NASD Regulation Fines and Censures Worldco, LLC and Former Principal for Day Trading Margin Violations
Washington, D.C.—NASD Regulation, Inc. today announced that it censured and fined Worldco, LLC of New York City $175,000 for violating NASD day trading rules. Additionally, NASD Regulation announced that Worldco's former Chief Financial Officer, Terry T. Maloney, was censured and fined together with the firm, an additional $15,000 for the violations.
NASD Regulation found that from October 1998 through March 2000, Worldco failed to adequately monitor, calculate and enforce NASD day trading margin requirements for a prime brokerage account of an institutional customer. Worldco cleared and financed transactions in that customer's account.
NASD Regulation found that Worldco failed to monitor and calculate whether the account, which engaged in extensive day trading, exceeded day trading buying power. As a result, Worldco was not able to determine whether the account had sufficient equity, and whether a margin call needed to be issued. It was found that Worldco, acting through Maloney, who was responsible for ensuring the firm's compliance with day trading margin rules, violated NASD rules.
In a typical prime brokerage account, an institutional investor will execute trades with various broker-dealers, and the trades will be aggregated in the prime brokerage account for the purpose of clearance and settlement. The clearing firm is responsible for ensuring that the prime brokerage account is maintained pursuant to the requirements of Regulation T and applicable Self Regulatory Organization margin rules. NASD rules require, among other things, that a firm ensure that a customer's account maintains sufficient equity, and in the case of a deficiency, require that the customer provide additional cash or securities to meet any deficiency.
As a part of the settlement with NASD Regulation, Worldco and Maloney neither admitted nor denied NASD Regulation's findings.
Investors can obtain more information about NASD Regulation as well as the disciplinary record of any NASD-registered broker or brokerage firm by calling (800) 289-9999, or by sending an e-mail through NASD Regulation's Web Site, www.nasdr.com.
The National Association of Securities Dealers, Inc. (NASD) is the largest securities-industry, self-regulatory organization in the United States. It is the parent 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; www.nasdr.com; www.amex.com; www.nasdadr.com.