finra

FINRA

For Release:
Contact:
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:

  • David M. Nussbaum, Chief Executive Officer, was fined $50,000, suspended for 30 days in all capacities, and censured.
  • Roger N. Gladstone, President, was fined $50,000, suspended for 30 days in all capacities, and censured.
  • Robert H. Gladstone, Executive Vice President, was fined $100,000, suspended for 30 days in all capacities, suspended for three months from acting as a supervisor, required to re-qualify as a registered principal, and censured.
  • Richard Buonocore, Head Trader, was fined $50,000, suspended for 30 days in all capacities, and censured.
  • Vincent Bruno, the firm’s compliance director at the time, was fined $30,000, suspended for 30 days in all capacities and censured.
  • David Greenberg, branch manager, was fined $15,000, suspended for ten days from acting as a supervisor, and censured.
  • Martin Schaffer, branch manager, was fined $10,000 suspended for seven days from acting as a supervisor, and censured.

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:

  • Dmitry Aranovich ($8,000 fine, five-day suspension, censure).
  • Jeffrey Attamanuk ($3,500 fine, three-day suspension, censure).
  • David Baum ($6,000 fine, five-day suspension, censure).
  • Anthony Colombo ($15,000 fine, seven-day suspension, censure).
  • Paul Cooney ($4,000 fine, three-day suspension, censure).
  • Irving R. Edelstein ($5,000 fine, three-day suspension, censure).
  • Mario Figuero ($25,000 fine, seven-day suspension, censure).
  • Edward Gallagher ($4,000 fine, three-day suspension, censure).
  • Carlos Garceran ($11,000 fine, five-day suspension, censure).
  • Mark Grenier ($3,500 fine, three-day suspension, censure).
  • Dmitri Kardonski ($10,000 fine, required to re-qualify by examination as General Securities Representative, and censure).
  • Eugene Kingman ($25,000 fine, seven-day suspension, censure).
  • Scott Kliewe ($15,000 fine, nine-month suspension, censure).
  • Elliot Kurz ($4,500 fine, three-day suspension, censure).
  • Robert Lesser ($7,500 fine, five-day suspension, censure).
  • David Macias ($15,000 fine, seven-day suspension, censure).
  • Richard Murnick ($4,500 fine, three-day suspension, censure).
  • Kevin Neumark ($4,000 fine, three-day suspension, censure).
  • Victor Palomino ($5,000 fine, three-day suspension, censure).
  • David Siegel ($6,000 fine, five-day suspension, censure).
  • Alan Weiss ($4,000 fine, three-day suspension, censure).
  • Steven J. White ($3,000 fine, three-day suspension, censure).

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.