Monthly Disciplinary Actions - February 2008

• An NYSE hearing officer found that, at the time of the relevant events, Galeon was a research analyst at Credit Suisse. Galeon covered a number of publicly traded medical companies, including an NYSE-listed company (“XYZ”). On May 24, 2005, Galeon obtained certain information from the CEO of XYZ relating to XYZ’s expected updated earnings guidance. That was the day before the official public release of the company’s updated earnings guidance. Galeon selectively disseminated emails to 17 Firm clients and 31 Firm sales personnel, conveying the information the CEO had disclosed to him. All but one email contained an admonition to keep the information confidential. Subsequently, Credit Suisse and two clients of Credit Suisse who received the information in Galeon’s email traded in shares of XYZ, prior to the public release of such information. By selectively disseminating the information he obtained from the CEO, Galeon engaged in conduct inconsistent with just and equitable principles of trade.

The NYSE imposed a penalty of a censure, four-month bar, and a $50,000 fine. Galeon consented to the penalty.

• An NYSE hearing officer found that Merrill Lynch, between April 19, 2004 and March 15, 2007 , prior to the opening of trading, introduced for execution on the NYSE at least 48,462 odd-lot market orders that should have been aggregated into round lots. In addition, the Firm failed to reasonably supervise and implement a separate system of follow up and review, reasonably designed to achieve compliance with NYSE rules pertaining to odd-lot trading activity being routed to the NYSE through the Firm’s electronic order entry system
• In this matter, which is the first brought against a member firm involving odd-lot orders prior to the open, each order was routed to the NYSE through Merrill Lynch's SuperDOT lines by a non-member broker dealer customer of the Firm who was granted access to Merrill Lynch's SuperDOT lines.  These orders were all odd-lot market orders for the non-member broker dealer customer's proprietary account, were for the same security, were on the same side of the market, and were entered prior to the open.  Therefore, these orders were not time sensitive like an order entered during the trading day.  Merrill Lynch should not have accepted these orders for execution unless they were, as far as possible, aggregated into round-lots by its customer.  Alternatively, the Firm could have consolidated the orders into round lots on its own, or it could have rejected them outright.

The NYSE imposed a penalty of censure and $160,000 fine. Merrill Lynch consented to the penalty.

• An NYSE hearing officer found that while acting as a specialist in XYZ on October 2, 2002, Smyth failed to maintain a fair and orderly market by failing to effectively represent and execute orders entrusted to him as a specialist during four distinct time-gaps in trading, during the time period from 9:58:48 a.m. through 10:26:50 a.m. Additionally, Smyth failed to comply with his firm quote obligations by failing, on several occasions, between 9:58:48 a.m. and 10:26:50 a.m. on October 2, 2002, to adequately disseminate a published quotation that accurately reflected the market conditions at the time and by failing, on a number of occasions, to execute orders at least as favorable to a buyer or seller at the published best offer or bid price and size thereof.

The NYSE imposed a penalty of censure and $35,000 fine. Smyth consented to the penalty.

• An NYSE hearing officer panel found that Cespedes violated NYSE Rule 476(a)(6) by recommending and effecting in customers’ accounts transactions that were unsuitable in view of customers’ age, retirement status, financial resources, or financial experience.
• On appeal to the Board of directors, the decision was affirmed.

The NYSE imposed a penalty of a censure and a 10-year bar.