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Firm Officials Disciplined for Disseminating Material Non-Public Information
In related cases, Janina Alexandra Casey of Darien, Conn. , director of equity institutional sales at her member-firm employer, and Peter John Caruso of Asharoken, N.Y., a senior analyst formerly at the firm, each consented without admitting or denying guilt to findings relating to disclosures by them of certain material information concerning the shares of Home Depot, Inc., an Exchange-listed security, prior to public dissemination of that information.
The Exchange previously settled an enforcement action against Casey’s and Caruso’s member-firm employer for supervisory deficiencies relating to the firm’s failure to prevent the misconduct by them in which the firm consented to a penalty of a censure and $625,000 fine (see NYSE hearing panel decision 04-30: Merrill, Lynch, Pierce, Fenner & Smith, Inc.).
- An NYSE hearing panel found that on July 11, 2002, after receiving approval for a ratings change but prior to release of the report by his member-firm employer (which occurred after midnight on July 12), Caruso disclosed information to clients of the firm that led some of them to believe that he was going to downgrade his rating on the common stock of Home Depot, Inc. The panel found that Caruso made this disclosure at a lunch meeting on July 11, which was arranged and attended by Casey, and that, on that day, based on Caruso’s comments during the course of the meeting, Casey informed four institutional clients, in substance, that she believed Caruso planned to downgrade his rating of the company’s stock. The hearing panel found that the institutional customers then sold several million shares of the stock on July 11 prior to the release of the ratings change at approximately $2 per share more than the prices at which the stock traded on July 12.
- The hearing panel found that, after the lunch meeting, Caruso again disclosed material non-public information to third parties during a conference call on the afternoon of July 11, when he indicated that he could be expected to lower his earnings estimates for the company. The panel found that the conference call reached a total of approximately 55 individuals, including institutional clients and firm employees.
The NYSE imposed the following penalties: on Casey, a censure, one-month suspension and $150,000 fine; and, on Caruso, a censure, 4-month bar and $25,000 fine. Casey and Caruso consented to the penalties, respectively.
Member Disciplined for Illegal On-Floor Trading,Making Material Misstatements and Other Violations
Paul Iver Olsen of New York City, a former Exchange member and independent floor broker, consented without admitting or denying guilt to findings that he engaged in illegal on-floor trading, including violations of Section 11(a) of the Securities Exchange Act of 1934, and made material misstatements to the Exchange during the course of its investigation, among other violations.
- An NYSE hearing panel found that, from approximately February-November 1999, Olsen initiated numerous orders in Exchange-listed securities for his rollover retirement account during the trading day while he was present on the trading floor.
- The panel found that during his February 2003 on-the-record testimony, in connection with this matter, Olsen made a false statement that his practice in 1999 was to enter orders for his IRA account from off the floor of the Exchange. The panel found that his misstatements in this regard were material to the issue of his liability under Section 11(a) and, among other things, delayed the conclusion of the Enforcement’s investigation.
- The hearing panel also found that when his lessee membership terminated in August 2003, Olsen continued to be the president and sole owner of an NYSE member firm but failed to become an allied member, as required by Exchange rules.
The NYSE imposed a penalty of a censure and one-year bar. Olsen consented to the penalty.
Member Disciplined for Conducting Unapproved Public Customer Business and Other Violations
John Edward Wilson, Jr. of New York City, an Exchange member and independent floor broker, consented without admitting or denying guilt to findings that he conducted a public customer business without proper registration and/or approval, among other violations.
- An NYSE hearing panel found that, during 1999-2000 and with respect to a single customer, Wilson conducted a public customer business without complying with applicable Exchange rules. The panel also found that, during 2000-2001, Wilson failed to maintain accurate books and records relating to error account transactions, failed to preserve floor order tickets, and improperly processed certain transactions through the firm’s error account.
The NYSE imposed a penalty of a censure and $20,000 fine. Wilson consented to the penalty.
Director of Institutional Sales Disciplined for Improper Communications with the Public
- An NYSE hearing panel found that, during the period January 2001-June 2002, Kaplan issued research reports without supervisory analyst approval or in a manner that otherwise failed to conform to Exchange requirements. For example, the panel found that Kaplan prepared and distributed research reports that did not identify him as having prepared them, that did not indicate the market price of the security at the time the recommendation was made, and that were not appropriately dated.
- The panel also found that Kaplan used an Internet account in the name of a former registered representative of his member-firm employer to post negative messages on the Internet with respect to a security on which he had issued research reports advocating a short position and in which his clients held short positions.
- An NYSE hearing panel found that, during the period June 1995-August 2000, Moore failed to adequately supervise and follow-up on delegation of supervisory duties and obligations relating to the activities of a registered representative under his supervision [see NYSE hearing panel decision 04-46, re Kenneth M. Cohen who, on consent, was barred by the NYSE for four years for serious sales practice violations]. The panel found that Moore failed to detect and halt Cohen’s solicitation of numerous unsuitable transactions in at least seven customer accounts and excessive trading in one customer account.
- The panel also found that Moore failed to detect and halt the accumulation of concentrations of low-priced, speculative equities or below investment grade high-yield bonds in several customers’ accounts, which was inconsistent with the customers’ investment objectives and investment experience as well as their financial situations and low-risk tolerance levels.
- An NYSE hearing panel found that, during the period 1997-2000, Young obtained funds belonging to the customer by causing one of her accounts to issue payments to third parties who then gave Young the funds. The panel found that Young signed the customer’s name to the checks, letters of authorization and new account documents without receiving the necessary authority to do so.
- The panel also found that Young entered unauthorized transactions in the customer’s accounts and caused her account statements to be sent to a post office box that he controlled. Additionally, the panel found that, during the period February 1999-June 2001, Young made recommendations to the customer and effected trades for her accounts that were unsuitable in light of the customer’s investment objectives, risk tolerances and circumstances.
The NYSE imposed a penalty of a censure and permanent bar. Young consented to the penalty.
Paul Steven Alexander of Henderson, Nev., a former registered representative, consented without admitting or denying guilt to findings that he engaged in sales practice misconduct in the account of five customers while employed by two member firms, among other violations.
- An NYSE hearing panel found that, during the period 1999-2002, Alexander effected trades in the accounts of four customers that were excessive in frequency, and effected trades in the accounts of these customers, as well as a fifth customer, that were unsuitable in view of the customers’ investment objectives, prior investment experience and financial resources. The panel found that Alexander exercised discretionary power in the accounts of four of the customers without the prior written authorization of the customers.
- The hearing panel found that Alexander also caused inaccurate information to be reflected on new account documentation of four of the customers and mismarked orders entered for each of the customers’ accounts as unsolicited.
The NYSE imposed a penalty of a censure and five-year bar. Alexander consented to the penalty.
Mark David Leavitt of Carmel, Ind., a former registered representative, consented without admitting or denying guilt to findings that he engaged in sales practice misconduct in ten customer accounts and failed to cooperate in an investigation by the NYSE Division of Enforcement, among other violations.
- An NYSE hearing panel found that, during the period April 1999-December 2000, Leavitt recommended to five customers unsuitable investments in two stocks traded on the pink sheets and the OTC bulletin board. The panel found that Leavitt also made untrue statements of fact regarding the stocks to these customers and, with respect to one of them, mismarked order tickets as unsolicited, when in fact the transactions were solicited.
- The hearing panel also found that Leavitt engaged in an outside business activity in that he recommended investments in a private entity to five additional customers, without making a written request and receiving prior written consent of his member-firm employer.
- The panel found that Leavitt also failed to comply with written requests by the Exchange that he appear and testify concerning these matters.
The NYSE imposed a penalty of a censure and four-year bar. Leavitt consented to the penalty.
Robin Raffo Schmerler of Atlanta, Ga., a former registered representative, consented without admitting or denying guilt to findings that she engaged in sales practice misconduct in the accounts of three customers.
- An NYSE hearing panel found that, on numerous occasions during the period January-December 2000, Schmerler exercised discretionary power in two customer accounts without first obtaining written authorization and attempted to reimburse a third customer for losses associated with a margin call in the customer’s account.
The NYSE imposed a penalty of a censure and three-month bar. Schmerler consented to the penalty.
Individual Disciplined for Engaging in Unauthorized Outside Business Activity
Ralph William Russell of Itasca, Ill., a registered representative formerly with a member firm, consented without admitting or denying guilt to findings that he engaged in an unauthorized outside business activity and related violations.
- An NYSE hearing panel found that, during 1999-2000 and without the knowledge or approval of his member-firm employer, Russell engaged in an outside website venture, commingled customer funds obtained in connection with the venture with his own funds, wrongfully spent the customer funds and made a misstatement to his member-firm employer concerning the outside activity.
The NYSE imposed a penalty of a censure and five-year bar. Russell consented to the penalty.
Individuals Disciplined for Misappropriation and Other Violations
Rodrigo Christian Herreros of Jacksonville, Fla., a former non-registered employee of a member firm, was found guilty of misappropriating customer funds and failing to cooperate in an investigation by the NYSE Division of Enforcement.
- An NYSE hearing panel found that, between September 2000-March 2001, Herreros misappropriated approximately $13,550 in checks from a customer of his member-firm employer and that he admitted to the firm that he received funds from the customer totaling approximately $18,000.
- The panel also found that Herreros failed to comply with written Exchange requests to provide a statement concerning this matter.
The NYSE imposed a penalty on Herreros of a censure and permanent bar.
Francisco Perez of Brooklyn, N.Y., a former non-registered employee of a member firm, was found guilty of misappropriating property of his member-firm employer and failing to cooperate in an investigation by the NYSE Division of Enforcement.
- An NYSE hearing panel found that, on Feb. 13, 2003, Perez misappropriated a computer, valued at approximately $1,000, from a shipment of computers sent to his member-firm employer. The panel also found that Perez failed to comply with written Exchange requests for information concerning this matter.
The NYSE imposed a penalty on Perez of a censure and permanent bar.
Individuals Disciplined for Failing to Disclose Criminal History and Failure to Cooperate
Amitabh Parasher of Avenel, N.J., a former non-registered employee of a member firm, was found guilty of failing to disclose his criminal history to his member-firm employer and failing to cooperate in an investigation by the NYSE Division of Enforcement.
- An NYSE hearing panel found that Parasher failed to disclose (on an employment application submitted to his member-firm employer) felony convictions in 1992 and 1995, the latter subjecting him to a statutory disqualification. (The convictions related to the criminal sale of firearms and of a narcotic drug.)
- The panel also found that Parasher failed to comply with Exchange requests for a detailed written statement in connection with this matter.
The NYSE imposed a penalty on Parasher of a censure and six-year bar.
Lawrence Henry Williams, Jr. of St. Charles, Ill., a former non-registered employee of a member firm, was found guilty of failing to disclose his criminal history and failing to cooperate in an investigation by the NYSE Division of Enforcement.
- An NYSE hearing panel found that Williams failed to disclose (on an employment application submitted to his member-firm employer and on a Form U-4 submitted to the Exchange) 1998 and 2001 criminal matters (for criminal trespass and deceptive practices by issuing fraudulent checks, respectively). His conviction in 2001 subjected him to a statutory disqualification.
- The panel also found that Williams failed to comply with written Exchange requests for a written explanation concerning these matters.
The NYSE imposed a penalty on Williams of a censure and four-year bar.
Individual Disciplined for Failing to Disclose Accurate Background Information
Catherine Mclelland (also known as Catherine Mclelland-Greer) of Jacksonville, Fla., a former non-registered employee of a member firm, consented without admitting or denying guilt to findings relating to her failure to disclose accurate background information in connection with her employment by a member firm.
- An NYSE hearing panel found that, in 2002 in her efforts to obtain employment with a member firm, Mclelland submitted an employment application to her member-firm employer and a Form U-4 to the Exchange that mischaracterized the reasons she had left her prior member-firm employer.
The NYSE imposed a penalty of a censure and three-month bar. Mclelland consented to the penalty.
About NYSE Regulation: The New York Stock Exchange is the designated examining authority for the major securities firms in the United States, including the almost 250 member firms that deal with the public and account for more than 85 percent of the public customer accounts carried by broker-dealers. These firms service 93 million customer accounts, operate from more than 21,000 branch offices around the world and employ approximately 157,000 registered personnel. The NYSE is committed to strong and effective regulation of its members and member firms to protect investors, the health of the financial system, and the integrity of the capital-formation process. While self-regulation in the U.S. securities industry begins with the broker-dealer, the NYSE plays a critical role by maintaining an extensive system for monitoring and regulating the activities of its membership. The Securities and Exchange Commission oversees these activities.
NYSE Regulation consists of three divisions: Member Firm Regulation, responsible for the financial, operational and sales-practice regulation of member organizations; Market Surveillance, responsible for surveillance of all trading activities on the floor of the Exchange and in NYSE-listed securities by member firms; and Enforcement, which investigates and prosecutes violators of NYSE rules and federal securities laws. There are approximately 560 people in NYSE Regulation, representing approximately one-third of the Exchange’s staff.
