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UBS Securities LLC, Inc. of New York City, a member firm, consented without admitting or denying guilt to findings of failing to preserve electronic communications and related supervisory failures.
- An NYSE hearing panel found that the firm failed to preserve for a period of three years, the first two of which in an accessible place, electronic communications relating to its business.
- In addition, the panel also found the firm failed to maintain appropriate procedures for supervision and control of its employees by failing to establish an adequate system of follow-up and review to ensure compliance with Exchange rules and federal securities laws relating to the retention of electronic communications.
The NYSE imposed a penalty on UBS Securities of a censure, a $2.1 million fine and an undertaking relating to its procedures regarding the preservation of electronic communications. The amount paid to the Exchange by UBS Securities shall be reduced by $700,000 pursuant to a civil money penalty paid to the Securities and Exchange Commission and by $700,000 pursuant to a fine paid to NASD, in related proceedings. UBS Securities consented to the penalty.
ABN AMRO Incorporated of New York City, a member firm, consented without admitting or denying guilt to findings of financial, operational, books and records and supervisory deficiencies.
- An NYSE hearing panel found that, on multiple occasions during the period from approximately May 2001 to approximately November 2001, the firm:
- failed to apply Net Capital charges on aged, internally unpaired debit items in its fixed income clearance accounts;
- improperly computed its Customer Reserve Formula;
- funded its Customer Reserve Bank Account from its operating account, which was overdrawn;
- improperly calculated its Proprietary Accounts of Introducing Brokers and Dealers (PAIB) reserve formula computation; and,
- in one instance, created a deficit by improperly delivering fully paid securities out of a control location.
- The panel also found that for the week of September 30, 2002, the firm incorrectly computed its Customer Reserve Formula by, among other things, improperly coding one or more accounts as “non-customers,” and using an inconsistent methodology to determine the amount of stock borrows/loans to be included; failed to maintain an accurate stock record; and miscoded Repos and Reverse Repos on its FOCUS Report.
- In addition, the panel also found that the firm failed to provide appropriate supervision to prevent these violations.
The NYSE imposed a penalty on ABN AMRO Incorporated of a censure and a $200,000 fine. ABN AMRO Incorporated consented to the penalty.
ABN AMRO Securities LLC of New York City, a former member firm, consented without admitting or denying guilt to findings of financial, operational, books and records and supervisory deficiencies.
- An NYSE hearing panel found that, on multiple occasions, during the period from approximately August 2001 to approximately December 2001, the firm failed to properly compute its weekly Customer Reserve Formula and to adequately fund its Customer Reserve Account; improperly recorded non-bona fide errors in its error account; and during the period from approximately May 2001 to approximately December 2001, failed to report off-Floor transactions in Exchange-listed securities as required.
- The panel also found that the firm failed to provide appropriate supervision to prevent these violations.
The NYSE imposed a penalty on ABN AMRO Securities of a censure and a $75,000 fine. ABN AMRO Securities consented to the penalty.
ABN AMRO Securities was a member organization of the Exchange until March 2002, when the firm merged into ABN AMRO Incorporated, a member organization through its predecessor entities since 1965.
Preferred Trade, Inc. of San Francisco, California, a member firm, consented without admitting or denying guilt to findings that it failed to fund its special reserve account causing hindsight deficiencies.
- An NYSE hearing panel found that, during the period of January 19, 2001 to April 26, 2002, the firm failed to fund its special reserve account for the exclusive benefit of customers in the amount required to be on deposit, thereby causing seventy hindsight deficiencies ranging from approximately $1.6 million to $16.5 million.
The NYSE imposed a penalty on Preferred Trade of a censure and $100,000 fine. Preferred Trade consented to the penalty.
Richard T. Bennett of Amawalk, New York, a former Exchange member, consented without admitting or denying guilt to findings that he transacted business on the Exchange Floor while not a member, among other violations.
- An NYSE hearing panel found that, during the period from April 16 through April 19, 2002, Bennett transacted business on the Exchange Floor when he was not a member of the Exchange.
- The panel found that after Bennett’s employment as a qualifying member of a member firm terminated on April 16, 2002, Bennett improperly represented himself to be a member firm employee by wearing the member identification badge issued to him in conjunction with his former firm on the Exchange Floor and effecting trades while wearing the trading identification badge.
The NYSE imposed a penalty of a censure and $10,000 fine. Bennett consented to the penalty.
Michael C. Hirschi of Sandy, Utah, a former registered representative and branch office manager, was found guilty of findings that he caused documents to be concealed from his member firm employer’s internal inspectors during an inspection.
- An NYSE hearing panel found that, during an inspection of his branch office by his member firm in October 2003, Hirschi, as the branch office manager, caused improperly completed letters of instruction authorizing the transfer of customer assets or disbursements of customer funds to be concealed from the firm ’s internal inspectors.
The NYSE imposed a penalty of a censure, a 30-day suspension, a three-year supervisory bar and a requirement to retake the appropriate supervisory examination before being employed in a supervisory position.
This matter is related to a prior joint disciplinary action by the NYSE and SEC against Fidelity Brokerage Services, LLC for violating the broker dealer record keeping requirements of the NYSE Rules and the Exchange Act and for failing to reasonably supervise employees. In that matter, Fidelity Brokerage consented to a $2 million fine imposed by the SEC and the NYSE for the rule violations. [See NYSE hearing panel decision 04-110.] Hirschi was the branch office manager of the firm’s Salt Lake City, Utah branch office at which a customer service representative, John Leonard, with Hirschi’s knowledge, concealed documents from firm inspectors during an internal inspection. The NYSE previously completed disciplinary action against Leonard who consented to a censure and a two-month bar. [See NYSE hearing panel decision 04-106.]
Mercer Cook III of New York City, a former registered employee, consented without admitting or denying guilt to findings that he performed the duties of a supervisor without being properly qualified and made a material misrepresentation to his member firm employer.
- An NYSE hearing panel found that, during the period June 2002 through September 2003, Cook, a former institutional sales team supervisor, falsely represented to his member firm that he had taken and passed the Series 24 Examination which qualifies registered individuals to supervise or manage branch activities such as corporate securities, variable contracts and venture capital.
The NYSE imposed a penalty of a censure and a two-year bar. Cook consented to the penalty.
Kenneth Harley Haas of Maplewood, New Jersey, a registered representative, consented without admitting or denying guilt to findings that he engaged in unauthorized pricing activities, books and records and other violations.
- An NYSE hearing panel found that Haas, on several occasions in the period from the spring of 2001 through October 2001, when acting as one of the independent pricing sources for the month-end valuation of a customer’s portfolio, improperly supplied prices that were dictated by the customer.
- The panel found that Haas, on one or more occasions in the above period, engaged in unauthorized pricing activities at his member organization employer and concealed such activities from his member organization employer.
- Haas also issued fax communications to a customer of his member organization employer without submitting such communications for review and approval and failed to preserve required books and records.
The NYSE imposed a penalty of a censure and a six-month suspension. Haas consented to the penalty.
Michael Pelham of Sausalito, California, a registered representative, consented without admitting or denying guilt to findings that he furnished an inaccurate price relating to a security in a customer’s account.
- An NYSE hearing panel found that, during the period from June 2001 through October 2001, Pelham was improperly influenced by a portfolio manager for a customer in quoting securities prices and, on one or more occasions, furnished an inaccurate price on a security in a customer’s account.
The NYSE imposed a penalty of a censure and six-month bar. Pelham consented to the penalty.
Kenneth Harley Haas and Michael Pelham were not employed by the same member organization and were unknown to each other. However, both acted improperly at the request of the same portfolio manager who was employed by a non-member firm.
Thomas Mitchell Forbes of Royal Palm Beach, Florida, a former registered representative, consented without admitting or denying guilt to findings that he engaged in unauthorized communications.
- An NYSE hearing panel found that, in June 2002, after the firm instructed Forbes to have no further contact with an outside business, Forbes sent a potential investor of that business an unapproved email from his home computer.
The NYSE imposed a penalty of a censure and one-year bar. Forbes consented to the penalty.
William Walter Jackson, IV of Greentown, Pennsylvania, a former registered representative, consented without admitting or denying guilt to findings that he engaged in sales practice misconduct.
- An NYSE hearing panel found that, during the period 1999 to 2001, Jackson recommended and effected trades in the accounts of at least 12 customers of his member firm employer that were unsuitable in view of the customers’ financial circumstances, investment experience and investment objectives.
The NYSE imposed a penalty of a censure and four-year bar. Jackson consented to the penalty.
Daniel Seth Peterson of Lake Forest, Illinois, a former non-registered employee, consented without admitting or denying guilt to findings that he failed to disclose a prior criminal conviction on an employment application submitted to his member firm employer.
- An NYSE hearing panel found that, in October 2003, Peterson failed to disclose a prior criminal conviction relating to misdemeanor theft on an employment application submitted to his member firm employer.
The NYSE imposed a penalty of a censure and a four-year bar. Peterson consented to the penalty.
Robert Burns of Lake Park, Florida, a former registered representative, consented without admitting or denying guilt to findings that he used funds for his personal benefit that he knew or should have known had been erroneously deposited into his personal firm account.
- An NYSE hearing panel found that in October 2003, Burns was the recipient of approximately $12,000 that had been erroneously credited to his personal account at his member organization and used the funds for his personal benefit when he knew, or should have known, that the funds did not belong to him.
The NYSE imposed a penalty of a censure and a five-year bar. Burns consented to the penalty.
Eric P. Steffens of Bayville, New Jersey, a former non-registered employee, consented without admitting or denying guilt to findings that he misappropriated funds belonging to his member firm employer.
- An NYSE hearing panel found that, during the period from approximately March 2001 to April 2004, Steffens misappropriated approximately $11,825 in funds belonging to his member firm employer that were paid to the firm by a vendor.
The NYSE imposed a penalty of a censure and permanent bar. Steffens consented to the penalty.
Karen Kelsch of Croton-on-Hudson, New York, a former non-registered employee, consented without admitting or denying guilt to findings that she misappropriated funds belonging to another employee of her member firm employer.
- An NYSE hearing panel found that, during the period from May 2002 through June 2003, Kelsch misappropriated approximately $23,200 belonging to another employee of her member firm employer by using the employee’s corporate credit card to make unauthorized purchases and by diverting the employee’s personal checks to pay the balance on her own corporate credit card account.
The NYSE imposed a penalty of a censure and permanent bar. Kelsch consented to the penalty.
Richard Paul Ziegler of San Francisco, California, a former registered representative, was found guilty of failing to cooperate in an investigation by the NYSE Division of Enforcement.
- An NYSE hearing panel found that Ziegler failed to comply with written requests by the Exchange that he appear and testify regarding a matter that occurred prior to the termination of his status as an employee of a member firm.
The NYSE imposed a penalty on Ziegler of a censure and a bar until he complies.
Keith Allen Carvell of Greensboro, North Carolina, a former registered representative, was found guilty of failing to cooperate in an investigation by the NYSE Division of Enforcement.
- An NYSE hearing panel found that Carvell failed to comply with written requests by the Exchange that he appear and testify regarding matters that occurred prior to the termination of his status as an employee of a member firm.
The NYSE imposed a penalty on Carvell of a censure and a bar until he complies.
Maria J. Malito of New York City, a former non-registered employee, was found guilty of failing to cooperate in an investigation by the NYSE Division of Enforcement.
- An NYSE hearing panel found that Malito failed to comply with written requests by the Exchange that she appear and testify concerning allegations, reported by her member organization on a Form RE-3, that she failed to cooperate during a firm internal investigation relating to unauthorized expenses.
The NYSE imposed a penalty on Malito of a censure and a bar until she complies, to become permanent if she does not comply in three months.
Jennifer Hiyashi of Chantilly, Virginia, a former non-registered employee, was found guilty of failing to cooperate in an investigation by the NYSE Division of Enforcement.
- An NYSE hearing panel found that Hiyashi failed to comply with requests by the Exchange for information relating to allegations that she failed to disclose her criminal history on a Form U-4.
The NYSE imposed a penalty on Hiyashi of a censure and a bar until she complies.
The cases, prosecuted by the NYSE Division of Enforcement, may be subject to review by the Securities and Exchange Commission and, thereafter, federal courts.
On December 17, 2003, the SEC approved a new governance structure for the NYSE. Under the new design, the NYSE Board of Directors is comprised solely of independent directors, except for the chief executive officer, who have no affiliation with any regulated member firm. A new position of chief regulatory officer was created and reports directly to the board of directors through a new Regulatory Oversight Committee. As a result, NYSE Regulation is insulated from potential influence from NYSE members and member firms, operates separately from the business side and is independent in its decision-making.
NYSE Regulation plays a critical role in monitoring and regulating the activities of its members, member firms and listed companies, as well as enforcing compliance with NYSE rules and federal securities laws. Nearly 400 of the largest securities firms in America are members of the New York Stock Exchange. These firms service 92 million customer accounts, or 90 percent of the total public customer accounts handled by broker-dealers, with total assets of over $3 trillion. They operate from 19,000 branch offices around the world and employ 146,000 registered personnel. Nearly 700 employees, or more than 40 percent of the Exchange’s staff, work for NYSE Regulation, which consists of four divisions: Market Surveillance, Member Firm Regulation and Enforcement and Listed Company Compliance, as well as a Risk Assessment Unit and Dispute Resolution/Arbitration.
