|Thursday, July 25, 1996
Nancy A. Condon - (202) 728-8379
Roger B. Sherman - (301) 208-2859
William H. Jackson, Jr. - (216) 694-4545
NASD Regulation Obtains $1 Million-Plus in Restitution for Investors from H.J. Meyers; Fines of Nearly $500,000 Imposed
Washington, D.C.--NASD Regulation, Inc. announced today that it has obtained more than $1 million in restitution for about 3,000 customers who were charged unfair prices in seven securities traded by H.J. Meyers & Co., Inc. between 1990 and 1993.
NASD Regulation also announced that it fined the firm and 22 of its current and former managers and sales representatives a total of nearly $500,000 in connection with the three-year unfair pricing practice. H.J. Meyers was also censured by NASD Regulation.
"This restitution is one of the largest refunds ever obtained for investors by the NASD, and reinforces our commitment to customer protection," said NASD Regulation President, Mary L. Schapiro. "Individual sales representatives and senior management share equally the responsibility to ensure that customers are treated honestly and receive fair market prices."
Based in Rochester, N.Y., H.J. Meyers employs more than 700 people, including 480 brokers, in 15 offices throughout the country.
The overcharging at H.J. Meyers was uncovered after a lengthy investigation by NASD Regulation's Enforcement Department in Washington and its District No. 8 Office in Cleveland.
The settlements with the firm and the 22 individual brokers--in which they consented to NASD Regulation's findings without admitting or denying the allegations--requires the firm to make restitution of $1,025,000 to the almost 3,000 customers who were overcharged. H.J. Meyers will notify each investor who is entitled to restitution, and make all necessary payments within 120 days.
The $1 million-plus in NASD Regulation-ordered restitution is in addition to the almost $517,000 H.J. Meyers has already credited to certain customers' accounts. The final amount of restitution may increase significantly, based on the results of a full accounting that is still in progress. H.J. Meyers has agreed to make additional restitution payments if needed.
The firm will also pay a $250,000 fine to NASD Regulation, and must improve its oversight function by, among other things, hiring an independent consultant to review and monitor for one year the firm's trading policies and procedures.
Michael L. Vanechanos, the firm's head trader, was fined $100,000, suspended for six months from acting in any principal or supervisory capacity, including a 45-day suspension from acting in any capacity at all, and censured.
The firm's President, James A. Villa, was fined $25,000, suspended for 20 business days in all capacities, and censured.
NASD Regulation found that H.J. Meyers, acting through Vanechanos, dominated and controlled the trading in seven securities (in some cases stocks and warrants of the same issuer) to such an extent that there was no active, competitive market. The securities involved were: Acqua Group, Inc., common stock and warrants; Vision Ten, Inc,. common stock; Xerographic Laser Images Corp., common stock and warrants; and Integrated Security Systems, Inc., common stock and warrants.
As a result, H.J. Meyers and Vanechanos were able to charge retail customers unfair markups and markdowns that ranged from five percent to as much as 50 percent over the prevailing market price for the seven securities. NASD Regulation found there were a total of 4,824 separate transactions, almost two-thirds of which, or 3,206, were fraudulent because the markup or markdown exceeded ten percent. Generally, markups or markdowns of more than ten percent are considered fraudulent under NASD Regulation rules.
NASD Regulation also found that H.J. Meyers and Villa failed to implement and/or enforce the firm's written supervisory procedures concerning markups and markdowns.
Troy M. Peters of Poway, California, a former H.J. Meyers branch manager, was fined $5,000 by NASD Regulation, suspended for three business days, and censured. Peters was cited for failure to supervise. To re-enter the securities industry as a principal or supervisor, Peters must re- qualify by examination.
In separate settlements, an additional 19 brokers were fined, suspended, and censured. The fines imposed on these H.J. Meyers brokers ranged from $2,500 to $7,500, and the suspensions from three to ten business days.
NASD Regulation found that these individuals were also responsible for overcharging retail customers because they accepted excessive gross commissions or sales credits in sales of Xerographic and/or Integrated securities.
The specific sanctions are as follows:
All of the these violations occurred at Thomas James Associates, Inc., which later acquired H. J. Meyers, and operates under that name today.
The terms of these settlements were accepted by the District Business Conduct Committee for District No. 8, in Chicago, and approved by the National Business Conduct Committee.