Monthly Disciplinary Actions - August 2007

For Case Summary See News Release Link Below.

• An NYSE hearing officer found that from September 2003 through June 2004, the Firm failed to aggregate thousands of improper odd-lot orders that were introduced by the Firm to the NYSE through SuperDOT.
• In addition, the Firm submitted inaccurate Daily Program Trade Reports (“DPTRs”) to the NYSE on August 19, 2004, and again from September 12-21, 2006. On October 20, 2005, when the NYSE Rule 80A Collar was in place, the Firm transmitted for execution twelve sell program orders for S&P 500 component stocks that were part of index arbitrage transactions without the required  “sell plus” instruction. 
• Finally, the Firm failed to implement adequate supervisory procedures reasonably designed to achieve compliance with NYSE rules and policies pertaining to electronic order activity, including odd-lot and program trading activity being routed to the NYSE through the Firm’s electronic order entry system and the submission of DPTRs.

The NYSE imposed a penalty of a censure and $175,000 fine.  Electronic Brokerage Systems, LLC consented to penalty.

• An NYSE hearing officer found that during the period from March 2001 through June 2005, Wachovia violated NYSE Rule 345A by permitting 36 registered representatives to engage in activities requiring registration while their registrations were inactive, due to their failure to comply with continuing education requirements in a timely fashion. The Firm also violated NYSE Rule 342 by failing to establish and maintain adequate supervisory procedures and controls with respect to compliance with continuing education training requirements by Firm registered representatives.

• An NYSE hearing officer found that through September 9, 2005, Merrill Lynch failed to have appropriate procedures in place and implemented for identifying, registering and supervising locations from which registered representatives were conducting limited business. As a consequence, there were approximately 285 locations from which registered representatives routinely conducted limited securities business prior to September 9, 2005, that were not properly registered as branch offices. Of these 285 locations, 120 had been in effect longer than two years, with the longest being 17 years.
• Additionally, as of July 2006, there were approximately 49 instances in which there was an office space sharing arrangement between a Firm branch office and a Firm affiliate that had not been approved by the NYSE as required under NYSE Rule 343. Some of these arrangements had been in effect for at least 15 years.

• An NYSE hearing officer found that during the year 2003, H&R Block Financial Advisors failed to obtain approval from the NYSE for independent contractors employed at the Firm, allowed these independent contractors to perform the duties of registered representatives; permitted an individual who did not have the required registration to directly supervise registered representatives; failed to establish an adequate system of follow-up and review to ensure that e-mails were being reviewed according to the Firm’s policies and procedures; and failed to have an adequate system of follow-up and review to ensure that its Branch Office Managers were not reviewing and approving their own correspondence.

• An NYSE hearing officer found that between January 2000 and August 2005, while serving as Branch Office Manager of the Firm’s 330 Madison branch office, Sengupta was responsible for supervising registered representatives John Steigerwald, Anthony Coniglio, and other brokers. During that time Sengupta, through delegates he appointed, and in March and April 2005, Sengupta personally failed to detect that Steigerwald and another broker engaged in unsuitable trading in seven Guardian Accounts that were established pursuant to court orders resulting from medical malpractice lawsuits on behalf of children injured at birth or during childhood. 
• Sengupta, through his delegates, also failed to detect that AL engaged in the unsuitable trading strategy of purchasing and quickly selling securities in three customer accounts, including two elderly and retired customers.
• In addition, Sengupta, through his delegates did not detect that Coniglio failed to write order tickets and timely allocate orders that were components of block trades. 
• Further, Sengupta failed to follow-up and ensure that other branch personnel adequately performed the supervisory duties and responsibilities he delegated to them related to the Broker’s activities.  

Sengupta consented to a penalty of a censure, six-month supervisory suspension and a requirement that he retake and pass supervisory examinations prior to becoming employed as a supervisor.

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), 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 during the period January 2004 through January 2007, Baruch failed to promptly report to her member organization employer that she had been arrested and convicted of a felony. In addition, Baruch made misstatements on two of the Firm’s Annual Compliance Certifications when asked questions regarding her prior criminal history.

The NYSE imposed a penalty of a censure and 24-month bar.  Baruch consented to the penalty.

• An NYSE hearing officer found that Arceneaux failed to comply with or respond to written requests by Enforcement that he submit a written explanation regarding certain matters that occurred prior to termination of his employment with a member organization.

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

• An NYSE hearing officer found that from January 2003 through September 2003, Fasciano and another registered representative at SWS (the “Other RR”), engaged in an illegal market-timing scheme, defrauded approximately 165 mutual funds and their shareholders by utilizing multiple account numbers, multiple affiliated entities, multiple registered representative numbers, and dual branch office numbers to circumvent restrictions that the mutual funds imposed on market timing. Fasciano and the Other RR executed approximately 2,000 market-timing trades, with an aggregate value of approximately $650 million on behalf of Hedge Fund G, a hedge fund client, in at least 56 mutual fund families (approximately 165 total mutual funds). Fasciano received approximately $56,000 in compensation from his illegal market timing activities. Fasciano’s misconduct was a violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and NYSE Rules 476(a)(5) and 476(a)(6).

The NYSE imposed a penalty of a censure, disgorgement of $56,000, fine and pre-judgment interest of $34,929.91, two-year bar, and requirement of cooperation. Fasciano consented to the penalty.

• An NYSE hearing officer found that during the period from approximately August 2001 through December 2005, Del Amo, in violation of NYSE 346(b), engaged in unapproved and undisclosed outside business activities while employed by Wachovia, a member organization; in violation of NYSE 476(a)(6), made misstatements in writing to Wachovia concerning his outside business activities; in violation of NYSE 476(a)(10) made misstatements and omissions of fact to Wachovia and to NYSE Regulation, Inc., on his Forms U-4; and caused Wachovia to violate NYSE Rule 345.12 by submitting multiple Forms U-4 to the NYSE that contained inaccurate information and by failing to keep current and accurately update his Form U-4.

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

• An NYSE hearing officer found that between February 2002 and September 2005, Stevens violated federal securities laws and NYSE Rules in connection with his financial, operational, and sales practice procedures. On certain occasions during this period, Stevens submitted inaccurate and untimely net capital computations and inaccurate Financial Operational Combined Uniform Single (FOCUS) Reports; failed to prepare and file Forms 600TC in a timely manner; failed to report error transactions that resulted in a profit of more than $500; used his error account to clear non-bona fide errors; failed to timely notify the NYSE of employee terminations; failed to return the identification cards of employees who had been terminated; and permitted an unregistered person to operate as a clerk on the Floor of the NYSE.
• In addition, Stevens failed to make and maintain sufficient records related to error transactions, order tickets, and compensation arrangements related to transactions executed on the Floor. Stevens also failed to retain or have procedures to retain electronic communications.

The NYSE imposed a penalty of a censure and a two-month bar. Stevens consented to the penalty.

• An NYSE hearing officer granted a default motion and found that Auld violated NYSE Rule 476(a)(6) by misappropriating funds belonging to her member firm employer; caused violation of Section 17(a) of Securities Exchange Act of 1934 and Rules 17a-3 and 17a-4 thereunder, and NYSE Rule 440 by making or causing to be made false entries in books and records of her member employer.

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

• An NYSE hearing officer granted a default motion and found that Williams violated NYSE Rules 476(a)(11) and 477 by failing to comply with written requests for information concerning matters that occurred prior to termination from member organization.

The NYSE imposed a penalty of a censure and bar until she complies, to become permanent if she does not comply within three months.

• An NYSE Hearing Officer granted a motion for summary judgment and found that Abad violated NYSE Rules 476(a)(11) and 477 by failing to comply with request by Enforcement that he appear and testify.

After a contested hearing on the issue of penalty, the NYSE imposed a penalty of a censure and temporary bar, to become permanent if he does not cooperate within three months, and, if he cooperates within three months, a six-month bar for failure to cooperate in a timely manner.