Monthly Disciplinary Actions - March 2007

• An NYSE hearing panel found that two examinations of the firm conducted by NYSE Regulation’s Division of Member Firm Regulation ("MFR") in 2004 and 2005 determined that the firm was not in complete compliance with rules regarding the physical possession and control of all fully-paid and excess margin securities carried for the account of customers and the required procedures in connection therewith.
• For example, as found by MFR, of 10 securities in a deficit condition on April 2, 2004, the firm created or increased deficits in 4 securities by making deliveries when it did not have adequate excess to make such deliveries or while it was already in deficit. Of 10 securities in a deficit condition on March 8, 2005, and March 10, 2005, the firm created or increased deficits in 3 securities by making deliveries when it did not have adequate excess to make such deliveries or while it was already in deficit.
• Additionally, the 2004 examination found deficiencies in the firm's completion of order tickets, and in its calculation and maintenance of option margin requirements due to a programming error that it has corrected.
• By failing to prevent the above-mentioned violations, the firm failed to reasonably supervise its employees and operations in that it failed to provide for, establish and maintain appropriate procedures of supervision and control.

The NYSE imposed a penalty of a censure and a $100,000 fine. Swiss American Securities Inc. consented to the penalty.

• An NYSE hearing officer found that in February 2006, Forkell failed to disclose on her employment application submitted to her member firm employer her prior criminal history, including a misdemeanor conviction for Second Degree Forgery, which subjected her to statutory disqualification.

The NYSE imposed a penalty of a censure and a 15-month bar. Forkell consented to the penalty.

• An NYSE hearing officer found that the firm violated NYSE Rule 123C on five separate trade dates by entering or canceling a total of 1,008 Market-on-Close ("MOC") or Limit-on-Close ("LOC") orders in various securities after the relevant cut-off times.
• Between June 24, 2005, and January 17, 2006, on four separate trade dates, the firm entered 1,007 MOC or LOC orders in a variety of securities after 3:40 p.m. where no published imbalance existed or on the same side of a published imbalance.
• The bulk of the orders--a total of 1,001--were entered on two separate trade dates in connection with program trades. Specifically, 724 LOC orders were entered after 3:40 p.m. on June 24, 2005, when the Russell 3000 Index was rebalanced. Another 277 LOC orders were entered after 3:40 p.m. on September 16, 2005, when the Standard & Poor's 500 Index was recomposed.
• Rebalancing and recomposition of indices often results in increased volume and volatility in the stocks affected. The orders placed on June 24, 2005, and September 16, 2005, were entered into the firm's systems before 3:40 p.m. but, due to a backlog of orders caused by increased volume on the two trading days, did not reach the NYSE until after the 3:40 p.m. deadline specified by NYSE Rule 123C.
• Of the remaining six orders, two orders were entered after the specified cut-off time on October 3, 2005, and four orders were entered after the specified cut-off time on January 17, 2006.  In both instances, the late orders were attributable to technological issues or human error.
• In addition, on February 17, 2006, the firm cancelled one MOC order after 3:50 p.m., when cancellation of an MOC order is not permitted for any reason.
• In addition, the firm failed to reasonably supervise and implement adequate supervisory procedures, including a separate system of follow-up and review, reasonably designed to achieve compliance with NYSE rules and policies pertaining to odd-lot trading activity and submission of account type indicators for comparison and clearance in violation of NYSE Rule 342.
• Between June and October 2003, on an almost daily basis, a proprietary trading desk submitted certain trades for execution on the NYSE that inadvertently resulted in the execution of multiple odd-lot orders. 
• Prior to NYSE Regulation's inquiry into this matter, the firm did not have in place policies and procedures specifically addressing odd-lot orders.  Specifically, the firm's supervisory manual applicable to the proprietary trading desk from which the odd-lot orders emanated contained no reference to odd-lot orders.  Moreover, the firm did not conduct supervisory reviews of odd-lot orders placed through that proprietary trading desk.
• Finally, on multiple occasions, UBS submitted inaccurate account type indicators or submitted orders without account type indicators for comparison and clearance in violation of NYSE Rule 132; failed to maintain records of certain orders as required by NYSE Rules 123(b) and 440 and Section 17(a)(1) of the Securities Exchange Act of 1934 and Rule 17a-4(b)(1) thereunder; and failed to comply with the NYSE’s Front End Systemic Capture requirements in violation of NYSE Rule 123(e).

The NYSE imposed a penalty of a censure and a $95,000 fine.  UBS Securities, LLC consented to the penalty.

• An NYSE hearing officer found that Stampfly, while employed as an operations manager for a member firm organization in its Napa, California branch office, instructed two subordinate employees to back date entries in an OATS Log.
• In March 2004, the branch received a new digital OATS Clock, replacing the older OATS Clock system. Firm procedures, however, still required the maintenance of the OATS Log by branch staff.
• In or about March-April 2005, after attending a weekly Operations manager conference call in which the requirement for the maintenance of an OATS Log for the newer digital clocks was discussed, Stampfly later spoke to a branch wire operator ("BWO") about the OATS Log. BWO told Stampfly that the OATS Log had not been consistently maintained during the relevant period, because she thought it was no longer necessary.
• Stampfly then instructed BWO and the other branch wire operator to fill out the OATS Log and backdate it to fill in the missing time gaps.
• As a result, Stampfly's actions impeded the firm's auditors from immediately discovering that its employees were not adhering to firm policies and procedures.
• Stampfly also made misstatements to her member firm employer about the authenticity of the OATS Log.

The NYSE imposed a penalty of a censure and an eight-month bar. Stampfly consented to the penalty.

• An NYSE hearing officer found that Figarola, in violation of NYSE Rule 346(b), engaged in undisclosed and unapproved outside business activities while employed at a member firm organization and solicited a client of his member firm to invest in this outside business.
• Additionally, in violation of NYSE Rule 476(a)(10), Figarola failed to disclose this outside business activity on multiple Uniform Applications for Securities Industry Registration or Transfer that were filed with the NYSE.

The NYSE imposed the penalty of a censure and a six-month bar. Figarola consented to the penalty.

• An NYSE hearing officer found that from May through July 2006, Chorley failed to disclose his prior criminal history on an employment application submitted to his member firm employer, made a misstatement on a Uniform Application for Securities Industry Registration or Transfer (“Form U-4”) submitted to the NYSE, caused a violation of NYSE Rule 345.12 by submitting an inaccurate Form U-4 containing false information, and failed to timely comply with one or more written requests by NYSE Regulation for information concerning a matter that occurred prior to the termination of his employment with his member firm employer.

The NYSE imposed a penalty of a censure and a two-year bar. Chorley consented to the penalty.

• An NYSE hearing officer granted a motion for a default determination of guilt and found that Yu violated NYSE Rules 476(a)(11) and 477 by failing to comply with a written request by NYSE Regulation for a detailed written explanation concerning matters that occurred prior to his termination as a non-registered employee of a member organization.

The NYSE imposed a penalty of a censure and a bar until he cooperates, the bar to become permanent if he fails to cooperate in three months.

• An NYSE hearing officer found that from July 2003 through October 2005, Davis submitted false invoices totaling approximately $36,000 to his member firm and improperly received reimbursement checks based on these invoices, most of which he used personally. Davis, a former director in the firm's Client Development Center, submitted numerous improper payment requests purportedly for services rendered by vendors when no services actually were provided. In total, Davis misappropriated approximately $21,000 from his member firm.

The NYSE imposed a penalty of a censure and a permanent bar. Davis consented to the penalty.

• An NYSE hearing officer granted a motion for a default determination of guilt and found that Willis failed to disclose his prior criminal history on an employment application submitted to his member firm employer and failed to comply with one or more written requests by NYSE Regulation for information concerning one or matters that occurred prior to the termination of his status as an employee of a member organization.

The NYSE imposed a penalty of a censure and a permanent bar.

• An NYSE hearing officer granted a motion for a default determination of guilt and found that Derrick failed to disclose her prior criminal history on an employment application submitted to her member firm employer and failed to comply with one or more written requests by NYSE Regulation for information concerning a matter that occurred prior to the termination of her employment with a member firm employer.

The NYSE imposed a penalty of a censure and a permanent bar.

• An NYSE hearing officer granted a motion for a default determination of guilt and found that Stuart failed to disclose her prior criminal history on an employment application submitted to her member firm employer that subjected her to statutory disqualification and failed to comply with a written request by NYSE Regulation for information with respect to activities that occurred prior to the termination of her employment with a member firm.

The NYSE imposed a penalty of a censure and a permanent bar.

• An NYSE hearing officer granted a motion for a default determination of guilt and found that Morrissey failed to disclose her prior criminal history, including a conviction that rendered her statutorily disqualified, on an application for employment submitted to her member firm employer and failed to comply with one or more written requests by NYSE Regulation for information concerning a matter that occurred prior to the termination of her employment with her member firm employer.

The NYSE imposed a penalty of a censure and a permanent bar.

• An NYSE hearing officer granted a motion for a default determination of guilt and found that Razzouk failed to disclose his prior criminal history on an employment application submitted to his member firm and failed to comply with one or more written requests by NYSE Regulation for information concerning a matter that occurred prior to the termination of his employment with his member firm employer.

The NYSE imposed a penalty of a censure and a permanent bar.

• An NYSE hearing officer found that Ruppel failed to timely comply with a request that he appear and testify on April 20, 2005 regarding certain matters that occurred prior to his termination as a registered employee of a member organization. After Enforcement had completed its investigation, Ruppel's attorney advised Enforcement that Ruppel would in fact agree to appear and testify in this matter. On December 5, 2006, more than 18 months after his originally scheduled date for testimony, Ruppel appeared and provided testimony to Enforcement. Ruppel's failure to provide testimony about the events at issue at the time such testimony was requested had a material impact on Enforcement's investigation in this matter.  

The NYSE imposed a penalty of a censure and a nine-month bar.  Ruppel consented to the penalty.

• An NYSE hearing officer found that from December 2003 through September 2004, Cohan posted approximately 65 communications concerning XYZ Company on an Internet message board, without the knowledge or approval of his member firm employer.
• A number of Cohan’s postings contained speculative statements that included positive information about the future of XYZ and could reasonably be expected to affect investor interest.
• During the relevant period, as Cohan was making the aforementioned statements about XYZ, Cohan and approximately 38 of his customers held and/or traded shares of XYZ.

The NYSE imposed a penalty of a censure and three-month bar.  Cohan consented to the penalty.

• An NYSE hearing officer found Lucas signed customer names to documents such as checks, Letters of Authorization, mutual fund switch letters, federal tax forms and managed money account questionnaires. Lucas also added information to managed money account questionnaires after the customers had signed.
• Furthermore, Lucas made a number of misstatements to his member firm employer about adding customer signatures or adding information to client documents in an effort to protect his job at the firm, which misstatements he ultimately recanted.

The NYSE imposed a penalty of a censure and a three-month bar.  Lucas consented to the penalty.

• An NYSE hearing panel found that Tansil caused or permitted the books and records of his member firm employer to reflect inaccurate information about one or more customers and caused his member firm to fail to learn essential facts about one or more customers. One customer new-account form indicated that the customer had ten years experience with bonds even though she had no such experience.  Another customer's account information reflected her son's employment and age rather than her advanced age and the fact that she was in a retirement home.
• The NYSE hearing panel also found that Tansil engaged in unsuitable trading in the accounts of one or more customers, failed to disclose adequately the risks of an investment or investment strategy that he was recommending or made misstatements about such risks, investments and/or strategies. Tansil engaged in a trading strategy that did not take into account the unique background, objectives, and financial situation of each of his customers. Tansil traded in options, which his customers did not adequately understand, and his trading patterns resulted in an over-concentration of his customers' portfolios in the telecommunications and technology sectors. The NYSE hearing panel's conclusion that the trades were unsuitable was reinforced by the evidence that Tansil's approach was virtually identical for his customers, without regard to their unique concerns and circumstances. Based on Tansil's own testimony, the NYSE hearing panel doubted that Tansil himself fully understood the risks involved in the particular investments and investment strategies that he was recommending to his customers.
• The NYSE hearing panel also found that Tansil recommended one or more opening options transactions without having a reasonable basis for believing that the customer had such knowledge and experience in financial matters that the customer might reasonably be expected to be capable of evaluating the risks of the recommended transaction and/or be financially able to bear the risks of the recommended option position. Tansil also exercised discretionary power without first obtaining written authorization, failed to follow customer instructions, utilized margin in customer accounts without authorization, and shared and/or agreed to share losses in a customer's account.

The NYSE imposed a censure and a five year bar.