Health Sciences Group Inc (HESG)

[funmaxus]

HESG trading activity. Unusual or Familiar? You decide...

Knight Trading Fraud Information
http://www.knighttradingfraudinfocenter.com/information.php

Knight Trading Group Fraud InfoCenter
Editor?s Note: A glossary is included at the end of this page for terms with an asterisk.

Knight Trading Group, a leading market maker* and asset management firm, is one of Nasdaq?s* biggest players. It is parent company to Knight Securities L.P. The largest comprehensive market maker in the Nasdaq and OTC* (over-the-counter) securities, Knight Securities L.P. is a major participant in those markets.

Why is Knight accused of fraud?
Knight Trading Group has been accused of fraud by the National Association of Securities Dealers (NASD) and is being investigated by the Securities and Exchange Commission (SEC) for additional fraud charges. Thus far, Knight has denied the allegations against it.

In January 2002, the NASD fined Knight Securities L.P. for violating securities and market law. Knight was accused of neglecting to make accurate reports to the NASD. The NASD claimed that Knight did not adhere to posted quotes. It also accused the firm of violating certain rules pertaining to locked and crossed markets. (A locked market occurs when the ask and bid price for a stock are identical, and a crossed market occurs when the bid price is higher than the ask price. Both situations occur more frequently on the Nasdaq than on other markets.) The NASD claims that Knight committed a number of such violations between 1997 and 2001. Knight was fined $700,000.

In addition, the NASD required Knight to pay $800,000 back to clients who lost money on its OnSale, Inc. stock. The regulatory body cited improper execution of nearly 650 orders as the reason for the fine. Knight paid without admitting liability.

In June of 2002, more charges against Knight arose?this time perpetrated by a former employee, Robert Stellato. When he was head of Knight?s institutional trading, Stellato claims to have witnessed multiple violations of NASD and SEC rules. Among his accusations are allegations of front running stocks, a policy in which traders perform their own transactions ahead of their customers? orders. Front running usually results in a lower price for the trader and a higher price for the customer. Stellato claims that Knight traders engaged in front running with the knowledge of Knight?s CEO, other executives, and the company?s attorney. Knight has denied the allegations.

Also in June 2002, Applied Digital Solutions, Inc. and one of its shareholders filed a lawsuit against Knight, accusing it of front running and stock manipulation. They argue that Knight used illegal practices to keep Applied Digital?s stock prices down, thereby hurting the company and its investors.

What is the current status?
Knight has already paid the fines levied by the NASD for its alleged violations relating to improper reports, mishandling of locked and crossed markets, and the improper handling of OnSale, Inc. orders. The firm paid $700,000 to the NASD and $800,000 to OnSale, Inc. investors.

The SEC is investigating the accusations made by Stellato. A class action lawsuit has been filed on behalf of investors who claim they were harmed by Knight?s alleged front running.

Finally, Applied Digital Solutions, Inc. has also filed a suit on behalf of itself and one of its shareholders, accusing Knight of manipulating its stock price.