NASD Regulation Settles Stock Manipulation Case with M. H. Meyerson & Co., Inc. and Four Execs
Washington, D.C. — NASD Regulation, Inc., announced today that it found that M.H. Meyerson, & Co., Inc. and its Head Trader, Salvatore Dacunto, manipulated the stock of Concap, Inc., (CNCG) a thinly traded OTCBB security in a scheme to artificially inflate its price in return for 100,000 restricted shares under a veiled investment banking arrangement. The firm and three of its officers - CEO Martin H. Meyerson, former President and COO Michael Silvestri and Compliance Officer Joseph G. Messina - were found to have failed to adequately supervise Dacunto's trading activities, and failed to establish and maintain adequate supervisory procedures. All parties consented to NASD Regulation's findings without admitting or denying the allegations and were fined a total of $240,000.
NASD Regulation found that as part of the manipulative scheme, Dacunto acting on behalf of M. H. Meyerson & Co. of Jersey City, NJ, up-ticked Meyerson's bid for the security on a daily basis over a two-week period in 1998, causing the inside bid for CNCG to increase 400 percent. Dacunto fraudulently up-ticked the bid despite the lack of any favorable news reports, very little retail interest in the security, and no competing bids. In fact, Concap had no reported operating revenues for the previous three years and had recently received a going concern opinion from its auditors.
In settling with NASD Regulation:
- The firm was censured, fined $75,000 and consented to the hiring of an independent consultant to review and revise the firm's "Chinese Wall" procedures between the firm's trading and investment banking departments.
- Dacunto was fined $75,000, suspended from associating with any NASD member firm for three months and suspended for an additional two months from acting in a supervisory or trading capacity. He is also required to re-qualify as a trader through examination, before again serving in that capacity.
- The firm, along with Martin H. Meyerson, Silvestri and Messina were sanctioned for failing to adequately supervise Dacunto's trading activities and for failing to have adequate supervisory procedures in place to detect his conduct.
- Specifically, Mr. Meyerson failed to make an effective delegation of supervision of Dacunto's trading activities since he was aware that the firm had no system to monitor traders' quotations, and that Messina had not established adequate procedures to review Dacunto's market-making activities. Mr. Meyerson was fined $50,000, suspended from associating with an NASD member firm for 20 business days and suspended from serving as a supervisor for an additional 10 business days.
- Silvestri also was aware that Messina had failed to establish adequate procedures to monitor the trading department's market-making activities. He was fined $25,000 and suspended from associating with an NASD member firm for 20 business days.
- Messina, for failing to adequately supervise Dacunto, and failing to develop an adequate system to monitor the trading room's activities, was censured, fined $15,000 and required to re-qualify by examination as a General Securities Principal before again serving in that capacity.
In a related matter, NASD Regulation filed a complaint against Michael Marcus, previously a trader with Morgan Grant Capital Corp., a former NASD member firm, and Louis Montaino, a former broker with Morgan Grant, for engaging in related fraudulent trading in CNCG while at Morgan Grant. As part of the scheme, Morgan Grant obtained 1 million shares of Concap for little or no consideration. This represented more than 40 percent of the float. The two are alleged to have "pumped and dumped" the CNCG stock on their unsuspecting customers allowing the firm to garner $1.9 million in illicit profits. These charges are pending.
The complaint filed against Marcus and Montaino alleges that between July 30, 1998 and August 12, 1998, Marcus directed purchase limit orders for CNCG to Meyerson almost on a daily basis, at increasingly higher prices. At that time, Meyerson was the only active market maker in the security. According to the complaint, the orders provided a pretense for Dacunto to increase Meyerson's bid for CNCG and to make it appear as if there were interest and activity in the security. Marcus placed those orders for his firm's proprietary account despite the fact that Morgan Grant already held a substantial long position of CNCG and that Marcus had no retail orders at that time.
The issuance of a disciplinary complaint against Marcus and Montaino represents the initiation of a formal proceeding by the NASD. Investors can obtain more information and 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 at www.nasdr.com.
The National Association of Securities Dealers, Inc. 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; www.nasdr.com; www.amex.com; www.nasdadr.com.