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FINRA

 

 

FOR RELEASE:
CONTACTS:

Monday, January 31, 2005

Nancy Condon (202) 728-8379

Herb Perone (202) 728-8464

 

 

NASD Bars Todd Eberhard, Former Park South Chairman and Once-Popular Television Personality

Washington, D.C.—NASD announced today that it has barred Todd M. Eberhard, the former chairman of New York’s Park South Securities, LLC, from the securities industry for federal securities fraud and other, multiple violations of NASD rules. Eberhard was known to millions as a guest analyst and commentator who appeared frequently on financial television programs on CNN, CNNfn, CNBC, Fox News Channel and on PBS’ Nightly Business Report.


The bar stems from NASD charges announced in October 2002 that Eberhard had committed securities fraud in connection with scores of mutual fund transactions. Park South was liquidated in 2003. In 2004, Eberhard pleaded guilty in federal court to mail and wire fraud, as well as conspiracy, investment adviser fraud and obstruction of justice.

 

“This high-profile broker’s misconduct cost his customers millions of dollars,” said NASD Vice Chairman Mary L. Schapiro. “He compounded his fraudulent activities by trying to silence complaining customers and by hiding evidence of those complaints from regulators. That kind of conduct merits the most severe sanction that NASD can impose.”

 

NASD found that during the period December 1998 through October 2001, Eberhard made, or caused to be made, scores of fraudulent and unsuitable mutual fund transactions in four customers’ accounts.  Eberhard intentionally or recklessly failed to disclose material information to those customers. He purchased on behalf of customers large volumes of Class B mutual fund shares that increased his commission revenue, but deprived his customers of volume “breakpoint” discounts available through Class A shares and/or the lower, shorter-term sales charges available through Class C shares. Eberhard defrauded and deceived customers by employing a pattern of short-term trading of mutual funds in order to maximize his commissions.

 

NASD also found that Eberhard effected numerous unauthorized transactions in customer accounts.  For one customer, Eberhard created, or caused to be created, account statements that contained false valuations – the prices or net asset values of many securities were inflated to reflect a greater portfolio value than the true value of the accounts, to induce the customer to continue to maintain accounts with Eberhard.

 

Many customers eventually complained to Eberhard about the activity in their accounts. NASD found that between June 1997 and December 2001, Eberhard improperly settled 14 complaints made by 11 customers.  Those settlements, which totaled more than $3.6 million, were made without the knowledge and consent of the brokerage firms employing Eberhard at the time – Linsco/Private Ledger Corp., Royal Alliance Associates and Clearing Services of America, Inc. 

 

In resolving 10 customer complaints, Eberhard included improper confidentiality agreements that effectively prohibited the customers from cooperating with NASD investigations and from disclosing the underlying facts of their complaints and the settlement terms to NASD. 

 

In many instances, Eberhard either failed to report, or failed to timely report, customer complaints and settlements to NASD and other regulators on the securities industry registration Form U-4, as required by the federal securities laws. NASD found that when Eberhard amended his Forms U-4, he willfully failed to disclose material information and/or misrepresented material information, including the nature of customers’ complaints. For example, on one Form U-4, Eberhard misrepresented the nature of a customer complaint by stating that the client was unhappy with the performance of her portfolio when, in fact, the customer had accused Eberhard of severely churning her account for commissions, repeatedly making investments that benefited Eberhard more than the customer. 

 

Eberhard also willfully failed to disclose that he had been discharged by Royal Alliance Associates for violating investment-related statutes, regulations, rules, or industry standards of conduct. Additionally, he willfully failed to disclose that he had been named as a defendant in an investment-related, consumer-initiated civil lawsuit, which alleged that he was involved in sales practice violations.

 

Finally, NASD found that when Eberhard was questioned by NASD investigators, he provided false, misleading and evasive testimony.

 

In settling this matter, Eberhard neither admitted nor denied the charges, but consented to the entry of NASD’s findings and to the sanction of a lifetime bar from the securities industry.

 

Investors can obtain more information and the disciplinary record of any NASD-registered broker or brokerage firm through NASD's BrokerCheck. NASD makes BrokerCheck available at no charge to the public. In 2003, members of the public used this service to conduct more than 2.8 million searches for existing brokers or firms and requested almost 180,000 reports in cases where disclosable information existed on a broker or firm. Investors can link directly to the program by going online to www.nasdbrokercheck.com. Investors can also access this service by calling 1-800-289-9999.

 

NASD is the leading private-sector provider of financial regulatory services, dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business—from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and registered firms. For more information, please visit our Web Site at www.nasd.com.