Monthly Disciplinary Actions - March 2008

• An NYSE hearing officer found that on thousands of occasions during the relevant period, Hayward knowingly or recklessly engaged in fraudulent trading on the Floor of the NYSE and violated his fundamental agency obligations as a specialist to hold the interest of public customer orders entrusted to him above the proprietary interests of his member Firm and himself, and to match executable customer orders. The public customer orders were transmitted to the Floor of the NYSE electronically. Instead of pairing buy and sell orders, Hayward intentionally “interpositioned” the Firm’s dealer account between those orders or intentionally “traded ahead” of orders on one side of the market. In either case, Hayward disadvantaged customer orders.

The NYSE imposed the penalty of a censure, $165,165.39 fine, and permanent bar.   Payment of the fine shall be made to the SEC only pursuant to an SEC Order. Hayward consented to the penalty.

• An NYSE hearing officer found that while employed as a registered representative at UBS, Tart serviced two individual trust accounts owned by customers IJ and AJ (collectively, the “Js”). The Js, an elderly married couple, also maintained an irrevocable charitable remainder trust account (“CRUT”) at the Firm and appointed a financial institution Trustee as the trustee. The Js gave Trustee authorization to make trading decisions in the CRUT.
• Between 2004 and 2005, Tart mismarked order tickets for solicited orders as “unsolicited.” Additionally, Tart improperly accepted orders in the AJ account from IJ without first obtaining the written discretionary authority authorization of AJ. In 2005, Tart also engaged in unauthorized trading in the CRUT by liquidating and acquiring mutual fund positions, without first obtaining prior authorization from the trustee.

The NYSE imposed a penalty of censure and five-month bar. Tart consented to the penalty.

• An NYSE hearing officer found that Shields Capital Corp. violated: NYSE Rule 445 by failing to conduct an independent test of its Anti-Money Laundering (“AML”) program by failing to have a member of senior management approve in writing its Customer Identification Program, by failing to timely file a suspicious activity report, and by failing to have procedures for the independent testing of its AML program; NYSE Rule 472 by failing to establish written supervisory procedures for the review and pre-approval of media appearances by its employees and by issuing research reports without certain required disclosures or which had inadequate disclosures; Section 17 of the Securities and Exchange Act of 1934 (“Exchange Act”) and Rules 17a-4 thereunder and NYSE 440 by failing to preserve certain electronic communications; NYSE Rule 401 by failing to monitor the internet for unauthorized use of its corporate name by its employees and by failing to have an independent person conduct the annual compliance examinations of its New York branch office; NYSE Rule 405A by failing to provide customers in its non managed fee-based account programs with sufficient disclosures, by failing to establish and maintain systems and procedures to monitor and identify customer activity in these programs, and by failing to establish and maintain appropriate written procedures for these programs; the Firm also violated NYSE Rule 342 and certain provisions thereunder by failing to establish and maintain appropriate procedures for supervision and control, including a system of follow-up and review, with respect to (a) the firm’s non-managed fee-based account programs, (b) a registered representative with an extensive history of customer complaints, (c) media appearances by its employees, and (d) the retention and review of its employees electronic communications.

The NYSE imposed a penalty of censure, $82,500 fine and an undertaking. Shields Capital Corp. consented to the penalty.

• On five trading days in December 2005, CRT Capital Group, LLC inadvertently failed to maintain continuous, two-sided Q orders on the NYSE Arca Marketplace in the security in which CRT was a registered Market Maker.

The Office of the General Counsel of NYSE Arca Equities imposed the penalty of a censure and a $2,500 fine. CRT consented to the penalty.