meaning that the conditions. arrange loans for customers from equity must not fall below 25 percent other sources. Customers incur of the current market value of the Increased Maintenance Margin additional finance charges when securities in the account. For a short In light of current market conditions, credit is arranged, and they face securities position where the stock some members have elected to additional credit risks when they sells at $5 per share or above, Rule increase their maintenance margin extend credit to other customers. 2520 requires maintenance margin requirements for certain volatile of $5 per share or 30 percent of the stocks to help ensure that the equity Discussions with firms about their current market value of the stock, in each customer account is responses to volatility indicate that whichever amount is greater. In su f fi cient to cover the large swings in many firms have adopted special addition, for a short securities the price of the stocks. In general, procedures with respect to margin. position where the stock sells at less the firms have increased the amount For instance, as further detailed than $5 per share, a customer must of equity that must be maintained in below, many firms have increased maintain margin of $2.50 per share margin accounts for long positions in maintenance margin requirements or 100 percent of the current market these stocks to between 40 percent for selected groups of highly volatile value, whichever amount is greater. and 100 percent. In addition, the st o c k s . 3 However, with markets at Where the same security is carried firms often have raised their historically high levels, concerns long and short by the same maintenance margin requirements remain with the amount of funds that customer, Rule 2520 permits on short positions to an even greater customers are borrowing to trade maintenance margin of five percent degree than on long positions. securities, and the manner in which of the current market value of the credit is being extended by various long security. Identifying Stocks For sources. Accordingly, this Sp e c i a l Increased Maintenance Margin Notice discusses current margin Rule 2520 also permits customers to Firms have considered a variety of requirements and certain firm guarantee each other’s accounts for parameters in identifying the stocks practices when extending credit to maintenance margin purposes.6 In that will be subject to increased customers, and solicits comment on cross-guaranteed accounts, the maintenance margin requirements. A these important issues.4 amount of maintenance margin particularly useful approach is to excess in one account may be used calculate the volatility of the stock Current Margin Requirements to offset a maintenance margin and impose more stringent Federal Reserve Board Regulation T de fi cit in the other cross-guaranteed requirements on stocks that are governs the extension of credit to account. In addition, if the cross- highly volatile. In this context, one customers by broker/dealers and guaranteed accounts are long and appropriate way to measure volatility includes provisions concerning the short the same securities, including is to calculate the standard deviation initial margin requirements for most the same number of shares, the of the relative daily return of a given types of securities transactions. In maintenance margin requirement on stock over a specified time period, general, Regulation T requires 50 the combined positions is five such as three months (which would percent initial margin for long percent. Day trading is also capture an entire quarterly earnings purchases of marginable equity recognized by Rule 2520 through cy c l e ) . 8 securities. In addition, Regulation T the definitions of “day-trading,” “day- requires 150 percent margin for short trader,” and certain specified margin Firms also may identify stocks for sales of equity securities, of which re q u i r e m e n t s . 7 Under these more stringent maintenance margin 100 percent can be from sales provisions, a day trader may need to requirements by reviewing customer proceeds. deposit additional equity in his or her accounts to assess trading activity in account to satisfy a day-trade a particular stock, as well as the margin call. firm’s aggregate risk exposure to the

NASD Special Notice to Members 99-33 Ap r il 15, 1999 222 stock. This type of analysis should credit to customers to fina n c e such a heightened margin be performed in conjunction with securities transactions are required requirement for small accounts? calculating the volatility of the stock. to furnish, in writing, specified What would be an appropriate Other factors firms may consider in information regarding the terms of de fi nition of “small account”? reviewing their margin requirements the loan.9 during extraordinary market 2. Should margin requirements be conditions include price fluc t u a t i o n s These disclosures must be made on linked to volatility? If so, how should (such as a recent sharp rise or both an initial and periodic basis. For this approach work? decline in price), the degree to which instance, at the time a customer trading in a stock is concentrated in a opens a margin account, a broker 3. Should the ability of customers to small number of Market Makers, or must provide the customer with a guarantee each other’s accounts for an issuer’s market capitalization or written statement disclosing, among maintenance margin purposes be industrial code classification. Firms other things, the annual rate of eliminated or restricted? For also have indicated that they interest, the method of computing instance, should rules require that regularly review and, where interest, and what other credit cross-guaranteed accounts be appropriate, revise the lists of stocks charges may be imposed. These owned or controlled by the same that are subject to increased initial disclosures help to ensure that customer in order to receive special maintenance margin requirements. the customer understands the terms maintenance margin treatment? and conditions of the margin loan What would be the effect of any such NASD Regulation believes that and allow the customer to compare revisions? Should the five percent increasing the maintenance margin available credit terms.10 A firm also is maintenance margin treatment for requirements to be applied to certain required to provide periodic (at least perfectly offsetting long and short stocks is an appropriate response to quarterly) written statements to the positions between cross-guaranteed extreme volatility in those stocks. customer, which disclose such accounts be eliminated or revised? Discussions with firms have information as opening and closing indicated that customers generally balances, total interest charges, and 4. How important is margin to day- have not been transferring their other charges resulting from the trading activities? Are the current accounts to other firms in response extension of credit. margin requirements applicable to to increased margin requirements for day-trading accounts appropriate? If volatile stocks. In this regard, NASD Request For Comment not, how should the current Regulation believes that a firm ’ s NASD Regulation encourages requirements be revised? decision to adopt such measures members and other interested should not be influenced by the parties to comment on the issues 5. Should customers be required to possible short-term competitive discussed in this Special Notice, make margin deposits during the day effects. Moreover, NASD Regulation including whether adjusting NASD in order to account for intra-day risk will continue to monitor actions taken margin requirements for certain exposure? If so, what should those by members to adjust maintenance stocks is an appropriate means of margin requirements be, and should margin requirements in response to addressing volatility in the securities margin deposits be made prior to market volatility, and the effects of markets. In addition, we seek additional trading taking place? those actions, to determine whether comment on the following issues: changes to NASD rules may be 6. Are customers receiving wa r r a n t e d . 1. Should margin requirements adequate disclosure of the credit applicable to a securities transaction terms of margin transactions? When Disclosure Of Credit Terms To or account differ based on the size of a firm arranges loans for customers Customers a customer’s account? In particular, from other sources, are customers In reviewing margin procedures, should margin requirements be more receiving adequate disclosure of the firms also should confirm that they stringent for small accounts, given credit terms of the loans? Are the are providing appropriate disclosure that the financial consequences of a persons or entities making the loans of credit terms to customers with margin call to the holder of a small receiving adequate disclosure of the margin accounts. Under the federal account may be more severe? If so, risks and terms of the loans? securities laws, brokers that extend should there be any exemptions to

NASD Special Notice to Members 99-33 Ap r il 15, 1999 223 Comments should be mailed to: 2NASD Notice to Members 99-12, NASD 8The relative daily return of a stock can be Regulation Issues Guidance Concerning The derived from the closing price (or the bid-ask Joan C. Conley Operation Of Automated Order Execution mid-point) of an issue each day during the Of fi ce of the Corporate Secretary Systems During Turbulent Market Conditions specified time period. Using the closing NASD Regulation, Inc. (Feb. 1999). price, the daily relative return would be the 1735 K Street, NW percent price change between the most Washington, DC 20006-1500 3See NASD Notice to Members 99-11 (Feb. recent closing price and the previous day’s 1999) for additional discussion of margin closing price. For example, a stock that clos- or e-mailed to: requirements for volatile stocks. es at $10 on Monday and at $11 on Tuesday pu b c o m @ n a s d . c o m has a relative daily return for Tuesday of 10 4NASD Regulation also recently issued percent. Once this daily relative return has Important Note: The only comments investor guidance on the use of margin been calculated for each of the trading days that will be considered are those accounts and the risks involved with trading during the specified time period, a firm can submitted in writing or via e-mail. securities on margin. See NASD Regula- calculate the standard deviation (or disper- tion’s Web Site at www.nasdr.com. sion) of these returns to determine the Comments must be received no later volatility of the issue. than May 31, 1999. Before becoming 5While often thought of as a “maintenance” effective, any rule change developed margin rule, Rule 2520 also contains initial 9See Rule 10b-16 under the Securities as a result of comments received margin requirements. Initial margin is the Exchange Act of 1934. Brokers also are sub- must be adopted by the NASD greater of the amount specified in Regulation ject to the general anti-fraud provisions of Regulation Board of Directors, may T or the maintenance margin specified in the federal securities laws. be reviewed by the NASD Board of Rule 2520. Governors, and must be approved 10See Securities Exchange Act Release No. by the Securities and Exchange 6See NASD Notice to Members 98-102, Cal- 8773 (Dec. 8, 1969) (adopting Rule 10b-16). Co m m i s s i o n . culating Margin For Day-Trading And Cross- Guaranteed Accounts (Dec. 1998), for © 1999, National Association of Securities Dealers, further discussion of margin requirements for Inc. (NASD). All rights reserved. Endnotes cross-guaranteed accounts. When calculat- 1NASD Notice to Members 99-11, NASD ing Regulation T margin, cross guarantees Regulation Issues Guidance Regarding have no effect. Stock Volatility (Feb. 1999). 7See id. for further discussion of margin requirements for day-trading accounts.

Special Notices to Members are published on an accelerated basis and distributed independently of monthly Notices to Members newsletters. Numerical sequencing may thus appear to contain gaps during a given monthly publication cycle. Such temporary gaps reflect a priority in the production process and will disappear at the conclusion of monthly electronic posting and print distribution.

© 1999, National Association of Securities Dealers, Inc. (NASD). All rights reserved. NASD is a registered service mark of the National Association of Securities Dealers, Inc. Central Registration Depository (CRD) is a service mark of the NASD and the North American Securities Administrators Association, Inc. (NASAA). NASD Regulation is a service mark of NASD Regulation, Inc. NASD Notices to Members is published monthly by NASD Corporate Communications, Kim Dineen, Editor, NASD Editorial Services Department, 1735 K Street, NW, Washington, DC 20006-1500, (202) 728-8370. No portion of this publication may be copied, photocopied, or duplicated in any form or by any means, except as described below, without prior written consent of the NASD. Members of the NASD are authorized to photocopy or otherwise duplicate any part of this publication without charge only for internal use by the member and its associated persons. Nonmembers of the NASD may obtain permission to photocopy for internal use through the Copyright Clearance Center (CCC) for a $3-per-page fee to be paid directly to CCC, 222 Rosewood Drive, Danvers, MA 01923. NOTE: As of January 1999, there has been a change in Notices to Members di s t r i b u t i o n : Members no longer receive complimentary copies of Notices to Members. Each Executive Representative is entitled to one annual subscription at cost ($15 per year). Additional annual subscriptions are available for $225; single issues cost $25. Send a check or money order (payable to the National Association of Securities Dealers, Inc.) to NASD MediaSource, P.O. Box 9403, Gaithersburg, MD 20898-9403, or to phone in an order using American Express, MasterCard, or Visa charge, call (301) 590-6142, Monday to Friday, 9 a.m. to 5 p.m., Eastern Time. Back issues may be ordered by calling MediaSource at (301) 590-6142. NASD Notices to Members (December 1996 to current) are also available on the Internet at ww w . n a s d r . c o m .

NASD Special Notice to Members 99-33 Ap r il 15, 1999 224