finra

Testimony of Barry R. Goldsmith
Executive Vice President

Before the Finance and Hazardous Materials Subcommittee of the Commerce Committee
Hearing on Organized Crime in the Securities Markets

U.S. House of Representatives 

 

September 13, 2000

 

The NASD would like to thank the Subcommittee for this opportunity to testify on organized crime in the securities markets, the scope of the problem and our efforts to address it. America’s securities markets are essential to the capital formation process and economic well being of our nation. It is our job to work together with the SEC and law enforcement authorities to protect investors and the markets from fraud and abuse of any kind, including organized crime.

 

Your invitation letter asked us to discuss, among other things, the level of organized crime that NASDR has discovered in our capital markets through brokerage houses or other NASDR regulated entities. In addition, you requested that we discuss past, present and future efforts to detect and prevent organized crime in the securities markets, as well as the results of these efforts.

 

Our securities markets are the strongest, safest and best regulated markets in the world. The overwhelming majority of individuals in the securities industry are honest, ethical professionals who treat their obligation to comply with the law seriously and put the investor’s interest first. There are, however, a small number of dishonest individuals and firms in the securities business. The problem firms and brokers represent a tiny portion of the almost 5,600 securities firms and more than 650,000 registered industry professionals in this country. Importantly, only a tiny fraction of these are involved in criminal activity and an even smaller number are involved with organized crime. Nevertheless, any attempt, however limited or small, by organized criminal elements to influence the securities markets is unacceptable. We will not tolerate it. NASD Regulation, along with the SEC and criminal prosecutors, have stepped up its already significant surveillance, enforcement and prosecutorial efforts to rid the industry of these criminals and to better educate and protect the investing public. The recent spate of successful organized crime prosecutions in securities cases, and NASD Regulation’s substantial assistance to criminal prosecutors in those cases, demonstrates our strong commitment and success in this area.

 

I believe that the securities industry may be a target for organized crime for several reasons. We have experienced the longest sustained bull market in the history of our country. This market has attracted record numbers of new, sometimes relatively unsophisticated, individuals as investors. Inexperienced investors looking for a quick doubling or tripling of their money can too easily fall prey to those unscrupulous few in our industry and on its fringes. In addition, the number of small, newly capitalized companies in the non-listed or over-the-counter markets has increased. While many of these smaller companies provide significant growth potential for our capital markets and investors alike, these companies’ securities are also much more susceptible to manipulative conduct. This can be done the "old fashioned way" through rows of telephone banks housed in "bricks and mortar" boiler rooms, or now, much more efficiently, with a few clicks of the mouse over the Internet.

 

As securities regulators, we must adopt a "zero-tolerance" approach not just to organized crime, but to any criminal conduct in the securities marketplace. We must continue to look at ways of improving our enforcement and surveillance, as well as the rules we adopt to protect investors, especially as it concerns organized crime. Most importantly, we must also look at new ways of "investor outreach," so that the individual investor is armed with the information he or she needs to resist the criminals and scamsters and make responsible investment decisions. This is the best defense to any type of securities fraud.

 

The NASD

 

Let me briefly outline the role of the NASD in the regulation of our securities markets. Established under authority granted by the 1938 Maloney Act Amendments to the Securities Exchange Act of 1934, the NASD is the largest self-regulatory organization for the securities industry in the world. Every broker dealer in the U.S. that conducts a securities business with the public is required by law to be a member of the NASD. The NASD’s membership comprises almost 5,600 securities firms that operate in excess of 83,000 branch offices and employ more than 652,000 registered securities professionals.

 

The NASD is the parent company of NASD Regulation, Inc. (NASDR), the Nasdaq Stock Market, Inc., the American Stock Exchange LLC, and NASD Dispute Resolution, Inc. These subsidiaries operate under delegated authority from the parent, which retains overall responsibility for ensuring that the organization’s statutory and self-regulatory functions and obligations are fulfilled. The NASD is governed by a 31-member Board of Governors, a majority of whom are not securities industry affiliated. The NASDR subsidiary is governed by a 10 member Board of Directors balanced between securities industry and non-industry members. Board members are drawn from leaders of industry, academia, and the public. Among many other responsibilities, the boards, through a series of standing and select committees, monitor trends in the industry and promulgate rules, guidelines, and policies to protect investors and ensure market integrity.

 

NASD Regulation

 

NASD Regulation is responsible for the registration, education, testing, and examination of member firms and their employees. In addition, we oversee and regulate our members’ market-making activities and trading practices in securities, including those that are listed on the Nasdaq Stock Market and those that are not listed on any exchange. Although activities involving these securities may be reflected in different quotation media, NASDR is ultimately responsible for regulating the trading activity of its members whether it occurs in the Nasdaq Stock Market, the over-the-counter market, or any other area over which the NASD has jurisdiction.

 

In 1999, NASDR brought 1,175 new enforcement actions involving violations of the federal securities laws and NASD rules. This represents approximately a 12 percent increase from the prior year and more than a 30 percent increase over the past five years. In addition, NASDR barred nearly 500 individuals from the securities industry in 1999, almost a 30 percent increase from 1998.

 

The 1,500 member staff of NASDR is devoted exclusively to carrying out the NASD’s regulatory and enforcement responsibilities. NASDR carries out its mandate from its Washington headquarters and 14 district offices located in major cities throughout the country. Through close cooperation with federal and state authorities and other self-regulators, overlap and duplication is minimized, freeing governmental resources to focus on other areas of securities regulation.

 

NASDR rulemaking is a widely participatory process with broad input from industry members, other regulators, and the public. By the requirements of the Securities Exchange Act of 1934, NASDR rules do not become final until they are filed with and approved by the SEC. The SEC staff carefully reviews each rule filing and publishes NASDR rules for comment in the Federal Register.

 

NASDR has examination responsibilities for all of its 5,600 members. In addition to special cause investigations that address customer complaints and terminations of brokers for regulatory reasons, NASDR has established a comprehensive routine cycle examination program. This program is carried out through a regulatory plan that focuses each District's examination efforts on the firms, individuals, issues and practices that present the greatest regulatory challenges and concerns. Annual on-site inspections are conducted of high priority areas. In addition, NASDR has established an examination frequency cycle for all of its members, which is based upon the type of business conducted by the member, the scope of that business, the extent of customer exposure, method of operation, past regulatory history, and other factors. During 1999, more than 2,400 main office routine examinations were completed and over 6,700 customer complaints and 2,900 terminations for cause were investigated.

 

Another key factor in NASDR's overall regulatory program involves developing and administering qualifications testing for securities professionals. All sales and supervisory persons associated with NASD member firms must demonstrate a requisite understanding of the products offered by their firms, as well as regulatory requirements for the functions they are to perform for their employer-members. Individuals acting in a management capacity must pass the appropriate principal's examination, while sales personnel must demonstrate specific understanding of the products they intend to sell and the regulations that govern those products. In 1999, NASDR administered 353,778 qualifications tests.

 

NASDR’s Central Registration Depository (CRD) maintains the qualification, employment, and disciplinary histories of more than 650,000 registered securities employees of member firms through this automated, electronic system. Developed jointly by the North American Securities Administrators Association (NASAA), the organization of state securities regulators, and the NASD, CRD is an on-line registration data bank and application-processing facility to which each of its regulatory participants are linked by a nationwide network of on-line computer terminals.

 

Records of securities professionals are available to the public through NASDR’s Public Disclosure Program. Background information is supplied, including all reportable criminal convictions and dismissed indictments, final disciplinary actions taken by the NASD or any other securities self-regulatory organization and state and federal regulators, pending NASD and other SRO disciplinary actions, dismissed NASD complaints, arbitration decisions, and civil judgments in securities or commodities disputes. This information is provided without charge to requestors.

 

The Over-The-Counter Market

 

The NASD has regulatory responsibilities for what is known as the OTC or over-the-counter market. The over-the-counter market is a vast amalgam of publicly traded companies that list neither on Nasdaq nor on any exchange. It is in the thinly traded, micro-cap securities that characterize the over-the-counter-market where we find the greatest potential for fraudulent activity.

 

A part of the over-the-counter market is what is known as the OTC Bulletin Board (OTCBB). While it is a system operated by Nasdaq, the Bulletin Board is markedly different and distinct from the Nasdaq Stock Market. It is an electronic quotation service for subscribing members. While the system displays real-time quotes, last sale prices, and volume information in domestic securities, there is no formal legal relationship between the OTC issuers whose shares are quoted there and Nasdaq. The companies need not meet any listing standards to have their stock included in the Bulletin Board. This system provides a centralized and automated alternative to the Pink Sheets, which historically have been published on paper once each day, but which are now available electronically.

 

Until recently, there were no periodic public reporting requirements for companies who wanted their shares included on the OTCBB. Thus, investors who wanted to evaluate the merits of companies whose shares were quoted there had little available information. In January 2000, the SEC approved the NASD’s OTC Bulletin Board Eligibility Rule. This rule permits only those companies that report their current financial information to the SEC, banking, or insurance regulators to be quoted on the OTCBB. This new rule ensures that investors are provided with more and better information about OTCBB stocks. In particular, investors will now have access to companies’ current financial information when considering investments in OTCBB securities.

 

NASDR Criminal Enforcment Activities

 

The U.S. securities industry is one of the most comprehensively regulated in the country. This regulation has helped make our markets the deepest and safest in the world. In the overwhelming majority of situations, securities rule violations by market participants can be and are dealt with by administrative or civil sanctions. NASDR’s administrative sanctions include suspensions and bars of registered representatives, business restrictions on or expulsions of member firms, restitution to customers, and the imposition of monetary fines. We believe that this comprehensive web of regulation is a major reason that the limited organized crime involvement in the industry that we have seen to date has rarely been by those who are registered to operate in the industry, but rather by those who operate outside the periphery of that regulation.

 

There are, however a very small number of violations that are so pernicious or are committed by such hardened securities law recidivists that they can only be dealt with criminally. Importantly, NASDR jurisdiction extends only to member securities firms and their associated persons, and thus does not have the jurisdictional reach or the necessary array of governmental investigative tools – wiretap, search warrant and subpoena authority – that are available to the FBI and other law enforcement officials. While we pursue our own investigations and take administrative action against registered persons and entities in these types of cases, we also refer the most serious of these matters to criminal law enforcement officials. It is the criminal authorities who are best positioned to fully prosecute those involved in these cases. In these instances, we work closely with the criminal authorities to assist them in any way we can.

 

The type of assistance we provide to criminal authorities depends upon the nature of the case and the needs of the particular prosecutor. Many of these cases involve very complex fraudulent schemes with thousands of customer trades, months if not years of illicit activity and tens of millions of dollars of illegal profits. While prosecutors often obtain important evidence in these cases from informants, coconspirators, and wiretap evidence, not all of this evidence may be of the quality necessary to bring a successful criminal prosecution. Criminal cases require proof of guilt beyond a reasonable doubt.

 

NASDR has unique access to the audit trail that accompanies nearly every securities trade. This audit trail includes detailed information on the billion-plus shares that trade hands in our markets each day, each share of which must be reported within 90 seconds of a trade to power computer systems we maintain. Likewise, we capture and maintain, on a real time basis, every quote to buy or sell a security and every change to those quotes that brokerage firms make in these securities.

 

Our investigators come from a variety of securities industry and professional backgrounds and are well versed in the technical and sometimes difficult to understand language of the securities industry. They are also computer proficient and are able to efficiently analyze thousands of trades and quotes to detect patterns of potentially illicit conduct. Working side-by-side with criminal prosecutors, they are able interpret tape recordings, heavily laden with technical jargon. Likewise, they are able to recreate the trading in particular securities that may corroborate the testimony of a cooperating witness that the trading in that security was manipulated.

 

NASDR investigators are able to work with criminal prosecutors to graph and chart the evidence into compelling demonstrative exhibits that can be presented to the jury at trial. Sometimes, NASDR investigators and examiners serve as fact witnesses in criminal trials, describing to the jury the underlying factual basis of demonstrative exhibits or compilations of trading data. On other occasions, in organized crime and other criminal matters, NASDR officials have served as expert witnesses explaining the regulations and workings of the securities markets.

 

NASDR has reacted to the potential criminal conduct primarily through three approaches: (1) Stepped-up assistance to criminal prosecutors through its recently formed Criminal Prosecution Assistance Group (CPAG), as well as through its Market Regulation Department; (2) Implementation of its new taping rule; and (3) Enhanced training of federal, state and local prosecutors and law enforcement officials.

 

CPAG, Market Regulation, and Other Assistance to Prosecutors

 

Our commitment to assisting criminal prosecutors has been on going and of a long-standing nature. The NASD’s record of assistance to and cooperation with criminal authorities goes back many years. At least as early as the 1980’s, the NASD had investigative staff working full-time to assist in the investigation and criminal prosecution of securities fraud. We continue to play an active role in this work through close relationships between our 14 district offices and prosecutors in their locales.

Our Market Regulation Department conducts an ongoing surveillance program of the market activity for all Nasdaq and over-the-counter securities. While this is an enormous task given that it includes watching over 10,000 securities on a daily basis, NASDR has committed significant resources to develop technology to identify suspicious scenarios that require further investigation. Our surveillance staff works closely with the U. S. Securities and Exchange Commission and criminal law enforcement agencies and has quickly uncovered numerous fraud schemes that have been successfully investigated and prosecuted. In 1999, the Market Regulation Department referred over 230 cases of potential insider trading and fraud to the SEC and other law enforcement agencies.

 

To ensure that prosecutors have the expertise and support that they need to bring securities cases, and responding to the numerous requests of criminal law enforcement officials, NASDR’s Enforcement Department created the Criminal Prosecution Assistance Group, or CPAG, in April 1998. It is through CPAG that NASDR most directly takes part in the fight against organized crime in the securities industry.

 

The purpose of CPAG is to make available to criminal prosecutors and investigating agents throughout the country the expertise and experience of the NASD for the identification, investigation and prosecution of securities fraud and related offenses. CPAG is the first unit within a self-regulatory organization to be devoted to working directly and exclusively on criminal investigations and prosecutions involving securities-related crimes.

 

The office is headed by a CPAG Chief Counsel who was both a Special Assistant United States Attorney and an Assistant Chief Litigation Counsel with the SEC. The group includes securities examiners who are widely experienced and knowledgeable about the securities industry generally, the computerized databases of the NASD, and the analysis of trading records maintained in the industry.

 

CPAG has been involved in about 200 separate criminal matters, ranging from hundreds of hours of work on lengthy investigations and trials to brief telephone consultations with prosecutors and agents. The group provides detailed analysis of trading records and related documentation, offers advice and training to prosecutors and agents, provides summary and expert testimony, creates demonstrative exhibits, assists with complex securities law motions, and provides attorney assistance through appointment as a Special Assistant United States Attorney or Deputy District Attorney. Many of these matters involve non-public investigations, and thus cannot be disclosed.

Cases

 

CPAG and the Market Regulation Department have assisted criminal prosecutors on all of the significant publicly available matters involving allegations of Mob activity in the securities markets, including the following cases:

 

U.S. v. Gangi, et al. – United States Attorney’s Office (SDNY)

 

This case was the first prosecution of organized crime involvement in the securities industry, and came to be known as the "Mob on Wall Street" case. It involved secret organized crime control of several brokerage firms to manipulate the price of Healthtech common stock and warrants by artificially upticking their quotes and bribing brokers to provide retail. All of the organized crime figures pleaded guilty, and the remaining defendants, including a notorious stock promoter named Gordon Hall, were convicted at trial on May 11, 1999. The charges included racketeering and conspiracy as well as securities fraud. Hall was sentenced to 87 months in prison. The organized crime figures received sentences ranging from 4-8 years in prison.

NASDR provided hundreds of hours of assistance to the SEC and prosecutors on this important case. NASDR’s Market Regulation Department referred it to the Nasdaq Listing Investigations Department to investigate questionable assets, potential false disclosures by the company, suspicious Internet activity, and a significant increase in the total shares outstanding. Evidence uncovered in the resulting investigation was referred to the government. After the government initiated its investigations, CPAG analyzed trading data, reviewed transcripts of government tape recordings post-indictment and identified data that corroborated particular statements on the tapes, such as statements by Mob associates about manipulation of Healthtech’s stock on particular days. CPAG prepared demonstrative exhibits, such as a comparison of the reported brokers’ commissions to the conspirators’ secret listing of actual payments of bribes to brokers. CPAG also created bar charts that graphically displayed the dominance of the corrupt brokerage firm in sales to the public of Healthtech common stock and warrants. NASDR staff also participated in interviews of cooperating witnesses and a defendant who ultimately pleaded guilty. NASDR also provided expert witness testimony in the trial of this case.

 

U.S. v. Ageloff, et al. – United States Attorney’s Office (EDNY)

 

This on-going matter involves fraudulent sales practices and manipulation of Initial Public Offerings (IPOs). Ageloff was reported in the media to have extensive Mob connections. The defendants in this case included primarily top producing brokers and managers from the brokerage firms of Hanover Sterling, Norfolk Securities, Capital Planning, and PCM Securities. Approximately 50 of these defendants have agreed to plead guilty in this case. CPAG’s Chief Counsel is serving as a Special Assistant U. S. Attorney and will assist in the trial of the remaining seven defendants, currently scheduled to begin October 30. CPAG is also assisting in analyzing trading records, creating demonstrative exhibits, and preparing for summary trial testimony.

 

U.S. v. Coppa, et al. – United States Attorney’s Office (EDNY)

 

This IPO manipulation case involves 19 defendants, including the principals of the brokerage firms of State Street and White Rock Partners. It also involves members of the Gambino, Genovese, Bonnano, and Colombo crime families who had been enlisted by other defendants to settle internal disputes. CPAG was extensively involved in analyzing data and interviewing potential witnesses in this matter over an 18-month period, and will provide summary trial testimony and demonstrative trial exhibits.

 

"UPTICK" Indictments – United States Attorney’s Office (SDNY)

 

In June 2000, the U.S. Attorney for the Southern District of New York announced criminal charges against 120 defendants named in 21 separate charging documents, as part of "Operation Uptick." The defendants included members and associates of all five New York Mob families, and allegations that they had controlled or infiltrated several brokerage firms, including First Liberty Investment Group, William Scott & Company, Bryn Mawr Investment Group, Monitor Investment Group, Meyers Pollack & Robbins, and Atlantic General Financial Group. The cases included allegations of kickbacks to an investment adviser in connection with a New York Stock Exchange listed Real Estate Investment Trust (American Realty Trust), as well as a union pension fund. The allegations included fraudulent Internet touting of stocks, fraudulent private placements, pump and dump schemes, prearranged trades, bribes, "no net sales" policies, and brokers being subjected to "beatings, intimidation and threats."

 

Market Regulation and CPAG have provided trading analyses and background information from the NASD’s Central Registration Depository, as well as customer loss information for purposes of sentencing calculations, and plans extensive involvement in assisting the U.S. Attorneys Office and the FBI in trial preparation.

 

U.S. v. Abramo – United States Attorney’s Office (SDFL)

 

This case involved "pump and dump" manipulations by a brokerage firm named Sovereign Equity Management Corporation, which a "capo" in the Decavalcante crime family, Philip Abramo, secretly controlled. NASDR’s Atlanta district office and, to a lesser extent, CPAG, assisted in this matter in Tampa.

 

People v. Spero – Manhattan District Attorney

 

CPAG assisted the Manhattan District Attorney in this case involving an alleged enforcer for the Genovese crime family. This securities fraud consisted of telemarketers posing as brokers and selling fictitious stock in imaginary trucking companies. All of the defendants pleaded guilty, and the alleged Genovese enforcer is serving up to 5 years for securities fraud.

Other Matters

 

CPAG and the Market Regulation Department are also currently involved in assisting in several non-public investigations involving allegations of organized crime involvement, but are unable to comment on these confidential matters.

Although CPAG has had extensive involvement in assisting prosecutors and agents on organized crime-related cases, this is a relatively small part of that unit’s work. Of the approximately 200 matters CPAG has assisted on, fewer than a dozen have involved any allegations of organized crime involvement. The non-Mob cases have in fact often involved more defendants and, in some cases, more extensive securities frauds than the Mob-related cases.

 

For example, CPAG is currently assisting the U.S Attorney for the Southern District of New York on U.S. v. Randy Pace, et al., a case involving numerous fraudulent initial public offerings, primarily involving a notorious penny stock firm named Sterling Foster. NASD Regulation brought a major regulatory action against Sterling Foster and its principals and brokers in 1996, an action that preceded SEC and criminal charges. CPAG has spent many months analyzing the trading records of the securities involved in the criminal case. On September 8, 2000, the two primary defendants in that case – Randy Pace and Warren Schreiber - pleaded guilty to criminal charges that they helped cheat investors of $170 million by manipulating the price of stocks the firm underwrote.

 

In U.S. v. Swan, et al, CPAG’s Chief Counsel, also supported by the Market Regulation Department, was the lead prosecutor in a series of related cases in Las Vegas in which thirty-eight defendants, including stock promoters, stockbrokers, financial public relations consultants, officers and directors of the public company, and the company’s accountant, pleaded guilty or were convicted at two trials on charges including racketeering, conspiracy, securities fraud, wire fraud, money-laundering, illegal structuring of financial transactions, and tax evasion. In essence, the Chairman and CEO of a company named Teletek recruited a nationwide network of stockbrokers and bribed them to recommend Teletek stock to their customers, often by sending thousands of dollars in cash by Federal Express. The most culpable of these defendants are facing likely sentences of approximately 10-14 years in prison.

 

CPAG has also provided assistance to the Manhattan District Attorney’s Office in People v. Victor Wang, et al., an indictment issued on May 5, 1999, charging 17 defendants with 109 counts of enterprise corruption, grand larceny, violations of the Martin Act, and related charges at Duke & Company. This case grew out of an independent NASD Regulation investigation that was ultimately referred to the prosecutors.

 

More recently, CPAG assisted the Manhattan District Attorney’s Office in a case involving allegations of manipulation of numerous stocks over a nine-year period by the brokerage firm D.H. Blair. This case was preceded by an independent NASD Regulation action in 1997, in which D.H. Blair was fined $2 million and ordered to pay $2.4 million in restitution to customers.

Just as a small part of CPAG’s work involves organized crime, it also makes up a small part of the work of the Market Regulation Department. Market Regulation has also assisted prosecutors in referring investigations of insider trading and fraud to the SEC and criminal law enforcement agencies around the country. These referrals resulted in numerous criminal cases filed. Market Regulation has been particularly active in surveilling fraudulent Internet activity, particularly so-called "pump and dump" schemes. Two examples of our ability to act quickly are cases involving Uniprime Capital and NEI Web World, both over-the-counter micro cap companies.

 

In the Uniprime case, the issuer claimed in press releases that it had developed a cure for AIDS. This information, combined with Internet message board chat, spurred investors’ interest, causing a 300% price rise in Uniprime shares and over $20 million in market transactions. This scenario was identified immediately and referred within the same day to the SEC and U.S. Attorney’s Office. This referral resulted in the SEC taking civil action and the U.S. Postal Inspector service arresting the architect of the scheme, a paroled convicted murderer. The U.S. Attorney’s office for the Southern District of New York is currently prosecuting this case as U.S. v. Flores.

 

In the NEI Web World case, Internet message board activity containing false merger information caused investors to purchase NEI Web World shares, driving the share price from $0.09 to over $15 in less than an hour of trading. Again, this scenario was identified immediately and referred the same day to the SEC. This referral resulted in the SEC taking civil action and the FBI arresting three recently graduated UCLA students for perpetrating this scheme in which they dumped previously purchased NEI Web World shares into the rising market created by their fraudulent Internet postings.

 

NASDR’s Taping Rule

 

When NASDR succeeds in putting a securities firm out of business, our job is not over. Sometimes the principals in those firms turn around and form new firms under a different name; other times the brokers go in clusters or en masse to a new firm or to existing broker-dealers. When a large number of these brokers become employed at another broker-dealer, this raises the risk that their new firm will have significant sales staff that may have taken their bad habits with them.

 

In September 1997, NASDR filed with the SEC a significant new rule proposal on the taping of broker’s conversations with their customers. After comment and approval by the SEC, Conduct Rule 3010(b)(2) went into effect on August 17, 1999. The rule requires a brokerage firm to tape record all brokers’ calls with existing or potential customers if a certain percentage of the firm’s brokers were employed by firms that have been expelled or had their registration revoked due to sales practice violations. The numerical criteria vary, depending on the size of the firm. The threshold percentage of brokers from a "disciplined firm" that would require recording ranges from 40% for a small firm to 20% for a large firm. Once a member becomes subject to the Taping Rule, it must not only tape telephone calls for two years, it must establish, maintain and enforce special written procedures to supervise the telemarketing activities of all of its registered persons.

Training

 

NASD Regulation has also been very active in providing training on securities issues to prosecutors and investigating agencies. In each of the last three years, the FBI has held a weeklong training program on securities cases at its facility in Quantico, Virginia; CPAG and NASDR’s Market Regulation Department have taught agents as part of this program every year.

On September 26-28, 2000, CPAG’s Chief Counsel will be one of the instructors at the Department of Justice’s Securities Fraud Seminar at the government’s training facility in Columbia, South Carolina. This seminar is being given to approximately 70 Assistant United States Attorneys from offices throughout the country. Market Regulation staff regularly take part in SEC training to develop investigative techniques and inform staff of tools available through NASDR. Representatives of NASDR’s Enforcement Department frequently provide training to prosecutors and agents, including recent sessions in Boston, Miami, and San Francisco. NASDR’s New York district office regularly provides various levels of training to agents and prosecutors, including intensive programs in which FBI agents, federal prosecutors, and prosecutors from the New York Attorney General’s Office and the Manhattan District Attorney’s Office spend two to three full days learning how the securities industry is structured, how NASDR conducts its examinations of brokerage firms, and how to understand the various records maintained by brokerage firms and NASDR, among other topics. In addition, that office coordinates quarterly meetings with Federal, state and local prosecutors in the New York City area that include discussion of identification of the influence of organized crime. NASDR has also provided training for foreign securities regulators on a number of occasions.

 

Conclusion

 

In closing, I wish to emphasize that the NASD is committed to providing a fair, well-regulated environment for the trading of all securities, even the most thinly-traded stocks, free of the taint of organized crime. We promise to continue to work diligently with federal and state law enforcement towards that end. Thank you.