Replies to post #8041 on Stock O'holics Investing University

[jackthegordon]

nice to hear from u mick hsfi will be submitting some new products for testing this coming week should make some noise this coming week positive results are expected

[PenniesGoneWild]

I remember this, wonder if any of the items they were all fined for still happens...hmmmmm

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Link: http://www.sec.gov/news/press/pressarchive/1999/99-2.txt

For Immediate Release 99-2

SEC Fines 28 Brokerage Firms $26 Million and Suspends
51 Individual Traders for Fraudulent Market-Making
Activities in the Nasdaq Market

Washington, DC, January 11, 1999 -- The Securities and
Exchange Commission today imposed civil penalties of more than
$26 million on 28 broker-dealers and suspended 51 individuals
from the industry for various lengths of time for numerous
federal antifraud or other violations resulting primarily from
market-making activities in the Nasdaq stock market.

Richard H. Walker, Director of the Division of Enforcement
said, "These settlements effectively bring to a close the long-
standing investigation of the Nasdaq market first begun by the
SEC in 1994. The settlements require the firms to improve their
trading policies and procedures, building upon other reforms
already implemented."

Chairman Arthur Levitt said, "Thanks to effective
leadership, today Nasdaq is stronger and better. The sound
reforms implemented over the past several years and the
commitment to strong oversight greatly enhance investor
protections and reaffirm confidence in the Nasdaq market."

The firms and individuals consented to a variety of
sanctions, including: civil monetary penalties totaling
$26,302,500, disgorgement of wrongful gains totaling $791,525,
suspensions or bars for the individual respondents, and cease and
desist orders. All of the firms and individuals involved in this
action settled the cases without admitting or denying the
charges.

The SEC found that the firms had engaged primarily in one or
more of the following types of violations: (a) the coordination
of quotations and transactions by traders making markets in
Nasdaq stocks in violation of antifraud and fictitious quotation
rules, (b) the intentional delay of trade reports, (c) other
manipulative activity, (d) failure to honor quoted prices, (e)
failure to provide customer orders with best execution, (f)
trading as principal with advisory clients or discretionary
customers without disclosure and consent, (g) failure to comply
with the books and records requirements, and (h) failure to
supervise.

The sanctions on the broker-dealer respondents include: (a)
civil monetary penalties, (b) disgorgement of wrongful gains,
where appropriate, (c) cease and desist orders, and (d) in the
case of twenty-two of the broker-dealers, a review of their
policies and procedures relating to the areas of their violations
by an independent consultant to be appointed by the Commission.

The sanctions on the individual respondents include: (a)
suspensions or bars from the securities industry, (b) civil
monetary penalties, (c) cease and desist orders, and (d)
disgorgement of wrongful gains, where appropriate.

Details of the Commission's actions, including the names of
the firms and individuals and the respective penalties assessed,
are identified in the Commission's order, which is available at:
www.sec.gov.

The SEC acknowledges the assistance of the NASD in these
cases.

# # #

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.

ADMINISTRATIVE RELEASE, January 11, 1999

SECURITIES EXCHANGE ACT OF 1934
Release No. 34-40900

In the Matter of Certain Market Making Activities on Nasdaq,
Administrative Proceeding File No. 3-9803


The Securities and Exchange Commission today announced the
institution of administrative proceedings against 28 broker-
dealers and 51 individuals who worked at those broker-dealers for
various antifraud violations and other violations of law
resulting primarily from market making activities in the Nasdaq
stock market. The respondents are identified on the attached
list. The respondents have simultaneously consented, without
admitting or denying the Commission's findings, to the entry of
Orders which impose civil monetary penalties totalling
$26,302,500, disgorgement of wrongful gains totalling $791,525,
suspensions or bars for the individual respondents, cease and
desist orders and other sanctions. The Orders found that the
respondents had engaged primarily in one or more of the following
types of violations: (a) the coordination of quotations and
transactions by traders making markets in Nasdaq stocks in
violation of antifraud and fictitious quotation rules, (b) the
intentional delay of trade reports, (c) other manipulative
activity, (d) failure to honor quoted prices, (e) failure to
provide customer orders with best execution, (f) trading as
principal with advisory clients or discretionary customers
without disclosure and consent, (g) failure to comply with the
books and records requirements, and (h) failure to supervise.

The sanctions on the broker-dealer respondents include: (a)
civil monetary penalties, (b) disgorgement of wrongful gains,
where appropriate, (c) cease and desist orders, and (d) in the
case of twenty-two of the broker-dealers, a review of their
policies and procedures relating to the areas of their violations
by an independent consultant to be appointed by the Commission.

The sanctions on the individual respondents include: (a)
suspensions or bars from being in the securities industry, (b)
civil monetary penalties, (c) cease and desist orders, and (d)
disgorgement of wrongful gains, where appropriate.

The Commission issued two different but related types of
Orders in this proceeding. The Order Instituting Proceedings
provides a broad discussion of the various types of unlawful
conduct that occurred in 1994 in connection with market making by
the respondents in the Nasdaq market. In addition, specific
Orders Making Findings and Imposing Sanctions were separately
issued for each broker-dealer respondent and the individual
respondents, usually traders, who worked at that particular
broker-dealer. Each Order Making Findings and Imposing Sanctions
describes the extent to which any particular respondent engaged
in the types of unlawful conduct described in the Order
Instituting Proceedings. The types of violative conduct found by
the Commission include the following:

1. Market Manipulation. Market makers coordinated the
entry of bid and/or ask quotations into the Nasdaq system
for the purpose of artificially affecting the market price
of a particular security in order to obtain an unfair
trading advantage for the participating market makers.
These undisclosed arrangements typically involved one market
maker requesting another market maker to move its quotations
in a manner that changed the inside spread or disadvantaged
customers or other market participants. Such coordinated
activity violated the antifraud provisions of Section
15(c)(1) of the Exchange Act and Rule 15c1-2 thereunder, and
the prohibition on the entry of fictitious quotations
provided in Section 15(c)(2) of the Exchange Act and Rule
15c2-7 thereunder.

2. Undisclosed Coordination of Quotations. Another type of
misconduct involved undisclosed arrangements between market
makers to coordinate the entry of quotations that did not
have a manipulative impact. In many instances, this
activity was intended to paint a deceptive picture of market
conditions, or induce another market participant into buying
or selling at an artificial price. Although the Commission
did not find that, in these instances, there was any
manipulative impact, such as a change in the inside market,
or harm to a customer or other market participant, such
conduct violated the rules prohibiting undisclosed
coordinated quotations. In other instances, one market
maker would enlist another market maker to disseminate a
quotation to buy or sell Nasdaq stocks on its behalf, such
as a request to the second market maker to join the existing
inside bid or ask, or create a new inside market price, in
the hopes of buying or selling stock. These undisclosed
arrangements violated the prohibition on the entry of
fictitious quotations provided in Section 15(c)(2) of the
Exchange Act and Rule 15c2-7 thereunder.

3. The Intentional Delaying of Trade Reports. In a number
of instances, market makers intentionally delayed reports of
significant trades to the Nasdaq market. The purpose of
delaying these trade reports was to provide the relevant
trader with an unfair informational and trading advantage
over other market participants. The failure to properly
report trades in such cases violated the antifraud
provisions of Section 15(c)(1) of the Exchange Act and Rule
15c1-2 thereunder.

4. Other Market Maker Misconduct . Market makers engaged
in other manipulative activity which did not involve
arrangements for the entry of quotations. This activity
involved transacting with other market makers that were
quoting the inside bid or inside ask, for the specific
purpose of altering the inside market prices where customer
orders were executed, which resulted in a worse price for
the customer (or for another market participant, in some
instances). Such conduct improperly benefitted the market
maker and harmed the interests of its customer (or another
market participant), in violation of the antifraud
provisions of Section 15(c)(1) of the Exchange Act and Rule
15c1-2 thereunder.

5. Best Execution Violations In a number of instances,
Nasdaq market makers failed to provide best execution for
their customers' orders. These instances involved a market
maker deliberately favoring its own interests, or those of a
cooperating market maker, over the interests of its
customers, such that the customer did not receive the most
favorable price reasonably available under the
circumstances. This violated the antifraud provisions of
Section 15(c)(1) of the Exchange Act and Rule 15c1-2
thereunder.

6. Failure to Honor Quotations. Another type of misconduct
was the failure by market makers to honor their Nasdaq
quotations in various instances. In these instances, the
market makers did not honor their quotations because they
did not like the trading practices of firms that presented
the orders or because of other improper reasons, in
violation of the Commission's firm quote rule (Exchange Act
Rule 11Ac1-1, 17 C.F.R. 240.11Ac1-1).

7. Failure to Keep Accurate Books and Records. In many
instances, market makers failed to create or maintain
records of their trading activity, particularly with respect
to the terms and conditions of customer orders, or the times
of entry or execution of such orders. These failures
violated the recordkeeping requirements of 17(a) of the
Exchange Act and Rules 17a-3 and 17a-4 thereunder .

8. Failure to Reasonably Supervise Nasdaq Trading. Most of
the respondent firms failed to reasonably supervise traders
and other persons involved in transactions in Nasdaq stocks.
Most of the respondent firms did not prescribe procedures or
guidelines for their traders or supervisors concerning the
potential problems of discussing quotations with traders at
other firms. Other respondent firms had inadequate
procedures in this regard. In addition, most respondent
firms had no procedures or guidelines for supervisors to
review activities of traders for potential coordination or
collaboration with respect to quotations. Other respondent
firms had inadequate procedures or guidelines for such
supervisory reviews. Certain respondent firms relied on
their head Nasdaq trader to perform much or most of the
supervisory function without effective oversight of the head
trader's activities. This proved to be a flaw in the
supervisory structure in some instances when the head trader
engaged in one or more of the violations of the federal
securities laws found by the Commission in these proceedings
to have occurred. Further, certain respondent firms did not
provide their Compliance Departments with resources adequate
to perform their assigned responsibilities relating to
trading in the Nasdaq market. The complexities of the
Nasdaq market and trading in Nasdaq stocks will often
require, at firms with sizeable Nasdaq trading departments,
a substantial commitment of compliance resources.

In addition, the Orders Making Findings and Imposing Sanctions as
to a few specific firms made findings of certain other unlawful
conduct in 1994, as is described below:

a. Improper DSPG Trading. PaineWebber, Inc., S.G. Cowen &
Co., CIBC Oppenheimer Corp., and Herzog, Heine, Geduld,
Inc., and certain of their employees engaged in manipulative
conduct involving the stock of DSP Group, Inc. ("DSPG").
Certain traders at these firms engaged in quote coordination
and other collaborative conduct involving DSPG stock on
various days over a period of several months. In the manner
and to the extent described in the applicable Order Making
Findings and Imposing Sanctions, they artificially depressed
prices in order to enable PaineWebber or Cowen to purchase
stock more cheaply from customers or others, and
artificially elevated prices in order to enable PaineWebber
or Cowen to sell at higher prices to customers or others.
Among other things, a PaineWebber registered representative
and certain of its traders failed to fulfill their
obligation of best execution for certain customer orders, in
order to enhance the profits and compensation obtained from
executing these orders. This conduct violated the antifraud
provisions of Section 10(b) of the Exchange Act and Rule 10b-
5 thereunder.

b. Section 15(f) Charge. J.P. Morgan Securities, Inc.
("J.P. Morgan") violated Section 15(f) of the Exchange Act.
This provision requires that a registered broker-dealer
establish, maintain and enforce policies and procedures
reasonably designed to prevent the misuse of material
nonpublic information. A J.P. Morgan Nasdaq trader
accumulated approximately 100,000 shares of Perrigo Company
("Perrigo") after learning that J.P. Morgan investment
bankers working for Perrigo were analyzing a potential stock
buyback by Perrigo as a means to enhance its stock price.
Perrigo subsequently decided not to proceed with a buyback
and the trader sold this position without profiting from his
knowledge of the consideration of a buyback. J.P. Morgan's
then existing policies and procedures were deficient in not
requiring any consultation with the Compliance Department or
legal personnel before the trader bought this position under
these circumstances.

c. Principal Trading with Advisory Clients and
Discretionary Customers. Legg Mason Wood Walker,
Incorporated ("Legg Mason") violated Section 206(3) of the
Investment Advisers Act of 1940 ("Advisers Act") by engaging
in indirect principal transactions with its advisory
clients, and violated the antifraud provisions of Section
15(c)(1) of the Exchange Act and Rule 15c1-2 by engaging in
indirect principal transactions with its discretionary
customers. These provisions prohibit a broker-dealer from
trading as principal with its advisory clients and
discretionary customers, without certain disclosures to them
and their consent. In executing certain orders to transact
stocks for the account of advisory clients and discretionary
customers, Legg Mason delivered the order to another market
maker, purportedly on an agency basis. Legg Mason then
simultaneously arranged to trade itself with the other
market maker the same amount of the same stock, such that it
indirectly filled the customer's order. The customer
confirmation inaccurately indicated that Legg Mason acted in
an agency capacity in the transaction. This arrangement
gave Legg Mason the potential to make a trading profit from
the orders of advisory and discretionary clients, or to
dispose of an unwanted inventory position, in violation of
the previously cited provisions.

The Commission acknowledges the assistance of the National
Association of Securities Dealers, Inc. in the investigation.

Respondent Firms and Individuals


Bear Stearns & Co., Inc. and Philip D. Zeifer

Cantor Fitzgerald & Co.

S.G. Cowen Securities Corp., Kennedy M. Buckley, David D. Dube,
Peter M. Gilfillan, John P. Mottes and Richard S. Striefler

CS First Boston Corp.

Dean Witter Reynolds, Inc.

Donaldson, Lufkin & Jenrette Securities Corp. and Lawrence H.
Kurtz

Gruntal & Co., L.L.C.

Hambrecht & Quist LLC and Edward L. Albert

Herzog, Heine, Geduld, Inc., Ronald F. Cullen, Jr. and Bradley
Zipper

J.P. Morgan Securities, Inc., Donald A. Dunworth, Mark A.
Gallagher and David J. Mottes

Jefferies & Company, Inc.

Legg Mason Wood Walker, Incorporated

Lehman Brothers Inc.

Mayer & Schweitzer, Inc., Robert Burns and Christopher D. Colgan

Merrill Lynch, Pierce, Fenner & Smith Incorporated

Morgan Stanley & Co., Inc., Peter W. Ferriso, Jr. and Robert S.
Ranzman

Olde Discount Corp., Jack G. Monopoli, Frank W. Schwarz, III, and
John F. Watson, Jr.

CIBC Oppenheimer Corp. and William G. Clark, Jr.

PaineWebber Inc., Richard A. Bruno, Peter F. Comas, Robert D.
Coppola, Gerard Kane, Joseph J. Palma, Arthur A. Raiola, Joseph
H. Raiola and Reuben G. Taub

Piper Jaffray Inc. and Stacey R. Rickert

Prudential Securities Inc., Michael T. Burke, Jr., Joseph G.
Candela and Robert D. Sprotte

Raymond James & Associates, Inc., Thomas J. Dudenhoefer and
Timothy J. Kane

The Robinson-Humphrey Company, LLC

Salomon Smith Barney Inc. (as successor to Salomon Brothers Inc)

Salomon Smith Barney Inc. (formerly known as Smith Barney Inc.),
Glenn Y. Blitzer, Barry J. Dusti and George C. Ross, Jr.

Sherwood Securities Corp., Brian J. Deegan, Richard M. Marino,
Edward G. Schmitz and David M. Zitman

Spear, Leeds & Kellogg, L.P. (by virtue of the activities of its
Troster Singer division), Michael J. Ling, James P. Morris, John
J. Quigley and Eric J. Scherzer

Tucker Anthony Inc.

Warburg Dillon Read, LLC, Michael R. Antolini, Steven D. Murphy,
Joel I. Zweig and David S. Rothman

William P. Heenan