Monthly Disciplinary Actions - June 2007

• An NYSE hearing officer found that from March 2004 through January 2005, the firm experienced difficulties in reconciling accounts following a conversion of its fixed income processing system from an internal system to a system using an outside vendor. The firm also erroneously concluded that these differences could be treated as bank issues, as opposed to securities clearance issues.
• Accordingly, the firm failed to include, when computing its Net Capital and Reserve Account requirements, certain aged items that were not paired-off in the reconciliation process.
• As a result, the firm experienced a Net Capital deficiency of approximately $464 million as of March 31, 2004, and a Reserve Account deficiency of approximately $1.7 billion as of April 16, 2004.
• Moreover, following the conversion, certain of the firm’s books and records were inaccurate because the firm failed to timely identify and resolve these unpaired differences. 
• In addition, the firm also submitted an inaccurate Key Operational Indicator Report (“KEOP Report”) to the NYSE after the conversion, because the firm had reported its reconciliation differences on a net, rather than gross, basis.

The NYSE imposed a penalty of a censure and a $150,000 fine. JP Morgan Securities, Inc. consented to the penalty. 

• An NYSE hearing officer found that the firm violated NYSE Rules 342 and 405(2) by failing to diligently supervise registered representatives John Steigerwald ("Steigerwald"), CW, AL and Anthony Coniglio.
• The firm failed to detect that Steigerwald, CW and AL recommended unsuitable transactions in one or more customer accounts.
• Steigerwald was a registered representative ("RR") for seven guardian accounts which were established for minors pursuant to court orders implementing medical malpractice settlements in favor of children who were injured at birth or during childhood.
• The court orders limited the type of investments for the guardian accounts to laddered portfolios of "A" rated New York State Municipal bonds and United States bonds and strips ("Strips"). The court orders also required that "all fees and commissions incurred herein shall be the lowest available rate, that there be no management fees, and the maturity dates shall be selected in the discretion of the guardian, even if a lower interest rate results."
• In or about February 2004, Steigerwald approached CW seeking advice concerning Strips and other fixed income products for the guardian accounts and they agreed that CW would receive a portion of the commissions for the trades.
• Between April 2004 and June 2005 Steigerwald and CW employed an unsuitable strategy of purchasing and quickly selling Strips and municipal bonds.
• The branch office manager ("BOM") read and was familiar with the court orders that established the guardian accounts and knew about the trade restrictions imposed by the court orders.  Nevertheless, the BOM failed to instruct or require CW or other supervisors to whom he delegated review of the trading activity in the guardian accounts to read or familiarize themselves with the terms of the court orders.
• Such a review would have disclosed a court ordered direction to prefer long-term strategy to current income.
• The firm failed to detect the unsuitable trading activity in the guardian accounts.
• The firm's failure to require supervisors reviewing trades and trading activity in fiduciary accounts to be aware of and familiarize themselves with the terms of the fiduciary relationship prevented its supervisors from detecting and halting the unsuitable trading.
• Separately, the firm also failed to diligently supervise the trading activity in the customer accounts of AL who recommended a speculative and sophisticated strategy of purchasing and quickly selling technology stocks and new issue fixed income products in the accounts of certain customers, some of whom were retired.  The unsuitable trading activity was not detected, investigated or halted by the BOM or the supervisors to whom he delegated the responsibility to review the trading activity.
• Further, the firm failed to detect that Coniglio failed to write order tickets for orders that were components of block trades. In addition, most of the allocations were sent after the close, hours after the firm's trading desk had filled the order.
• Prior to November 2005, the firm failed to have adequate procedures for entering and allocating block trades and other trades placed through its desk and failed to have written supervisory procedures for reviewing and approving block trades entered through the desk.
• The firm also failed to evidence the review of certain correspondence and e-mails of two producing branch office managers; failed to evidence e-mail reviews conducted by three branch offices; failed to review and retain certain business related e-mails sent and received on the personal computers of one RR; failed to evidence the review of certain correspondence sent and received by two RRs; and failed to report and/or erroneously reported certain customer complaints on its 351(d) report to the NYSE.
• The NYSE hearing officer noted that the firm has implemented certain remedial measures and has made whole the guardian accounts.

The NYSE imposed a penalty of a censure, a $500,000 fine and an undertaking to conduct and provide to the Division of Enforcement within 120 days of the decision herein, and prior to their implementation, a description of any new systems and procedures proposed by the firm governing the firm’s handling of guardian accounts.  See also  John Steigerwald, Decision 06-231 (NYSE Hearing Board January 4, 2007) (on default motion, individual barred for sales practice violations, misstatement and failure to cooperate) and Anthony Coniglio, Decision 07-54 (NYSE Hearing Board April 23, 2007) (individual disciplined for improper trade allocation and causing books and records violations).

• An NYSE hearing officer found that from at least 2000 through 2005, the firm did not cause money market mutual fund prospectuses to be timely delivered to customers of the firm in connection with a money market mutual fund sweep program in which such customers were enrolled.
• With respect to the ABC money market mutual fund, it was the firm's practice to cause a prospectus to be delivered to its customers on an annual basis at or about the time that ABC would issue an annual updated prospectus for its money market funds, typically effective in November of each year.  Thus, customers of the firm that became enrolled in the firm's sweep program with ABC any time prior to November of a given year may not have received a relevant ABC prospectus until in or about November of that year.  The delay in prospectus delivery could have been as long as approximately ten months.  
• During 2001 through at least August 2006, the firm did not cause product descriptions to be delivered to customers who purchased ETFs in their accounts.
• In addition, during at least 2000 through 2003, the firm did not disclose to its customers that in order for registered sales staff of the firm to be eligible to attend a sales conference held by the firm at a resort location, the sales staff had to sell a certain dollar amount of the products of specified mutual fund or annuity/insurance companies.  These companies acted as financial sponsors of the sales conference.
• During at least 2000 through 2003, the firm additionally did not disclose to customers that the firm had a policy to pay its registered sales staff, under certain circumstances, an increased commission on the sales of mutual funds that belonged to specified mutual fund families that appeared on an internal firm list.
• The NYSE hearing officer also noted that the firm has initiated certain changes to its sales conference and commission practices and to its money market mutual fund prospectus and ETF disclosure document delivery practices.  

The NYSE imposed a penalty of a censure, a $225,000 fine and an undertaking to review the firm’s prospectus delivery and product description delivery practices and procedures, to (as necessary) develop written policies and procedures, and cause changes to be made to its (or its agents’) operational systems that are reasonably designed to cause the firm to be in compliance with applicable delivery requirements; and to prepare a report of the review.  Crowell, Weedon & Co. consented to the penalty.

• An NYSE hearing officer found that the firm failed to locate securities available for borrowing prior to effecting short sales of that security and document or adequately document that a “locate” was obtained as required.
• In addition, the firm improperly maintained two error accounts contemporaneously, improperly effected non-bonafide error transactions in its error account, and failed to maintain required books and records relating to its error account.
• The firm failed to submit accurate account type indicators and failed to enter the details of orders executed on the Floor of the NYSE in the Front End Capture System (“FESC”).
• The firm also failed to timely report employee terminations to the NYSE Security Office, surrender the terminated employee’s identification cards, and file Forms U-5 for terminated employees.
• Moreover, the firm failed to provide for, establish and maintain appropriate procedures of supervision and control, including a system of follow-up and review with respect to: (a) compliance with the short sale locate requirements of Regulation SHO; (b) the use of the firm’s error account; (c) entering details of orders effected on the Floor in FESC; (d) the timely notification of the NYSE Security Office of employee terminations and the timely surrender of terminated employee’s identification cards; (e) the timely filing of Forms U-5; and (f) the review of employee outside accounts.
• The NYSE hearing officer noted that the firm has since instituted a procedure by which it will obtain a locate control number from its clearing firm on all short sale transactions, note the number on the corresponding order ticket and maintain a log of all locate control numbers. 

The NYSE imposed a penalty of a censure and a $60,000 fine. HLA Securities, Inc. consented to the penalty.

• An NYSE hearing officer found that the firm failed to make and preserve certain required books and records; failed to properly enter into the Front End Systemic Capture System the details of transactions executed on the Floor of the NYSE; failed to comply with requirements concerning the submission of certain audit trail data elements; failed to timely notify the NYSE Security Office of an employee’s termination and failed to timely return a terminated employee’s Floor badge; accepted public customer orders without proper registration and/or approval from the NYSE; improperly processed non-bona fide errors through the allied member's error account; and lacked an appropriate system of supervision and control.

The NYSE imposed a penalty of a censure and a $40,000 fine to be applied jointly and severally against the former firm and a former allied member.  SDS Securities Corp. consented to the penalty.  See  Sean D. Seigel, Decision 07-70 (NYSE Hearing Board May 17, 2007) (former allied member disciplined for reporting, books and records, operational and supervisory violations).  See also Timothy F. Alfano, Decision 07-71 (NYSE Hearing Board May 18, 2007) (floor clerk disciplined for improper and unauthorized activities and causing books and records violations).

• An NYSE hearing officer found that Seigel failed to make and preserve certain required books and records; failed to properly enter into the Front End Systemic Capture System the details of transactions executed on the Floor of the NYSE; failed to comply with requirements concerning the submission of certain audit trail data elements; failed to timely notify the NYSE Security Office of an employee’s termination and failed to timely return a terminated employee’s Floor badge; accepted public customer orders without proper registration and/or approval from the NYSE; improperly processed non-bona fide errors through the allied member's error account; and lacked an appropriate system of supervision and control.

The NYSE imposed a penalty of a censure and a $40,000 fine to be applied jointly and severally against the former allied member and a former firm.  Seigel consented to the penalty.  See  SDS Securities Corp., Decision 07-69 (NYSE Hearing Board May 17, 2007) (former member firm disciplined for reporting, books and records, operational and supervisory violations).  See also Timothy F. Alfano, Decision 07-71 (NYSE Hearing Board May 18, 2007) (floor clerk disciplined for improper and unauthorized activities and causing books and records violations).

• An NYSE hearing officer granted a motion for a default determination of guilt and found that Miller violated NYSE Rules 476(a)(11) and 477 by failing to comply with written requests by NYSE Regulation for testimony and information concerning his activity as a specialist and as a floor broker; violated NYSE Rule 476(a)(6) by improperly altering the reported sequence of transactions to cover up an improper transaction; and violated NYSE Rule 104.10(6)(i)(A) by selling stock from his firm’s dealer account on a direct minus tick without Floor Official approval.
• Miller also violated NYSE Rules 116.40 and 123C(3)(A) by (i) improperly calculating the imbalance between the buy and sell market-on-close/limit-on-close orders and then executing the incorrect amount of shares as the imbalance after the close; (ii) executing the incorrect amount of the remaining buy and sell market-on-close/limit-on-close orders against each other; and (iii) executing those transactions at a price above the prevailing bid.
• In addition Miller violated NYSE Rule 52 by executing a transaction after the market had closed and violated NYSE Rule 407(a) by opening a securities account in which he had a direct or indirect interest, and executing a trade for that account, without the prior written consent of his 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 Lull, an administrative assistant, misappropriated funds belonging to her member firm employer by submitting a dinner receipt to the firm in a travel and expense report under her own name rather than the name of her supervisor; and failed to comply with written request by NYSE Regulation for detailed written explanation concerning her termination.

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

• An NYSE hearing officer granted a summary judgment order and found that Trahan submitted to his firm an altered court document to support his misstatement regarding his criminal history; submitted to the Division of Enforcement an altered court document to support his misstatement regarding his criminal history; failed to disclose his prior criminal history on his Form U-4; and made a misstatement or omitted a fact on his application for registration filed with NYSE.
• An NYSE hearing panel, convened to hear evidence and argument concerning the penalty to be imposed, at which hearing Trahan did not appear, found "that [Trahan] altered a court document, in two different ways, on two separate occasions, precisely for the purpose of concealing his prior convictions from his then employer and the NYSE. We conclude that he acted deliberately, methodically, and in bad faith. We believe that this type of egregious, unabashed deception and failure to take any responsibility for what is clearly wrongful conduct must be sanctioned harshly."

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

• An NYSE hearing officer found that while acting as the specialist in one security on October 29, 2002 and in another security on November 14, 2003, Veenstra failed to maintain fair and orderly markets as he executed transactions at excessive price variations from the last sale that were not justified by orders in the marketplace or market conditions, and without any specialist buy-side participation against the market trend. This resulted in significant downward price movements, which elected sell stop orders.
• Veenstra also improperly “froze” his Display Book for an excessive period of time to prevent potential contra-side interest from participating so that he could purchase the elected sell stop orders with his dealer account at significantly lower prices. Once the Display Book was unfrozen, Veenstra’s dealer account sold some of the shares purchased at higher prices.
• During the instance involving the security on October 29, 2002, Veenstra also failed to timely display the price and full size of limit orders in the published quote when such orders would have improved the best bid.
• During the instance involving the security on November 14, 2003, Veenstra also failed to effectively represent and execute an agency order entrusted to him at or within the published quotation.

The NYSE imposed a penalty of a censure and a $40,000 fine.  Veenstra consented to the penalty.

• An NYSE hearing officer found that on several occasions over two separate trade dates, when electronic orders were received in the Display Book, McCoy failed to reflect those orders on a timely basis in the NYSE’s published quotations when the orders might have improved the published bid or offer.
• Additionally, McCoy failed to maintain a liquid and continuous two-way auction market by failing to timely trade another security, and failed to effectively represent certain agency orders, both in violation of NYSE Rule 104.10.
• In negotiating the penalty in this matter, the Division of Enforcement took the following factors in consideration: The violations were matters of market quality and specialist performance; and there is no evidence that McCoy intended to improperly influence published trades or quotations, or to profit personally, or to have his member firm employer profit from the acts or omissions described above.

The NYSE imposed a penalty of a censure, a three-month plenary bar, followed by additional three-month bar from employment in any capacity on the NYSE Floor. McCoy consented to the penalty.

• An NYSE hearing officer found that from  July 2004 through November 2006, Briggs “froze” the Display Book for more than 30 seconds on more than 300 occasions in violation of the specialist’s obligation to maintain a fair and orderly market as mandated by NYSE Rule 104.10. This prevented customer orders from entering or exiting the NYSE auction market and prevented the excluded orders from being represented during the duration of the freeze.
• 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 Rule 11Ac1-4 of the Securities Exchange Act of 1934 and NYSE Rule 79A.15 (collectively the “Limit Order Display Rules”).
• In arriving at the penalty in this matter, the Division of Enforcement considered certain additional factors including: (i) that during its investigation, Enforcement found no evidence that Briggs’ use of the freeze key advantaged the Firm’s dealer account; and (ii) that the incidents of “freezes” for excessive periods of time represented a small percentage of the millions of trades executed by Briggs during this period. 

The NYSE imposed a penalty of a censure and a $25,000 fine. Briggs consented to the penalty.

• An NYSE hearing officer found that from July 2004 through November 2006, Wey “froze” the Display Book for more than 30 seconds on more than 400 occasions in violation of the specialist’s obligation to maintain a fair and orderly market as mandated by NYSE Rule 104.10.  This prevented customer orders from entering or exiting the NYSE auction market and prevented the excluded orders from being represented during the duration of the freeze.
• 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 Rule 11Ac1-4 of the Securities Exchange Act of 1934 and NYSE Rule 79A.15 (collectively the “Limit Order Display Rules”).
• In arriving at the penalty in this matter, the Division of Enforcement considered certain additional factors including: (i) that during its investigation, Enforcement found no evidence that Wey’s use of the freeze key advantaged the Firm’s dealer account; and (ii) that the incidents of “freezes” for excessive periods of time represented a small percentage of the millions of trades executed by Wey during this period.

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

• An NYSE hearing officer found that from July 2004 through November 2006, Sweeney “froze” the Display Book for more than 30 seconds on more than 400 occasions in violation of the specialist’s obligation to maintain a fair and orderly market as mandated by NYSE Rule 104.10. This prevented customer orders from entering or exiting the NYSE auction market and prevented the excluded orders from being represented during the duration of the freeze.
• 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 Rule 11Ac1-4 of the Securities Exchange Act of 1934 and NYSE Rule 79A.15 (collectively the “Limit Order Display Rules”).
• In arriving at the penalty in this matter, the Division of Enforcement considered certain additional factors including: (i) that during its investigation, Enforcement found no evidence that Sweeney’s use of the freeze key advantaged the Firm’s dealer account; and (ii) that the incidents of “freezes” for excessive periods of time represented a small percentage of the millions of trades executed by Sweeney during this period.

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

• An NYSE hearing officer found that from January 1999 to April 2003, on thousands of occasions McGagh 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.
• Instead of pairing off buy and sell orders, McGagh intentionally “interpositioned” the firm’s dealer account between those orders or intentionally “traded ahead” of those orders thereby disadvantaging the customer orders.
• On May 12, 2006, McGagh pled guilty to one count of securities fraud in the United States District Court, Southern District of New York, stemming from the same conduct.

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

• An NYSE hearing officer found that from January 1999 to April 2003, on thousands of occasions Bongiorno 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.
• Instead of pairing off buy and sell orders, Bongiorno intentionally “interpositioned” the Firm’s dealer account between those orders or intentionally “traded ahead” of those orders thereby disadvantaging the customer orders.
• On May 12, 2006, Bongiorno pled guilty to one count of securities fraud in the United States District Court, Southern District of New York, stemming from the same conduct. 

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

• An NYSE hearing officer found that Alfano caused the books and records of his member firm employer to contain false or incomplete information; entered cover orders or otherwise transacted business on the NYSE Floor although he was a Floor clerk and not a NYSE member; created an error log sheet for a NYSE member’s error account on numerous occasions without the member’s authority; signed the signature of a NYSE member on error log sheets on numerous occasions without the member’s authority; processed an error through a NYSE member’s error account without the member’s authority; intentionally entered inaccurate information into the Front End Systemic Capture system (“FESC”); failed to properly enter into FESC certain details of transactions executed on the Floor; and submitted inaccurate trade data into the audit trail.
• The NYSE hearing officer also noted that prior to this matter Alfano had been subject to formal disciplinary action.  Timothy Alfano, Decision 94-42 (NYSE Hearing Panel March 28, 1994) (former non-registered employee disciplined for causing his employer to execute trades which did not originate from any
  customer and arranged for them to be placed in another firm's error
  account).

The NYSE imposed a penalty of a censure and a seven-month suspension.  Alfano consented to the penalty.  See also SDS Securities Corp., Decision 07-69 (NYSE Hearing Board May 17, 2007) (former member firm disciplined for reporting, books and records, operational and supervisory violations) and Sean D. Seigel, Decision 07-70 (NYSE Hearing Board May 17, 2007) (former allied member disciplined for reporting, books and records, operational and supervisory violations).

• An NYSE hearing officer found that Brinton and another registered representative with whom he formed a partnership at their member firm employer engaged in unapproved outside business activities when they facilitated the purchase of investments away from the firm by soliciting firm customers to invest in certain hedge funds managed  by ABC, that were not approved by their member firm.  Brinton received approximately $66,485 in compensation from ABC after certain customers invested in the hedge funds.
• Brinton also made misstatements on his annual employee certification of compliance relating to his outside business activities and the compensation he received from ABC. Brinton also made misstatements to his branch office manager regarding his outside business activities with ABC.

The NYSE imposed a penalty of a censure, a $10,000 fine and a three-month suspension. Brinton consented to the penalty.

• An NYSE hearing officer found that between February 2002 and May 2004 during his employment at a member firm, Walter purchased at least four equity index annuities away from the firm on behalf of firm customers, and received commissions without making a written request or disclosing his outside business and without receiving the firm’s prior written consent to engage in such outside business. The purchase of these annuities provided Walter, while depriving his firm a share in, more than $20,000 in commissions.

The NYSE imposed a penalty of a censure and a one-year bar. Walter consented to the penalty.

• An NYSE hearing officer found that from June 2005 through August 2005, Coniglio entered 12 block trades that included one or more customer orders and failed to create a contemporaneous written order ticket at the time the block trades were entered. Further, Coniglio allocated the block trades, among one or more customers; however, his member firm’s trading operations area did not receive the trade allocations for time periods ranging from 11 minutes to six hours and 33 minutes after the trades were executed. 

The NYSE imposed a penalty of a censure, a one-month bar and a $25,000 fine.  Coniglio consented to the penalty.  See also Morgan Stanley & Co. Incorporated, Decision 07-066 (NYSE Hearing Board May 9, 2007) (member firm disciplined for supervisory, books and records and other violations).

• An NYSE hearing officer found that during June and July of 2006, Grundhoefer misappropriated a total of $9,300 from an elderly customer of his former member firm employer. He did so by causing unauthorized stock sales to be executed in the customer’s account, thus creating an additional cash balance in the account. He also prevented the trade confirmations for these transactions from being delivered to the customer.  Thereafter, Grundhoefer fraudulently obtained a checkbook for the customer’s account and signed the customer’s signature as the payor on seven checks that he made out to “cash.” Over a period of almost two months, Grundhoefer cashed these checks at a banking institution in which he maintained an account and endorsed the checks on the reverse side in his own name. The firm has reimbursed the customer for his losses.

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

• An NYSE hearing officer found that between 1999 and 2006, Lichtmajer misappropriated close to $1 million from certain of his customers’ accounts, and used that money to fund withdrawals from other customers’ accounts in which he had lost money through an overly aggressive investment strategy. Lichtmajer misappropriated most of the money from his father's account, over which Lichtmajer had complete authority.
• Lichtmajer had ignored certain clients' requests to invest conservatively, and instead used unauthorized discretion to employ an aggressive investment strategy and churn the clients' accounts in an effort to obtain better profits for his clients.  Lichtmajer, however, exposed the clients to even greater losses because of his unauthorized and aggressive trading.
• Lichtmajer hid the trading activity and losses from his clients, including his father, by providing them with false account statements and/or account summaries that inaccurately reflected the value of and activity in their accounts.
• Lichtmajer knew that the affected clients, including his father, never retrieved their actual account statements from the law office in the neighboring country of Uruguay where they directed that the mail should be sent, but relied on Lichtmajer to keep them apprised of their investments.
• The NYSE hearing officer noted that the firm, after determining the client losses created by Lichtmajer's activities, promptly refunded those amounts to the affected clients other than Lichtmajer's father. 

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

• An NYSE hearing officer found that while employed by a member firm, Hueffmann and another firm employee abused their access to the firm's inventory control room to steal approximately 66 pieces of computer equipment, including laptops and memory cards, that were then sold through Hueffmann's online account.
• Hueffmann and the other firm employee received approximately $40,000 in proceeds from the sales of the stolen goods.
• On May 31, 2006, in connection with his theft of firm computer equipment, Hueffmann pled guilty in the United States District Court for the Eastern District of Missouri to the felony charge of Transportation of Stolen Goods.

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

• An NYSE hearing officer found that from approximately August 2003 through July 2004, Otte made misrepresentations and omissions to two customers regarding their account; engaged in unauthorized trading in two customers’ accounts; traded in the account of two deceased customers; and reimbursed a customer for her loss in an account.
• Otte also failed to report customer complaints and misled his member firm employer concerning certain customer related matters.  Further, Otte failed to update information reflected on customer new account documents, thereby causing books and records violations.
• Although Otte attended the funerals of two customers who maintained a trust account at his member firm employer, he failed to obtain the death certificates and other relevant documentation required to update the firm's records, and failed to obtain the required documentation to name a successor trustee for the account.  Without a successor trustee being name, Otte continued to trade the account.  He also made a misstatement to his firm about the date of death of one customer when the firm reviewed the trading.
• Otte also failed to advise his firm that the trustee of another account had complained about an unauthorized purchase and that Otte had personally reimbursed the trustee for the loss attributed to the sale of that security.
• In addition, Otte failed to advise his firm of another customer complaint concerning a contingent deferred sales charge associated with the sale of Class B mutual fund shares, and that another customer had also complained of an unauthorized trade.

The NYSE imposed a penalty of a censure and a one-year bar.  Otte consented to the penalty.

• An NYSE hearing officer found that between 2000 and 2002, while employed as a registered representative at a member firm, Rudin effected mutual fund transactions that were excessive and unsuitable in view of the customers’ investment objectives, prior investment experience and financial resources.  Rudin also failed to advise his customers of breakpoint discounts associated with Class A shares and the fees involved in switching out of Class B shares.
• Rudin's customers, a married couple both 31 years of age at the time they opened their accounts, had no prior investment experience.  Their joint account was funded with $1.9 million in proceeds that one of the customers had received as compensation after suffering a permanent eye injury in an automobile accident.  After the injury, the customer was unable to continue working.
• Rudin invested almost the entire $1.9 million settlement proceeds in mutual funds, principally Class B shares.  Fees were approximately 5.50%.  In addition, Rudin purchased small blocks of mutual fund shares thereby apparently circumventing prospectus requirements put in place to protect consumers from making unsuitable large purchases of Class B shares.
• In addition, shortly after Rudin invested the majority of his customers' funds in Class B shares, he began a pattern of selling and purchasing mutual funds for the sole purpose of generating extra commissions.
• Rudin also engaged in trading on margin that was unsuitable for his customers.

The NYSE imposed a penalty of a censure and a twelve-month bar.  Rudin consented to the penalty.

• An NYSE hearing panel found that Young violated NYSE Rule 472(e)(2) by purchasing, in his account and in account of household member, securities in subject companies less than 30 days prior to or five days after the firm’s issuance of research reports concerning the subject companies.
• NYSE Rule 472 regulates member firm communication with the public, including information contained in research reports.  On May 10, 2002, the U.S. Securities and Exchange Commission adopted certain amendments to NYSE Rule 472, which became effective on July 9, 2002.  
• Included in the amendments was a new rule, NYSE Rule 472(e)(2), which, at that time, provided as follows:  "No [research analyst] or member of the [research analyst’s] household may trade in any recommended subject company’s securities or derivatives of such securities for a period of thirty (30) calendar days prior to and five (5) calendar days after the member’s or member organization’s issuance of research reports concerning such security or a change in rating or price target of a subject company’s securities [the 'Blackout Period']".
• In 2002, Young maintained six brokerage accounts for himself and his family at Non-Member Firm E (the “Outside Accounts”).
• The NYSE hearing panel determined that in July and September 2002 Young had purchased securities, for one or more of the Outside Accounts, during the Blackout Periods for those securities. 
• The panel addressed whether Young’s trading could be excused because NYSE Rule 472(e)(2) had gone into effect only days before the trades in question took place and that Young did not fully grasp the trading restrictions imposed by the new rule.
• The panel was not persuaded that Young’s supposed lack of knowledge regarding the rule was a valid defense and "[i]n any event, even if we were persuaded that [Young] did not actually understand the specifics of the new Rule, ignorance of the law is no defense.  The changes embodied in NYSE Rule 472(e) were well publicized at the time, as they were part of a widely-reported legislative and regulatory response to conflicts of interest involving research analysts in the early part of this decade. . .  As a research analyst associated with a member organization, [Young] had an individual responsibility to inform himself of the new Rule and abide by it, and he failed to uphold that responsibility. . ." 
• The panel also rejected Young’s "contention that he should be absolved of responsibility for his violations of NYSE Rule 472(e)(2) because the Firm was aware of the violative trades at the time at which they were made and, yet, did nothing to stop them or to alert [Young] as to their violative nature. . ."
• In explaining the penalty to be imposed, the NYSE hearing panel found that "in every instance in which [Young] made a prohibited trade during the Blackout Period, his trade was consistent with his analysis of the companies in question. . .  [Young's] violations were inadvertent and the product of a lack of diligence, as opposed to bad faith [and] [t]hese violations caused no harm to the investing public and little or no undue benefit for [Young]."   

The NYSE imposed a penalty of a censure.