finra

FINRA

For Release: 
Media Contacts: 
Monday, July 27, 1998
Nancy A. Condon - (202) 728-8379

Other Contact: 


Barry R. Goldsmith - (202) 974-2850

 

NASD Regulation Fines Troster Singer for Intentional Late Trade Reporting; Six Brokers Also Sanctioned

Washington, D.C.—NASD Regulation, Inc., today fined Troster Singer $950,000 and censured the firm for fraud in connection with a series of 28 intentional trade reporting violations. Six Troster Singer employees were also sanctioned and fined a total of $100,000.

Troster Singer, which neither admitted nor denied NASD Regulation’s findings, was sanctioned for intentionally failing to report within 90 seconds Nasdaq Stock Market trades – many of which were made with large institutional customers. This conduct occurred between April and October 1994.

 

National Association of Securities Dealers, Inc. (NASD®) rules require that every security’s price – and the amount sold – be promptly displayed to the marketplace so that all market participants have equal access to the information. Troster Singer deliberately delayed reporting its trades in order to gain a competitive advantage by depriving other market participants of information regarding purchases and sales made by institutional and other investors.

 

Deliberately delaying trade reporting allows a brokerage firm to cover its positions while at a significant informational advantage over other market participants. NASD Regulation found that Troster Singer – knowing of these large unreported trades while the market did not – bought and sold shares from other dealers and customers in deceptive proprietary trading.

 

Troster Singer also was sanctioned for unintentionally reporting 18 other trades as late. When these 46 late trades were eventually reported, they were marked with an incorrect execution time, did not include the proper late designation, or both. In total, 16 securities were involved. Troster Singer’s intentional late trade reporting practices were evidenced in conversations taped by the firm.

 

NASD Regulation found that Troster Singer’s traders directed the firm’s institutional sales representatives (who were assigned to specific institutional customers, and acted as liaisons between the institutional customers and the traders) to delay trade reports, or to falsely document that certain trades were stopped orders. In a stopped order, a brokerage firm agrees to execute the trade at a specific, or better, price.

 

NASD Regulation also found that while Troster Singer knew about and cautioned its traders to stop these late trade reporting practices, they nevertheless continued. As part of its agreement with NASD Regulation, Troster Singer will hire an independent consultant to review its trade reporting practices.

 

Six Troster Singer employees were sanctioned:

  • Lowell Millar, trader, was fined $25,000, suspended in all capacities for 25 days, and censured.
  • Michael Ling, trader, was fined $25,000, suspended in all capacities for 25 days, and censured.
  • John Quigley, trader, was fined $20,000, and censured.
  • Lisa Bozzi Albanese, institutional sales representative, was fined $10,000, and censured.
  • Charles Esposito, institutional sales representative, was fined $10,000, and censured.
  • Steve Cline, institutional sales representative, was fined $10,000, and censured.

NASD Regulation thanked the Securities and Exchange Commission (SEC) for its substantial assistance in this case.

 

Over the last several years, NASD Regulation has developed and implemented a series of initiatives to protect investors and enhance compliance with market rules. These include:

  • Order Audit Trail System – The first phase of the Order Audit Trail System (OATS) will begin collecting information on all electronic orders received by market makers and Electronic Communication Networks (ECNs) on March 1, 1999. This system will track orders from the time they are entered until final execution.
  • Exam Program – Beginning in 1996, NASD Regulation’s Market Regulation Department initiated a comprehensive program to examine Nasdaq® market makers for compliance with trading and reporting rules.
  • Advanced Detection System – The Advanced Detection (ADS) system began operation in July 1997. Using sophisticated data mining, artificial intelligence, statistical analysis, and visualization technologies, ADS detects and evaluates patterns in trading data to search for potential violations of NASD trade reporting, market integrity, and best execution rules. ADS processes about 800,000 quotes every day.
  • Hot Lines – NASD Regulation’s Market Regulation Department instituted toll-free hot lines for the reporting of potential market harassment and potential backing away violations.

Investors can obtain the disciplinary record of any NASD-registered broker or brokerage firm by calling (800) 289-9999.

 

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. (NASD), the largest securities-industry self-regulatory organization in the United States.