|Thursday, August 14, 1997
Nancy A. Condon (202) 728-8379
Roger B. Sherman (202) 974-2859
NASD Regulation Fines GKN Securities and 29 Brokers $725,000; Firm Must Also Pay $1.4 Million in Restitution to Investors
Washington, D.C.-- NASD Regulation, Inc., today announced that GKN Securities Corp. as well as 29 brokers and supervisors have been fined $725,000 and will repay more than $1.4 million to investors who were overcharged as the result of a two year-long program of excessive mark-ups in eight securities.
Nearly 1,300 investors from 39 states and the District of Columbia and Puerto Rico will receive payments from GKN within 120 days. These overcharges were uncovered after an investigation by the national NASD Regulation Enforcement Department and its District Offices in New York and Atlanta.
Three of the firm’s top officials¾Chief Executive Officer David M. Nussbaum, President Roger N. Gladstone, and Executive Vice President Robert H. Gladstone¾received significant fines and suspensions. All of the violations occurred at GKN’s offices in New York City; Stamford, CT.; and Boca Raton, FL.
GKN and 29 of its supervisors and brokers neither admitted nor denied the allegations that from December 1993 through April 1996 GKN dominated and controlled the immediate after-market trading in eight securities it underwrote so that there was no competitive market for them. As a result, GKN was able to charge excessive markups ranging from six percent to as much as 67 percent over the prevailing market price in more than 1,500 transactions. At least 90 percent of these transactions were fraudulent because the mark-up exceeded 10 percent (a level considered fraudulent).
"Today’s case is another example of our focused effort to put an end to fraudulent practices in the micro cap market. These sanctions underscore NASD Regulation’s commitment to obtain restitution for victimized investors," said NASD Regulation President Mary L. Schapiro.
Yesterday, NASD Regulation fined D.H. Blair & Co. Inc. $2 million for overcharging investors and ordered the firm to repay 3,100 investors almost $2.4 million. D.H. Blair’s Chief Executive Officer and Head Trader were also fined a combined $525,000.
The eight securities involved were: European Gateway Acquisition Corp. Class A warrants; Trinity Americas, Inc. Class A and B warrants; Restructuring Acquisition Corp. Class A warrants; Entertainment/Media Acquisition Corp. Class A warrants; YES! Entertainment, Inc. warrants; Mako Marine International, Inc. warrants; and Batteries Batteries, Inc. warrants.
As part of the settlement, GKN must pay a $250,000 fine to NASD Regulation, and hire an independent consultant to review the firm’s trading policies and procedures for 18 months. This consultant will also recommend necessary improvements, that the firm must implement. Further, GKN is required to disclose to customers on their confirmation slips whenever a broker’s compensation exceeds ten percent of the gross transaction amount.
The following supervisors (who are still employed at GKN) were sanctioned:
In separate settlements, 22 brokers were fined from $3,000 to $25,000 each, and suspended. NASD Regulation found that these individuals were also responsible for overcharging investors because they accepted excessive gross commissions of 10 percent to 40 percent. They are:
The firm will pay $1,159,245, plus interest of $313,729, to the affected investors.
A New York City-based firm, GKN currently employs approximately 350 registered representatives, in five offices in New York, Connecticut and Florida.
NASD Regulation oversees all U.S. stockbrokers and brokerage firms. NASD Regulation, along with The Nasdaq Stock Market, Inc., are subsidiaries of the National Association of Securities Dealers, Inc. (NASDÒ), the largest securities-industry self-regulatory organization in the United States.
Investors who have questions should contact NASD Regulation at (301) 590-6500.