finra

FINRA

For Release:
Media Contact:
Thursday, June 7, 2001
Nancy A. Condon
(202) 728-8379



 

NASD Regulation Settles Five Disciplinary Actions Involving Day-Trading

Washington, D.C.— NASD Regulation, Inc., today announced it has settled five separate disciplinary actions against firms providing day-trading services to the public. These actions, including the expulsion of one firm, follow an earlier group of eight cases (see NASDR press release 2/24/00) resulting from examinations conducted by NASD Regulation that focused on day-trading activities.

 

The five actions include findings of violations of the federal securities laws and NASD rules in the following areas:

  • Misleading advertising materials
  • Registration violations
  • Improper loans to customers
  • Improper sharing of commissions
  • Short sale violations
  • Trade reporting violations
  • Deficient supervisory procedures

Without admitting or denying the allegations, all accepted the sanctions that include censures, the expulsion of one firm and suspensions and fines against firms and individuals ranging from $10,000 to $75,000.

 

These actions were investigated and filed by NASD Regulation offices in New Orleans and Dallas. They represent a continuing effort on the part of NASD Regulation to address problem areas in day-trading business practices.

 

Investors can obtain the disciplinary record of any NASD-registered broker or brokerage firm by calling (800) 289-9999, or by sending an e-mail through the NASD Regulation's Web Site, www.nasdr.com. For more information on NASD Regulation, visit the Web Site.

 

The National Association of Securities Dealers, Inc. (NASD®), is the largest securities-industry, self- regulatory organization in the United States. It is the parent organization of NASD Regulation, Inc., the American Stock Exchange, LLC; and NASD Dispute Resolution, Inc. For more information about the NASD and its subsidiaries, please visit the following Web Sites: www.nasd.com and www.amex.com.


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Day-Trading Enforcement Actions Announced  Today

 

  1. Landmark Securities Corporation and James C. Gillock, III - Case No. C05010022
    Landmark Securities Corporation and James C. Gillock, former president of Landmark – findings include:
    1. The firm, through Gillock, used advertising materials that contained misleading statements regarding customers' access to the markets; inappropriately implied that customers were employees and that they would earn a high income; and misrepresented the risks of day-trading;
    2. The firm, through Gillock, allowed an individual to supervise day-trading activities while not properly registered;
    3. The firm, through Gillock, loaned funds to a customer for the purpose of meeting a margin requirement;
    4. The firm, through Gillock, paid securities transaction-related compensation to an unregistered entity; and
    5. The firm committed short sale and trade reporting violations.
    Landmark was expelled from membership in the Association. Gillock was fined $50,000 and suspended for two years in a principal capacity and for six months in all capacities. He is further required to requalify as a General Securities Representative by taking and passing the Series 7 examination, prior to acting again in that capacity.
  2. Momentum Securities, LLC - Case No. C05010018
    Momentum Securities, LLC – findings include:
    1. The firm used advertising material that failed to disclose risks associated with day-trading; exaggerated customers' ability to access the markets; failed to disclose risks of market fluctuation; failed to disclose possible delays to system access and trade execution; and exaggerated the capabilities of technology-based services offered to customers;
    2. The firm failed to establish, maintain and enforce adequate written supervisory procedures addressing customer credit parameters and controls to detect entry of orders that exceeded such parameters. These shortcomings resulted in the execution of an order to purchase stock in the amount of approximately $11.5 million entered in error by a firm customer;
    3. The firm paid securities transaction-related compensation to unregistered entities;
    4. The firm failed to establish, maintain and enforce adequate written supervisory procedures addressing short-sale and trade reporting; and
    5. The firm committed short sale and trade reporting violations.
    Momentum was censured and fined a total of $75,000.
  3. CyBerBroker, Inc. (n/k/a CyBerCorp, Inc.) and Mark K. Stryker - Case No. C05010016
    CyBerBroker, Inc. and Mark K. Stryker, former president of
    CyBerBroker – The firm, through Stryker, allowed nine individuals to execute customer equity transactions while not properly registered as equity traders.
    CyBerBroker and Stryker were each censured, together fined a total of $16,000 and required to forfeit commissions of $4,000.
  4. Cornerstone Securities Corporation and Russell A. Grigsby - Case No. C06010010
    Cornerstone Securities Corporation and Russell A. Grigsby, former president of Cornerstone – findings include:
    1. The firm, through Grigsby, loaned funds to five public customers for the purpose of meeting Reg T margin requirements;
    2. The firm executed Nasdaq National Market short sale transactions at or below the inside bid when the current inside bid was below the preceding inside bid;
    3. The firm committed short sale and trade reporting violations;
    4. The firm used advertising materials that mitigated the risks of day trading and potential loss of capital; failed to disclose possible delays to system access and trade execution; and improperly implied that a "day trader" serves as an employee of the firm; and
    5. The firm failed to establish, maintain and enforce adequate written supervisory procedures addressing the NASD's rules governing advertising.
    Cornerstone and Grigsby were both censured and together fined $35,000.
  5. Summit Trading, Inc. and William N. Sunshine - Case No. C06010008
    Summit Trading, Inc. and William N. Sunshine, president of Summit Trading – findings include:
    1. The firm, through Sunshine, allowed proprietary trades to be executed through the Small Order Execution System (SOES);
    2. The firm committed short sale and trade reporting violations;
    3. The firm, through Sunshine, used advertising materials that contained misleading statements regarding customers' access to the markets; misrepresented the risks of day trading; and inappropriately implied that customers were employees of the firm; and
    4. The firm failed to establish, maintain and enforce adequate written supervisory procedures addressing advertising and SOES.
    Summit and Sunshine were both censured and fined a total of $20,000, ($15,000 of which is a joint fine, and $5,000 of which is assessed against the firm only).