Monthly Disciplinary Actions - April 2007

• An NYSE hearing officer found that from September 2002 through December 2004, the firm submitted to the NYSE 131 Floor Official approval slips which inaccurately indicated that approval had been obtained from certain Floor Officials who had not given such approval as they were not present on the NYSE Floor on the dates in question. The firm also 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 the documentation of Floor Official approvals.
• In addition, from January 2004 through May 2006, the firm failed on 141 separate occasions to document whether it had obtained the required Floor Official approval for the election of certain stop orders. As a result, it could not be determined whether Floor Official approval had in fact been granted.
• The NYSE hearing officer also noted that the Division of Enforcement considered certain additional factors in determining the penalty including that it does not appear that any of the underlying transactions referred to above would not have been approved by a Floor Official, the firm has since implemented policies and procedures pertaining to the documentation of Floor Official approvals, and that in the “Hybrid Market” there will no longer be stop orders requiring Floor Official approval, making a recurrence of these violations unlikely.  

The NYSE imposed a penalty of a censure and a $50,000 fine. Van der Moolen Specialists USA, LLC consented to the penalty.

• An NYSE hearing officer found that from July 2004 through November 2006, while employed at a specialist firm, Miranda, “froze” the display book for excessive periods of time on more than 400 occasions in violation of the specialist’s obligation to maintain a fair and orderly market. This prevented customer orders from entering the auction market and being effectively represented.
• On many of these occasions, customer limit orders, received while the display book was “frozen,” which would have improved the published bid or offer were not published in accordance with the requirements of the limit order display rules.
• The NYSE hearing officer also noted that the Division of Enforcement considered certain additional factors in determining the penalty including that during its investigation Enforcement found no evidence that Miranda's use of the freeze key advantaged the firm's dealer account and that the incidents of freezes for excessive periods of time represented a small percentage of the total number of trades executed by Miranda during this time period.

The NYSE imposed a penalty of a censure and a $50,000 fine. Miranda consented to the penalty.

• An NYSE hearing officer found that prior to January 2003 through June 2004, the firm submitted more votes than it was entitled to vote in proxy matters. This over-voting was caused by the firm’s failure to exclude from the vote long shares that, because they had been loaned out, were not in the firm’s possession or control. Also contributing to the over-voting was the failure of the firm to timely reconcile stock records of beneficial ownership in connection with proxy voting.
• In addition, in connection with its customer reserve account, the firm overstated its Excess Customer Debits Over Credits by approximately $30,000,000 in its Customer Reserve Formula Computation in its August 31, 2004 Financial and Operational Combined Uniform Single Report (“FOCUS Report”), and overstated its Excess Customer Debits Over Credits by $43,430,341 in its weekly Reserve Formula Computation as of September 17, 2004.
• The firm also understated Excess Credits Over Debits in its Proprietary Account for Introducing Brokers (“PAIB”) Reserve Formula Computation in the August 31, 2004 FOCUS Report, and overstated Excess Credits Over Debits in its weekly PAIB Reserve Formula Computation for September 17, 2004.
• In its Customer Reserve and PAIB computations, the firm failed to include overdraft balances in two accounts, overstated outstanding checks, misclassified accounts, calculated certain balances as of the wrong date, failed to determine the aggregate value of stock included in margin securities, improperly included accrued commissions payable, and failed to include certain securities positions.
• The firm also committed violations pertaining to its net capital requirements by incorrectly calculating net capital charges for aged unfavorable differences in two bank accounts and by failing to take the proper net capital charges on all aged unresolved suspense items, resulting in the firm overstating its excess net capital by $14,676,565.
• Additionally, the firm committed violations with regard to the audit trail requirements by failing to submit to the NYSE accurate account type indicators.
• The firm also failed to reasonably supervise and control its business activities relating both to the proxy processing function and its financial and operational requirements.  In connection with proxy processing, the firm failed to reasonably supervise proxy operations to prevent over-voting, implement adequate written procedures for proxy operations and supervision of the proxy processing function, or to implement written procedures for supervision of its proxy process provider.  In connection with its financial and operational requirements, the firm failed to establish, and maintain adequate procedures and controls, including a system of follow-up and review of certain of its business activities in order to prevent net capital and customer reserve violations.

The NYSE imposed a penalty of a censure and a $325,000 fine. First Clearing, LLC consented to the penalty.

• An NYSE hearing officer found that from October 2003 through March 2006 the firm failed to provide certain customers with required confirmations.
• The firm could not determine the actual number of accounts affected by its failure, but, at most, 5,423 accounts and 531,021 trades were impacted.
• During the relevant period, the firm acted as clearing broker for approximately 850 introducing broker dealers (IBDs). As such, the firm, among other things, prepared and transmitted confirmations to public customers on behalf of the IBDs.
• On or about March 22, 2006, after an IBD notified the firm that some of its customers were not receiving trade confirmations, the firm promptly commenced an inquiry to determine whether confirmations had been generated and mailed and then an immediate investigation to determine the cause and scope of the problem. The firm determined that, due to a technological error, it might have failed to mail trade confirmations.
• The NYSE hearing officer also noted that the Division of Enforcement considered certain additional factors in determining the penalty including that potentially affected accounts received either a monthly or quarterly account statement, the firm immediately disclosed its potential failure to NYSE Regulation and contacted each of the potentially affected customers, the firm's full cooperation with Enforcement's investigation, and the firm immediately identified and corrected the system error and retained a consultant to review relevant systems to ensure its corrective action was effective and that similar systemic errors were not occurring.

The NYSE imposed a penalty of a censure and a $150,000 fine. Pershing, LLC consented to the penalty.

• An NYSE hearing officer found that the firm's Financial and Operational Combined Uniform Single Report (“FOCUS Report”) and Net Capital Computation as of September 30, 2004 overstated the firm’s excess net capital by $32,323,000.
• In its Customer Reserve Formula Computation as of September 30, 2004, the firm overstated its Excess Customer Debits by $12,117,000.
• The firm failed to provide for, establish, and maintain adequate procedures and controls, including a system of follow-up and review of certain of its business activities in order to prevent these violations.
• The firm's internal controls failed to prevent multiple net capital and customer reserve violations, despite recent examinations which disclosed similar deficiencies.  The firm's internal controls in connection with the calculation and documentation of its net capital and customer reserve requirements were inadequate.

The NYSE imposed a penalty of a censure and a $100,000 fine. Wachovia Securities, LLC consented to the penalty.

• An NYSE hearing officer found that Certeza, a branch wire operator, pursuant to her supervisor’s instructions, backdated entries in an OATS Log maintained at her former firm’s Napa, California branch.
• 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.
• During the Spring of 2005, Certeza's supervisor inquired about the OATS Log and was told by Certeza that the Log had not been consistently maintained because she was told that it was no longer necessary.
• The supervisor told Certeza that she was incorrect and instructed her to fill in the missing entries. Certeza proceeded to backdate the dates and times in the OATS Log and instructed the second wire operator to do the same. 
• In addition, Certeza also made misstatements concerning the authenticity of certain entries on the OATS Log to her firm.   

The NYSE imposed a penalty of a censure and a two-month bar. Certeza consented to the penalty. See also Viktoria Albertovna Stampfly , Decision 07-11 (NYSE Hearing Board January 19, 2007) (former operations manager disciplined).

• An NYSE hearing officer found that from approximately October 2002 through October 2003, Starsia, while employed as a research analyst at a member organization, maintained a personal brokerage account without the firm’s consent and failed to arrange for duplicate confirmations and monthly statements for this account to be sent to the firm for review.
• In addition, he made a material misstatement on a questionnaire submitted to the NYSE. On an "Associated Person Questionnaire" which he completed in the summer of 2003, Starsia was asked whether he had purchased or sold, in the last 12 months, any stock that he covered as an analyst. He inaccurately answered this question in the negative, and also did not disclose the existence of a personal brokerage account.
• In addition, in opening one personal brokerage account at a member firm, Starsia failed to disclose on a new account form that he was employed at another member firm.
• Starsia also effected stock transactions in his personal brokerage accounts involving a number of securities for which he provided research coverage. One or more of  Starsia's trades in these covered securities occurred during the "no-trade window." In addition, a number of these trades were made in a manner inconsistent with Starsia's most recent recommendation concerning the stock in question.

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

• An NYSE hearing officer found that from approximately December 2004 through September 2005, Anagnostou misappropriated approximately $8,000 from a customer of his member firm employer.
• Anagnostou was the assigned registered representative for a 62-year-old customer. During visits to the customer's home, he often assisted her with errands.
• At times, the customer would give Anagnostou her Cash Management Account Visa Card, along with the PIN number, and asked him to withdraw cash for her.
• Anagnostou withdrew and misappropriated additional cash for himself without the customer's permission or authorization, usually in amounts of about $500 per withdrawal. 

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