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The Board concluded that because the respondents are presently before an NASD arbitration panel to resolve, among other things, issues as to whether the respondents are obligated to pay any damages as a result of the same actions in this matter, it will retain jurisdiction of this matter to determine the amount of disgorgement that should be ordered against the respondents.
The Board affirmed the BCC's findings that during the twenty-month period from January 1998 to September 1999, Salvatore DiAmbrosio, who was employed first as a stock execution clerk for D&D Securities Inc., a PHLX floor brokerage firm with a stock execution business, and thereafter as a trader for Bearcat, Inc., a PHLX proprietary options trading firm, entered fictitious trades, executed unauthorized trades and engaged in a series of fraudulent transactions designed to avoid detection. In those transactions, an Exchange member firm was led to believe that it bought or sold stocks at certain prices when, in fact, the transactions were executed at inferior prices. Later, as the fraud persisted, DiAmbrosio entered into an employment relationship with Bearcat. The Board affirmed the BCC's finding that D&D Securities and its principals, Nicholas and Dominick DiCicco, were negligent in their supervision of DiAmbrosio. The Board also affirmed the BCC's finding that Bearcat and its principals, Seth Diamond and Peter Fineberg, acted in reckless disregard of DiAmbrosio's actions.
In addition to partially reversing the BCC's decision regarding disgorgement, the Board affirmed all of the sanctions previously imposed on the respondents by the BCC. In this regard, DiAmbrosio has been censured, fined $1,000,000 and permanently barred from membership or participation on the PHLX or association with a PHLX member organization; D&D Securities and the DiCicco's have each been censured, jointly and severally fined $500,000 and prohibited from conducting a stock execution business for a period of one year; and Bearcat and Diamond and Fineberg have each been censured, jointly and severally fined $500,000, Fineberg and Diamond have each been suspended from membership or participation on the PHLX or association with a PHLX member organization or participant organization for six months, and Bearcat, Inc. has been suspended from membership or participation with the PHLX for six months. The sanctions are to begin on the thirtieth day following the date of the Board's Decision.
As a result of the conduct described above, the Board affirmed the BCC's findings that the respondents violated the following specific Exchange rules and provisions of the federal securities laws:
- DiAmbrosio, Bearcat, Diamond and Fineberg violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder;
- DiAmbrosio, Bearcat, Diamond and Fineberg violated PHLX Rules 707 (conduct inconsistent with just and equitable principles of trade) and 708 (acts detrimental to the interest or welfare of the PHLX);
- Bearcat, Diamond, Fineberg, D&D Securities, N. DiCicco and D. DiCicco violated PHLX rule 748 (failure to adequately supervise);
- DiAmbrosio violated PHLX rule 793 (failure to disclose dual relationship);
- Bearcat, Diamond and Fineberg violated PHLX Rules 772 (trading for joint account), 773 (participation in joint account), 751 (accounts of employees of members), and 783 (report of financial arrangements); and
- D&D Securities, N. DiCicco and D. DiCicco violated PHLX rule 703(a) and (c)(iv), and Sections 15(c) and 17 of the Exchange Act and Rules 15c3-1, 17a-5 and 17a-11 thereunder (net capital provisions).
