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part one/ Location: NASD > Notices > 1992 > Disciplinary Actions (November)
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Disciplinary Actions (October) Disciplinary Actions (December)
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Disciplinary Actions (November)
Disciplinary Actions Reported for November
The NASD® is taking disciplinary actions against the following firms and individuals for violations of the NASD Rules of Fair Practice; securities laws, rules, and regulations; and the rules of the Municipal Securities Rulemaking Board. Unless otherwise indicated, suspensions will begin with the opening of business on Monday, November 16, 1992. The information relating to matters contained in this Notice is current as of the fifth of this month. Information received subsequent to the fifth is not reflected in this publication.
FIRMS EXPELLED, INDIVIDUALS SANCTIONED
American Asset Management Corp. (Salt Lake City, Utah) and Karyl Eugene Harkins, Jr. (Registered Principal, Sandy, Utah). The firm was fined $20,000, jointly and severally with Harkins and expelled from membership in the NASD. Harkins was also barred from association with any member of the NASD in any capacity. The sanctions were based on findings that the firm, acting through Harkins, failed to respond to NASD requests for information and to file certain FOCUS Part I reports on a timely basis. In addition, the firm failed to file its FOCUS Parts I and IIA reports for certain periods.
Guardian International Securities Corp. (Miramar, Florida), Jaime Santiago Gomez (Registered Principal, Miramar, Florida), Louis Jerry Sitaras (Registered Principal, Hollywood, Florida), and Kenneth Cutler (Registered Principal, Miami, Florida). The firm was fined $100,000 and expelled from membership in the NASD, and Gomez was fined $50,000 and barred from association with any member of the NASD in any capacity. Sitaras was fined $25,000 and barred from association with any member of the NASD in any capacity, and Cutler was fined $25,000. In addition, the firm and Gomez must pay $20,674, jointly and severally in restitution to public customers, and, the firm, Gomez and Sitaras must pay $529,322, jointly and severally in restitution to public customers.
The sanctions were based on findings that the firm, acting through Gomez, Sitaras and Cutler, effected as principal for its own account, over-the-counter sales of a common stock to public customers at prices that were unfair. The markups on these transactions ranged up to 278 percent over the prevailing market price, in contravention of the NASD's Mark-Up Policy. The firm, acting through Gomez, Sitaras and Cutler, also participated in an unregistered distribution of this same stock to public customers; in contravention of Securities and Exchange Commission (SEC) Rule 10b-6, bid for and/or purchased shares for an account in which it had a beneficial interest; and, in addition, the firm, acting through Gomez and Sitaras, failed to disclose, in writing, to its customers purchasing the stock that it was participating, and had a financial interest, in the distribution of the stock. The aforementioned activity constitutes a manipulative, deceptive or fraudulent device or contrivance by the firm, Gomez and Sitaras, in connection with its customers' purchases of the stock.
The firm, acting through Gomez, also effected principal sales of another common stock to public customers at unfair prices with markups ranging up to 100 percent over the prevailing market price. The firm, acting through Gomez, failed to comply with its restrictive agreement with the NASD and effected transactions in non-exempt securities while failing to maintain its required minimum net capital. Furthermore, the firm, acting through Gomez, failed to accurately prepare its books and records, filed materially inaccurate FOCUS Parts I and IIA reports, and failed to give telegraphic notice with regard to the net capital and recordkeeping deficiencies. The NASD also found that the firm, acting through Gomez, failed to establish, maintain and/or enforce a supervisory system and written procedures and failed to promptly notify the NASD that its sole registered options principal was terminated. The firm, acting through Gomez, published and sent to its customers a newsletter, which failed to meet applicable standards governing a member's communications with the public. Moreover, the firm, acting through Gomez, failed to respond to NASD requests for information.
Morgan, Callahan & Co., Inc. (Santa Monica, California) and Richard John Callahan, Jr. (Registered Principal, Venice, California). The firm was expelled from membership in the NASD and fined $70,000, jointly and severally with Callahan. In addition, Callahan was fined an additional $59,400 and barred from association with any member of the NASD in any capacity.
The sanctions were based on findings that Callahan received from a public customer $9,400 for the purchase of securities. He failed to purchase such securities and, instead, deposited the funds into a bank account under his control and converted the monies. In addition, the firm and Callahan failed to respond to NASD requests for information.
Furthermore, the firm, acting through Callahan, participated in a best-efforts offering and recommended to public customers the purchase of its stock without having reasonable grounds for believing that such recommendations were suitable for the customers. Moreover, Callahan received remuneration for such purchases when he knew and understood that certain terms of the offering were unsuitable for the customers.
FIRMS SUSPENDED, INDIVIDUALS SANCTIONED
Chapman Securities, Inc. (Wichita, Kansas), Michael David Relihan (Registered Principal, Wichita, Kansas), and Jeffrey Dean Lee (Registered Principal, Wichita, Kansas) submitted a Letter of Acceptance, Waiver and Consent pursuant to which they were fined $25,000, jointly and severally. In addition, the firm was suspended from membership in the NASD for five days, and Relihan and Lee must requalify by examination as general securities principals or cease association with any member firm in that capacity. Without admitting or denying the allegations, the respondents consented to the described sanctions and to the entry of findings that the firm, acting through Relihan and Lee, conducted a securities business while failing to maintain its required minimum net capital.
Walbridge Securities, Inc. n/k/a Aztec Securities, Inc. (Fort Worth, Texas) and Ridge Bradley McMichael (Registered Principal, Forth Worth, Texas) were fined $1,000, jointly and severally. In addition, the firm was suspended from membership in the NASD for 90 days and McMichael was suspended from association with any member of the NASD in any capacity for 90 days. McMichael must also requalify as a direct participation programs principal or in any other principal capacity. Should McMichael fail to requalify during his suspension period, the firm shall continue to be suspended from membership until McMichael becomes requalified by appropriate principal examination or until the firm has employed another person, other than McMichael, who shall be qualified as a principal.
The sanctions were based on findings that the firm, acting through McMichael, permitted a statutorily disqualified person to act in the capacity of a registered representative of the firm without being qualified or registered. In addition, McMichael failed to supervise the activities of the same individual to prevent him from soliciting public customers and from acting as a registered representative.
FIRMS FINED, INDIVIDUALS SANCTIONED
Heiner & Stock, Inc. (Minneapolis, Minnesota), Randall R. Heiner (Registered Principal, Medina, Minnesota), and Thomas E. Bullock (Registered Representative, Coon Rapids, Minnesota). The firm and Heiner were fined $25,000, jointly and severally, and Heiner was barred from association with any member of the NASD in any principal capacity. Bullock was fined $4,000 and suspended from association with any member of the NASD in any capacity for five business days. The National Business Conduct Committee (NBCC) imposed the sanctions on review of a decision by the District Business Conduct Committee (DBCC) for District 4.
The sanctions were based on findings that the firm, acting through Heiner, effected principal sales of common stock to public customers at prices that were unfair and unreasonable. The markups on these transactions ranged from 5 to 150 percent above the prevailing market price. Bullock also participated in the aforementioned sale to public customers at prices that he should have known were unfair and unreasonable, but failed to disclose this fact to the customers.
San Marino Securities, Inc. (Salt Lake City, Utah), Garth Orson Potts (Registered Principal, Salt Lake City, Utah), and Mark Edwards Eames (Registered Principal, Salt Lake City, Utah). The firm and Potts were fined $20,000, jointly and severally and Potts was barred from association with any member of the NASD in any capacity. In addition, the firm and Eames were fined $10,000, jointly and severally and Eames was suspended from association with any member of the NASD in any capacity for five business days. Furthermore, the firm was fined $5,000, jointly and severally with another registered representative.
The sanctions were based on findings that the firm, acting through Potts, failed to establish and maintain adequate written supervisory procedures and an adequate supervisory system. Potts also failed to respond to an NASD request for information and approved two letters sent to clients that contained false and misleading statements. Furthermore, Eames, acting on behalf of the firm, created and sent to clients a brochure that was misleading.
In addition, the firm, acting through a registered representative, failed to maintain its required minimum net capital.
FIRMS AND INDIVIDUALS FINED
Damon Andrews & Co., Ltd. (New York, New York) and Larry K. Nick (Registered Principal, New York, New York) submitted a Letter of Acceptance, Waiver and Consent pursuant to which they were fined $10,000, jointly and severally. In addition, the firm has to employ a qualified, limited financial and operations principal within 60 days of the acceptance of the Letter of Acceptance, Waiver and Consent. Without admitting or denying the allegations, the respondents consented to the described sanctions and to the entry of findings that the firm, acting through Nick, conducted a securities business while failing to maintain its required minimum net capital.
The findings also stated that the firm, acting through Nick, failed to keep a record of when customer funds were forwarded to a bank trust account. In addition, the NASD found that the firm, acting through Nick, failed to satisfy the contingency on a private placement prior to withdrawing customer funds from its trust account for the issuer. The firm, acting through Nick, also failed to establish written supervisory procedures covering its business activities.
Protective Group Securities Corporation (Eden Prairie, Minnesota), Richard James Cochrane (Registered Principal, Edina, Minnesota), and Martin Melvin Fiterman (Registered Principal, Minnetonka, Minnesota) were fined $17,500, jointly and severally. In addition, Fiterman was fined $5,000. The NBCC imposed the sanctions on review of a decision by the DBCC for District 4. The sanctions were based on findings that the firm, acting through Cochrane and Fiterman, participated in the sales of unregistered securities without an applicable exemption from the registration requirements of the Securities Act of 1933. Furthermore, the firm, acting through Cochrane and Fiterman, sold the aforementioned securities to customers at prices that were unfair and unreasonable.
In addition, Fiterman executed transactions for the accounts of public customers on a discretionary basis without obtaining written authorization from the customers and written acceptance of the accounts as discretionary by his member firm. Also, in contravention of SEC Rule 10b-10, the firm, acting through another individual, failed to disclose on customer confirmations the amount of remuneration it received on riskless principal transactions.
The firm, Cochrane and Fiterman have appealed this action to the SEC, and the sanctions are not in effect pending consideration of the appeal.
Westonka Investments, Inc. (Minnetonka, Minnesota) and Timothy Joel Friederichs (Registered Principal, Minnetrista, Minnesota) submitted an Offer of Settlement pursuant to which they were fined $51,260, jointly and severally. Without admitting or denying the allegations, the respondents consented to the described sanction and to the entry of findings that the firm, acting through Friederichs, effected corporate securities transactions as principal at prices that were unfair and unreasonable, in contravention of the Interpretation of the Board of Governors with respect to the NASD's Mark-Up Policy.
INDIVIDUALS BARRED OR SUSPENDED
George Montgomery Albrecht, Jr. (Registered Representative, Laurence Harbor, New Jersey) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Albrecht failed to respond to NASD requests for information concerning his termination from a member firm.
Joseph L. Amos (Registered Principal, Knoxville, Tennessee) was fined $25,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Amos failed to respond to numerous NASD requests for information in a timely manner concerning three customer complaints and made unsuitable recommendations to two public customers.
Marlon D. Andersen (Registered Representative, North Ogden, Utah) was fined $81,090 and barred from association with any member of the NASD in any capacity. However, the fine may be reduced by the amount of restitution he makes to the member or to any affected customer not reimbursed by the firm.
The sanctions were based on findings that Andersen received funds totaling $15,210 from unauthorized loans that he caused to be taken out against insurance policies belonging to public customers and failed to use these funds for the benefit of the customers. Moreover, Anderson caused a customer's insurance policy to be surrendered without authorization and used the $13,380 proceeds check for his own benefit. Furthermore, Andersen received from a public customer a $2,500 check intended for investment in the customer's individual retirement account but never used the funds as instructed by the customer.
Andersen also altered account records and loan applications for these customers to reflect his own current or former addresses.
David L. Armstrong (Registered Representative, Norman, Oklahoma) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Armstrong failed to amend his Uniform Application for Securities Industry Registration or Transfer (Form U-4) to reflect the filing of a criminal charge against him. In addition, Armstrong failed to respond to NASD requests for information.
James L. Begbie (Registered Representative, Denver, Colorado) was fined $48,465, suspended from association with any member of the NASD in any capacity for 30 days, and required to requalify by examination in any capacity in which he will function. The sanctions were based on findings that Begbie exercised discretion in a customer account without obtaining prior written discretionary trading authority. In addition, he made unsuitable recommendations to three public customers.
Leonard P. Bogdan, Jr. (Registered Representative, Nashville, Tennessee) submitted an Offer of Settlement pursuant to which he was barred from association with any member of the NASD in any capacity. Without admitting or denying the allegations, Bogdan consented to the described sanction and to the entry of findings that he failed to provide written notice to his member firm concerning his affiliations with, and the compensation he received from, other firms. The NASD found that Bogdan solicited and executed orders in the accounts of public customers prior to the effective date of his registration with the NASD. The findings also stated that Bogdan engaged in private securities transactions without providing prior written notice to his member firm and provided investors with an offering memorandum that contained material misrepresentations.
According to the findings, Bogdan exercised discretion in the accounts of public customers without their prior written authorization and without his firm's prior written acceptance of the accounts as discretionary. In addition, the NASD determined that Bogdan recommended and engaged in transactions in the accounts of public customers without having reasonable grounds for believing that such recommendations and resultant transactions were suitable for the customers based on their financial situations, investment objectives, and needs.
Richard A. Bridge, Jr. (Registered Representative, Mobile, Alabama) was fined $40,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Bridge remitted a check to a public customer as reimbursement for trading losses sustained in the customer's account. Bridge received $20,000 from another public customer to buy mutual fund shares that he failed to purchase. Instead, he converted the funds to his own use without the customer's knowledge or consent. Furthermore, Bridge mailed fictitious account statements reflecting an investment that had not been made for this customer.
Bridge also used misleading business cards and stationery, and purchased a telephone directory advertisement that failed to indicate that the sale of various financial instruments would be made through a member firm. In addition, Bridge failed to respond to NASD requests for information.
Garrison Bye (Registered Representative, Tampa, Florida) was fined $10,000, barred from association with any member of the NASD in any capacity, and required to requalify by examination in any capacity. In addition, Bye is required to pay $20,955 in restitution to a public customer. The sanctions were based on findings that Bye recommended and caused to be purchased for the account of a public customer shares of common stocks without reasonable grounds for believing that the transactions were suitable for the customer based on his financial objectives and needs.
John D. Caraway (Registered Representative, Lisle, Illinois) was fined $8,500 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Caraway signed a customer's name to a disbursement request form resulting in a disbursement of $48.30 from the customer's insurance policy. Caraway applied the funds to purchase a second life insurance policy for the same customer and signed his name to the application. The above activity was conducted without the customer's knowledge or consent. In addition, Caraway failed to respond to NASD requests for information.
Stephen Earl Cayou (Registered Principal, Lakewood, Colorado) and Jeffrey Roy Skinner (Registered Representative, Golden, Colorado) submitted an Offer of Settlement pursuant to which they were each fined $7,500 and suspended from association with any member of the NASD in any capacity for 15 days. Without admitting or denying the allegations, Cayou and Skinner consented to the described sanctions and to the entry of findings that they failed to respond to NASD requests for information and operated an unregistered broker/dealer. The NASD also determined that Cayou and Skinner failed to inform their member firm of their participation in a private securities transaction.
Myra Audrey Uy Cheng (Registered Representative, Edgewater, New Jersey) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Cheng failed to respond to NASD requests for information concerning a customer complaint.
Thomas R. Collins (Registered Representative, Norman, Oklahoma) was fined $30,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Collins received from six public customers $1,816 intended for automobile insurance premium payments. Collins failed to submit the monies to his member firm. Instead, he converted the funds to his own use without the customer's knowledge or consent. In addition, Collins failed to respond to NASD requests for information.
James Linn Cooper (Registered Representative, Groves, Texas) was fined $60,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Cooper recommended the purchase and sale of securities to a public customer without having reasonable grounds for believing that such recommendations were suitable for the customer. In addition, Cooper failed to respond to an NASD request for information.
Craig A. Corrinne (Registered Representative, Boynton Beach, Florida) was fined $25,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Corrinne submitted false and fictitious applications for life insurance to his member firm.
Michael S. Duffy (Registered Representative, Baltimore, Maryland) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Duffy failed to respond to NASD requests for information concerning certain transactions allegedly effected by him for the accounts of public customers.
Robert Wayne Faglier (Registered Representative, Thomson, Georgia) was fined $20,000, barred from association with any member of the NASD in any capacity, and must pay $6,912.24 in restitution to his member firm. The sanctions were based on findings that Faglier requested loans totaling $6,912.24 against the cash value of life insurance policies of public customers and converted the funds to his own use and benefit without the customer's knowledge or authorization.
David J. Falatko (Registered Representative, West Pittsburgh, Pennsylvania) submitted an Offer of Settlement pursuant to which he was fined $20,000 and barred from association with any member of the NASD in any capacity. Without admitting or denying the allegations, Falatko consented to the described sanctions and to the entry of findings that he received from public customers insurance premium payments totaling $371.90 which he failed to remit to his member firm. The NASD also found that Falatko failed to respond to NASD requests for information.
Warren R. B. Feitig (Registered Representative, Richmond, Virginia) was fined $50,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Feitig effected unauthorized transactions in the accounts of public customers and failed to respond to NASD requests for information.
Donald Roger Fisher (Registered Representative, Lake Zurich, Illinois) was fined $3,000 and suspended from association with any member of the NASD in any capacity until he has fully paid a $60,116 NASD arbitration award. The sanctions were based on findings that Fisher failed to pay the aforementioned award.
Fisher's suspension commenced September 9, 1992, and concluded October 20, 1992, upon compliance.
Gene Clark Foland (Registered Representative, Ft. Lauderdale, Florida) was fined $5,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Foland failed to pay a $2,063 arbitration award.
William E. Gallaher (Registered Principal, Knoxville, Tennessee) submitted an Offer of Settlement pursuant to which he was fined $5,000 and suspended from association with any member of the NASD in any capacity for one week. Without admitting or denying the allegations, Gallaher consented to the described sanctions and to the entry of findings that he failed to exercise proper supervision over the handling of a new account at his member firm.
Terri Lynn Gent (Registered Representative, Overland Park, Kansas) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Gent failed to respond to an NASD request for information concerning a Letter of Caution.
Stephen Robert Goodwin (Registered Principal, New York, New York) was fined $15,000 and suspended from association with any member of the NASD in any principal capacity for two years. The sanctions were based on findings that Goodwin, acting on behalf of a former member firm, failed to comply with the firm's restriction agreement by executing and clearing equity transactions for public customers without obtaining the NASD's approval.
Goodwin, acting on behalf of the firm, conducted a securities business while failing to maintain the required minimum net capital and without having a general securities principal or representative registered with the NASD. In addition, the firm, acting through Goodwin, failed to maintain a fidelity bond and failed to provide the NASD with requested information.
Wayne Frederick Gorsek (Registered Representative, Springfield, Illinois) was fined $2,500 and suspended from association with any member of the NASD in any capacity for five business days. The sanctions were based on findings that Gorsek submitted a Form U-4 for registration with a member firm that was inaccurate.
Joseph E. Griffin, Jr. (Registered Representative, Tupelo, Mississippi) submitted a Letter of Acceptance, Waiver and Consent pursuant to which he was fined $1,000 and suspended from association with any member of the NASD in any capacity for six months. Without admitting or denying the allegations, Griffin consented to the described sanctions and to the entry of findings that he forged the signature of a registered representative on a $222.87 commission check, deposited the check into his personal business account, and converted the funds to his own use and benefit without the representative's knowledge or consent.
Cheryl B. Hagler (Registered Representative, Huntsville, Alabama) submitted a Letter of Acceptance, Waiver and Consent pursuant to which she was fined $100,000 and barred from association with any member of the NASD in any capacity. Without admitting or denying the allegations, Hagler consented to the described sanctions and to the entry of findings that she withdrew $50,900 from the account of public customers and converted the funds to her own use and benefit.
Edward Patrick Harris (Registered Representative, Holmdel, New Jersey) was fined $30,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Harris made purchase transactions in the account of a public customer without his knowledge or consent. In addition, Harris failed to respond to NASD requests for information.
Charles B. Hasty (Registered Principal, Stone Mountain, Georgia) was fined $26,350, barred from association with any member of the NASD in any capacity, and ordered to pay $ 1,270 in restitution to public customers. The sanctions were based on findings that Hasty obtained and negotiated commission checks made payable to other employees totaling $510 without their knowledge or authorization. Hasty also received from a public customer $760 intended for investment in a money market fund and converted the funds to his own use and benefit. In addition, Hasty failed to respond to an NASD request for information.
Robin Allan Heiney (Registered Representative, Aurora, Colorado) was fined $10,000 and barred from association with any member of the NASD in any capacity. The NBCC imposed the sanctions following an appeal of a decision by the DBCC for District 3. The sanctions were based on findings that Heiney failed to respond to NASD requests for information concerning his termination from a member firm.
William A. Henry, Jr. (Registered Representative, Panama, New York) was fined $70,000 and barred from association with any member of the NASD in any capacity. The fine may be reduced by submission of proof of payment of restitution. The sanctions were based on findings that Henry misappropriated and converted to his own use and benefit customer funds totaling $14,794.70. In addition, Henry failed to respond to NASD requests for information.
Richard J. Hettler (Registered Representative, Fort Collins, Colorado) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Hettler failed to respond to NASD requests for information regarding two customer complaints.
Traci A. Holland (Registered Representative, Huntingdon, Pennsylvania) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Holland failed to respond to NASD requests for information concerning the alleged mishandling of insurance applications and premiums.
Erik Dewitt Jackson (Registered Representative, Moreno Valley, California) was fined $41,393 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Jackson accepted from a public customer two checks totaling $1,393 intended for the purchase of insurance. Jackson failed to purchase any insurance. Instead, he endorsed the checks, deposited the funds into a bank account under his control, and converted the monies to his own use. In addition, Jackson failed to respond to NASD requests for information.
Michael C. James (Registered Representative, Beverly Hills, Maryland) was fined $50,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that James prepared, processed, and submitted to his member firm at least 25 administrative/financial change forms for public customers. He forged the customers' signatures on the forms thereby increasing the amount of each customer's investment in a fixed annuity. As a result of this activity, James received at least $2,816.61 in commissions.
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Disciplinary Actions (October) Disciplinary Actions (December)
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Disciplinary Actions (November)
Disciplinary Actions Reported for November
The NASD® is taking disciplinary actions against the following firms and individuals for violations of the NASD Rules of Fair Practice; securities laws, rules, and regulations; and the rules of the Municipal Securities Rulemaking Board. Unless otherwise indicated, suspensions will begin with the opening of business on Monday, November 16, 1992. The information relating to matters contained in this Notice is current as of the fifth of this month. Information received subsequent to the fifth is not reflected in this publication.
FIRMS EXPELLED, INDIVIDUALS SANCTIONED
American Asset Management Corp. (Salt Lake City, Utah) and Karyl Eugene Harkins, Jr. (Registered Principal, Sandy, Utah). The firm was fined $20,000, jointly and severally with Harkins and expelled from membership in the NASD. Harkins was also barred from association with any member of the NASD in any capacity. The sanctions were based on findings that the firm, acting through Harkins, failed to respond to NASD requests for information and to file certain FOCUS Part I reports on a timely basis. In addition, the firm failed to file its FOCUS Parts I and IIA reports for certain periods.
Guardian International Securities Corp. (Miramar, Florida), Jaime Santiago Gomez (Registered Principal, Miramar, Florida), Louis Jerry Sitaras (Registered Principal, Hollywood, Florida), and Kenneth Cutler (Registered Principal, Miami, Florida). The firm was fined $100,000 and expelled from membership in the NASD, and Gomez was fined $50,000 and barred from association with any member of the NASD in any capacity. Sitaras was fined $25,000 and barred from association with any member of the NASD in any capacity, and Cutler was fined $25,000. In addition, the firm and Gomez must pay $20,674, jointly and severally in restitution to public customers, and, the firm, Gomez and Sitaras must pay $529,322, jointly and severally in restitution to public customers.
The sanctions were based on findings that the firm, acting through Gomez, Sitaras and Cutler, effected as principal for its own account, over-the-counter sales of a common stock to public customers at prices that were unfair. The markups on these transactions ranged up to 278 percent over the prevailing market price, in contravention of the NASD's Mark-Up Policy. The firm, acting through Gomez, Sitaras and Cutler, also participated in an unregistered distribution of this same stock to public customers; in contravention of Securities and Exchange Commission (SEC) Rule 10b-6, bid for and/or purchased shares for an account in which it had a beneficial interest; and, in addition, the firm, acting through Gomez and Sitaras, failed to disclose, in writing, to its customers purchasing the stock that it was participating, and had a financial interest, in the distribution of the stock. The aforementioned activity constitutes a manipulative, deceptive or fraudulent device or contrivance by the firm, Gomez and Sitaras, in connection with its customers' purchases of the stock.
The firm, acting through Gomez, also effected principal sales of another common stock to public customers at unfair prices with markups ranging up to 100 percent over the prevailing market price. The firm, acting through Gomez, failed to comply with its restrictive agreement with the NASD and effected transactions in non-exempt securities while failing to maintain its required minimum net capital. Furthermore, the firm, acting through Gomez, failed to accurately prepare its books and records, filed materially inaccurate FOCUS Parts I and IIA reports, and failed to give telegraphic notice with regard to the net capital and recordkeeping deficiencies. The NASD also found that the firm, acting through Gomez, failed to establish, maintain and/or enforce a supervisory system and written procedures and failed to promptly notify the NASD that its sole registered options principal was terminated. The firm, acting through Gomez, published and sent to its customers a newsletter, which failed to meet applicable standards governing a member's communications with the public. Moreover, the firm, acting through Gomez, failed to respond to NASD requests for information.
Morgan, Callahan & Co., Inc. (Santa Monica, California) and Richard John Callahan, Jr. (Registered Principal, Venice, California). The firm was expelled from membership in the NASD and fined $70,000, jointly and severally with Callahan. In addition, Callahan was fined an additional $59,400 and barred from association with any member of the NASD in any capacity.
The sanctions were based on findings that Callahan received from a public customer $9,400 for the purchase of securities. He failed to purchase such securities and, instead, deposited the funds into a bank account under his control and converted the monies. In addition, the firm and Callahan failed to respond to NASD requests for information.
Furthermore, the firm, acting through Callahan, participated in a best-efforts offering and recommended to public customers the purchase of its stock without having reasonable grounds for believing that such recommendations were suitable for the customers. Moreover, Callahan received remuneration for such purchases when he knew and understood that certain terms of the offering were unsuitable for the customers.
FIRMS SUSPENDED, INDIVIDUALS SANCTIONED
Chapman Securities, Inc. (Wichita, Kansas), Michael David Relihan (Registered Principal, Wichita, Kansas), and Jeffrey Dean Lee (Registered Principal, Wichita, Kansas) submitted a Letter of Acceptance, Waiver and Consent pursuant to which they were fined $25,000, jointly and severally. In addition, the firm was suspended from membership in the NASD for five days, and Relihan and Lee must requalify by examination as general securities principals or cease association with any member firm in that capacity. Without admitting or denying the allegations, the respondents consented to the described sanctions and to the entry of findings that the firm, acting through Relihan and Lee, conducted a securities business while failing to maintain its required minimum net capital.
Walbridge Securities, Inc. n/k/a Aztec Securities, Inc. (Fort Worth, Texas) and Ridge Bradley McMichael (Registered Principal, Forth Worth, Texas) were fined $1,000, jointly and severally. In addition, the firm was suspended from membership in the NASD for 90 days and McMichael was suspended from association with any member of the NASD in any capacity for 90 days. McMichael must also requalify as a direct participation programs principal or in any other principal capacity. Should McMichael fail to requalify during his suspension period, the firm shall continue to be suspended from membership until McMichael becomes requalified by appropriate principal examination or until the firm has employed another person, other than McMichael, who shall be qualified as a principal.
The sanctions were based on findings that the firm, acting through McMichael, permitted a statutorily disqualified person to act in the capacity of a registered representative of the firm without being qualified or registered. In addition, McMichael failed to supervise the activities of the same individual to prevent him from soliciting public customers and from acting as a registered representative.
FIRMS FINED, INDIVIDUALS SANCTIONED
Heiner & Stock, Inc. (Minneapolis, Minnesota), Randall R. Heiner (Registered Principal, Medina, Minnesota), and Thomas E. Bullock (Registered Representative, Coon Rapids, Minnesota). The firm and Heiner were fined $25,000, jointly and severally, and Heiner was barred from association with any member of the NASD in any principal capacity. Bullock was fined $4,000 and suspended from association with any member of the NASD in any capacity for five business days. The National Business Conduct Committee (NBCC) imposed the sanctions on review of a decision by the District Business Conduct Committee (DBCC) for District 4.
The sanctions were based on findings that the firm, acting through Heiner, effected principal sales of common stock to public customers at prices that were unfair and unreasonable. The markups on these transactions ranged from 5 to 150 percent above the prevailing market price. Bullock also participated in the aforementioned sale to public customers at prices that he should have known were unfair and unreasonable, but failed to disclose this fact to the customers.
San Marino Securities, Inc. (Salt Lake City, Utah), Garth Orson Potts (Registered Principal, Salt Lake City, Utah), and Mark Edwards Eames (Registered Principal, Salt Lake City, Utah). The firm and Potts were fined $20,000, jointly and severally and Potts was barred from association with any member of the NASD in any capacity. In addition, the firm and Eames were fined $10,000, jointly and severally and Eames was suspended from association with any member of the NASD in any capacity for five business days. Furthermore, the firm was fined $5,000, jointly and severally with another registered representative.
The sanctions were based on findings that the firm, acting through Potts, failed to establish and maintain adequate written supervisory procedures and an adequate supervisory system. Potts also failed to respond to an NASD request for information and approved two letters sent to clients that contained false and misleading statements. Furthermore, Eames, acting on behalf of the firm, created and sent to clients a brochure that was misleading.
In addition, the firm, acting through a registered representative, failed to maintain its required minimum net capital.
FIRMS AND INDIVIDUALS FINED
Damon Andrews & Co., Ltd. (New York, New York) and Larry K. Nick (Registered Principal, New York, New York) submitted a Letter of Acceptance, Waiver and Consent pursuant to which they were fined $10,000, jointly and severally. In addition, the firm has to employ a qualified, limited financial and operations principal within 60 days of the acceptance of the Letter of Acceptance, Waiver and Consent. Without admitting or denying the allegations, the respondents consented to the described sanctions and to the entry of findings that the firm, acting through Nick, conducted a securities business while failing to maintain its required minimum net capital.
The findings also stated that the firm, acting through Nick, failed to keep a record of when customer funds were forwarded to a bank trust account. In addition, the NASD found that the firm, acting through Nick, failed to satisfy the contingency on a private placement prior to withdrawing customer funds from its trust account for the issuer. The firm, acting through Nick, also failed to establish written supervisory procedures covering its business activities.
Protective Group Securities Corporation (Eden Prairie, Minnesota), Richard James Cochrane (Registered Principal, Edina, Minnesota), and Martin Melvin Fiterman (Registered Principal, Minnetonka, Minnesota) were fined $17,500, jointly and severally. In addition, Fiterman was fined $5,000. The NBCC imposed the sanctions on review of a decision by the DBCC for District 4. The sanctions were based on findings that the firm, acting through Cochrane and Fiterman, participated in the sales of unregistered securities without an applicable exemption from the registration requirements of the Securities Act of 1933. Furthermore, the firm, acting through Cochrane and Fiterman, sold the aforementioned securities to customers at prices that were unfair and unreasonable.
In addition, Fiterman executed transactions for the accounts of public customers on a discretionary basis without obtaining written authorization from the customers and written acceptance of the accounts as discretionary by his member firm. Also, in contravention of SEC Rule 10b-10, the firm, acting through another individual, failed to disclose on customer confirmations the amount of remuneration it received on riskless principal transactions.
The firm, Cochrane and Fiterman have appealed this action to the SEC, and the sanctions are not in effect pending consideration of the appeal.
Westonka Investments, Inc. (Minnetonka, Minnesota) and Timothy Joel Friederichs (Registered Principal, Minnetrista, Minnesota) submitted an Offer of Settlement pursuant to which they were fined $51,260, jointly and severally. Without admitting or denying the allegations, the respondents consented to the described sanction and to the entry of findings that the firm, acting through Friederichs, effected corporate securities transactions as principal at prices that were unfair and unreasonable, in contravention of the Interpretation of the Board of Governors with respect to the NASD's Mark-Up Policy.
INDIVIDUALS BARRED OR SUSPENDED
George Montgomery Albrecht, Jr. (Registered Representative, Laurence Harbor, New Jersey) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Albrecht failed to respond to NASD requests for information concerning his termination from a member firm.
Joseph L. Amos (Registered Principal, Knoxville, Tennessee) was fined $25,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Amos failed to respond to numerous NASD requests for information in a timely manner concerning three customer complaints and made unsuitable recommendations to two public customers.
Marlon D. Andersen (Registered Representative, North Ogden, Utah) was fined $81,090 and barred from association with any member of the NASD in any capacity. However, the fine may be reduced by the amount of restitution he makes to the member or to any affected customer not reimbursed by the firm.
The sanctions were based on findings that Andersen received funds totaling $15,210 from unauthorized loans that he caused to be taken out against insurance policies belonging to public customers and failed to use these funds for the benefit of the customers. Moreover, Anderson caused a customer's insurance policy to be surrendered without authorization and used the $13,380 proceeds check for his own benefit. Furthermore, Andersen received from a public customer a $2,500 check intended for investment in the customer's individual retirement account but never used the funds as instructed by the customer.
Andersen also altered account records and loan applications for these customers to reflect his own current or former addresses.
David L. Armstrong (Registered Representative, Norman, Oklahoma) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Armstrong failed to amend his Uniform Application for Securities Industry Registration or Transfer (Form U-4) to reflect the filing of a criminal charge against him. In addition, Armstrong failed to respond to NASD requests for information.
James L. Begbie (Registered Representative, Denver, Colorado) was fined $48,465, suspended from association with any member of the NASD in any capacity for 30 days, and required to requalify by examination in any capacity in which he will function. The sanctions were based on findings that Begbie exercised discretion in a customer account without obtaining prior written discretionary trading authority. In addition, he made unsuitable recommendations to three public customers.
Leonard P. Bogdan, Jr. (Registered Representative, Nashville, Tennessee) submitted an Offer of Settlement pursuant to which he was barred from association with any member of the NASD in any capacity. Without admitting or denying the allegations, Bogdan consented to the described sanction and to the entry of findings that he failed to provide written notice to his member firm concerning his affiliations with, and the compensation he received from, other firms. The NASD found that Bogdan solicited and executed orders in the accounts of public customers prior to the effective date of his registration with the NASD. The findings also stated that Bogdan engaged in private securities transactions without providing prior written notice to his member firm and provided investors with an offering memorandum that contained material misrepresentations.
According to the findings, Bogdan exercised discretion in the accounts of public customers without their prior written authorization and without his firm's prior written acceptance of the accounts as discretionary. In addition, the NASD determined that Bogdan recommended and engaged in transactions in the accounts of public customers without having reasonable grounds for believing that such recommendations and resultant transactions were suitable for the customers based on their financial situations, investment objectives, and needs.
Richard A. Bridge, Jr. (Registered Representative, Mobile, Alabama) was fined $40,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Bridge remitted a check to a public customer as reimbursement for trading losses sustained in the customer's account. Bridge received $20,000 from another public customer to buy mutual fund shares that he failed to purchase. Instead, he converted the funds to his own use without the customer's knowledge or consent. Furthermore, Bridge mailed fictitious account statements reflecting an investment that had not been made for this customer.
Bridge also used misleading business cards and stationery, and purchased a telephone directory advertisement that failed to indicate that the sale of various financial instruments would be made through a member firm. In addition, Bridge failed to respond to NASD requests for information.
Garrison Bye (Registered Representative, Tampa, Florida) was fined $10,000, barred from association with any member of the NASD in any capacity, and required to requalify by examination in any capacity. In addition, Bye is required to pay $20,955 in restitution to a public customer. The sanctions were based on findings that Bye recommended and caused to be purchased for the account of a public customer shares of common stocks without reasonable grounds for believing that the transactions were suitable for the customer based on his financial objectives and needs.
John D. Caraway (Registered Representative, Lisle, Illinois) was fined $8,500 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Caraway signed a customer's name to a disbursement request form resulting in a disbursement of $48.30 from the customer's insurance policy. Caraway applied the funds to purchase a second life insurance policy for the same customer and signed his name to the application. The above activity was conducted without the customer's knowledge or consent. In addition, Caraway failed to respond to NASD requests for information.
Stephen Earl Cayou (Registered Principal, Lakewood, Colorado) and Jeffrey Roy Skinner (Registered Representative, Golden, Colorado) submitted an Offer of Settlement pursuant to which they were each fined $7,500 and suspended from association with any member of the NASD in any capacity for 15 days. Without admitting or denying the allegations, Cayou and Skinner consented to the described sanctions and to the entry of findings that they failed to respond to NASD requests for information and operated an unregistered broker/dealer. The NASD also determined that Cayou and Skinner failed to inform their member firm of their participation in a private securities transaction.
Myra Audrey Uy Cheng (Registered Representative, Edgewater, New Jersey) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Cheng failed to respond to NASD requests for information concerning a customer complaint.
Thomas R. Collins (Registered Representative, Norman, Oklahoma) was fined $30,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Collins received from six public customers $1,816 intended for automobile insurance premium payments. Collins failed to submit the monies to his member firm. Instead, he converted the funds to his own use without the customer's knowledge or consent. In addition, Collins failed to respond to NASD requests for information.
James Linn Cooper (Registered Representative, Groves, Texas) was fined $60,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Cooper recommended the purchase and sale of securities to a public customer without having reasonable grounds for believing that such recommendations were suitable for the customer. In addition, Cooper failed to respond to an NASD request for information.
Craig A. Corrinne (Registered Representative, Boynton Beach, Florida) was fined $25,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Corrinne submitted false and fictitious applications for life insurance to his member firm.
Michael S. Duffy (Registered Representative, Baltimore, Maryland) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Duffy failed to respond to NASD requests for information concerning certain transactions allegedly effected by him for the accounts of public customers.
Robert Wayne Faglier (Registered Representative, Thomson, Georgia) was fined $20,000, barred from association with any member of the NASD in any capacity, and must pay $6,912.24 in restitution to his member firm. The sanctions were based on findings that Faglier requested loans totaling $6,912.24 against the cash value of life insurance policies of public customers and converted the funds to his own use and benefit without the customer's knowledge or authorization.
David J. Falatko (Registered Representative, West Pittsburgh, Pennsylvania) submitted an Offer of Settlement pursuant to which he was fined $20,000 and barred from association with any member of the NASD in any capacity. Without admitting or denying the allegations, Falatko consented to the described sanctions and to the entry of findings that he received from public customers insurance premium payments totaling $371.90 which he failed to remit to his member firm. The NASD also found that Falatko failed to respond to NASD requests for information.
Warren R. B. Feitig (Registered Representative, Richmond, Virginia) was fined $50,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Feitig effected unauthorized transactions in the accounts of public customers and failed to respond to NASD requests for information.
Donald Roger Fisher (Registered Representative, Lake Zurich, Illinois) was fined $3,000 and suspended from association with any member of the NASD in any capacity until he has fully paid a $60,116 NASD arbitration award. The sanctions were based on findings that Fisher failed to pay the aforementioned award.
Fisher's suspension commenced September 9, 1992, and concluded October 20, 1992, upon compliance.
Gene Clark Foland (Registered Representative, Ft. Lauderdale, Florida) was fined $5,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Foland failed to pay a $2,063 arbitration award.
William E. Gallaher (Registered Principal, Knoxville, Tennessee) submitted an Offer of Settlement pursuant to which he was fined $5,000 and suspended from association with any member of the NASD in any capacity for one week. Without admitting or denying the allegations, Gallaher consented to the described sanctions and to the entry of findings that he failed to exercise proper supervision over the handling of a new account at his member firm.
Terri Lynn Gent (Registered Representative, Overland Park, Kansas) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Gent failed to respond to an NASD request for information concerning a Letter of Caution.
Stephen Robert Goodwin (Registered Principal, New York, New York) was fined $15,000 and suspended from association with any member of the NASD in any principal capacity for two years. The sanctions were based on findings that Goodwin, acting on behalf of a former member firm, failed to comply with the firm's restriction agreement by executing and clearing equity transactions for public customers without obtaining the NASD's approval.
Goodwin, acting on behalf of the firm, conducted a securities business while failing to maintain the required minimum net capital and without having a general securities principal or representative registered with the NASD. In addition, the firm, acting through Goodwin, failed to maintain a fidelity bond and failed to provide the NASD with requested information.
Wayne Frederick Gorsek (Registered Representative, Springfield, Illinois) was fined $2,500 and suspended from association with any member of the NASD in any capacity for five business days. The sanctions were based on findings that Gorsek submitted a Form U-4 for registration with a member firm that was inaccurate.
Joseph E. Griffin, Jr. (Registered Representative, Tupelo, Mississippi) submitted a Letter of Acceptance, Waiver and Consent pursuant to which he was fined $1,000 and suspended from association with any member of the NASD in any capacity for six months. Without admitting or denying the allegations, Griffin consented to the described sanctions and to the entry of findings that he forged the signature of a registered representative on a $222.87 commission check, deposited the check into his personal business account, and converted the funds to his own use and benefit without the representative's knowledge or consent.
Cheryl B. Hagler (Registered Representative, Huntsville, Alabama) submitted a Letter of Acceptance, Waiver and Consent pursuant to which she was fined $100,000 and barred from association with any member of the NASD in any capacity. Without admitting or denying the allegations, Hagler consented to the described sanctions and to the entry of findings that she withdrew $50,900 from the account of public customers and converted the funds to her own use and benefit.
Edward Patrick Harris (Registered Representative, Holmdel, New Jersey) was fined $30,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Harris made purchase transactions in the account of a public customer without his knowledge or consent. In addition, Harris failed to respond to NASD requests for information.
Charles B. Hasty (Registered Principal, Stone Mountain, Georgia) was fined $26,350, barred from association with any member of the NASD in any capacity, and ordered to pay $ 1,270 in restitution to public customers. The sanctions were based on findings that Hasty obtained and negotiated commission checks made payable to other employees totaling $510 without their knowledge or authorization. Hasty also received from a public customer $760 intended for investment in a money market fund and converted the funds to his own use and benefit. In addition, Hasty failed to respond to an NASD request for information.
Robin Allan Heiney (Registered Representative, Aurora, Colorado) was fined $10,000 and barred from association with any member of the NASD in any capacity. The NBCC imposed the sanctions following an appeal of a decision by the DBCC for District 3. The sanctions were based on findings that Heiney failed to respond to NASD requests for information concerning his termination from a member firm.
William A. Henry, Jr. (Registered Representative, Panama, New York) was fined $70,000 and barred from association with any member of the NASD in any capacity. The fine may be reduced by submission of proof of payment of restitution. The sanctions were based on findings that Henry misappropriated and converted to his own use and benefit customer funds totaling $14,794.70. In addition, Henry failed to respond to NASD requests for information.
Richard J. Hettler (Registered Representative, Fort Collins, Colorado) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Hettler failed to respond to NASD requests for information regarding two customer complaints.
Traci A. Holland (Registered Representative, Huntingdon, Pennsylvania) was fined $20,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Holland failed to respond to NASD requests for information concerning the alleged mishandling of insurance applications and premiums.
Erik Dewitt Jackson (Registered Representative, Moreno Valley, California) was fined $41,393 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that Jackson accepted from a public customer two checks totaling $1,393 intended for the purchase of insurance. Jackson failed to purchase any insurance. Instead, he endorsed the checks, deposited the funds into a bank account under his control, and converted the monies to his own use. In addition, Jackson failed to respond to NASD requests for information.
Michael C. James (Registered Representative, Beverly Hills, Maryland) was fined $50,000 and barred from association with any member of the NASD in any capacity. The sanctions were based on findings that James prepared, processed, and submitted to his member firm at least 25 administrative/financial change forms for public customers. He forged the customers' signatures on the forms thereby increasing the amount of each customer's investment in a fixed annuity. As a result of this activity, James received at least $2,816.61 in commissions.
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