News Release

NASD's NAC Bars Tony Elgindy and Expels Key West Securities, Inc. for Manipulative Short Selling Scheme

Washington, DC — NASD's National Adjudicatory Council (NAC) ruled that Amr (Tony) Elgindy and his firm, Key West Securities, Inc., engaged in a manipulative scheme in 1997 to inflate artificially the share price of Saf T Lok, Inc. through the entering of fraudulent quotations in the Nasdaq system, selling the stock short at the artificially high prices, and then taking active steps to depress the share price of Saf T Lok through the dissemination of negative research comments. The NAC ruling reversed that portion of a December 2001 NASD Hearing Panel decision that dismissed the charge of manipulation, while affirming the Hearing Panel's findings other violations. The NAC barred Elgindy from associating with any NASD member in any capacity, expelled Key West Securities from NASD membership, and fined Elgindy and Key West Securities $51,000, jointly and severally.

NASD filed the original complaint in March 2000. It charged that from Oct. 9, 1997, to Nov. 11, 1997, Key West Securities and Elgindy engaged in a manipulative short selling scheme involving the common shares of Saf T Lok, Inc. NASD charged that Elgindy entered quotes in Saf T Lok designed to artificially increase the inside bid, failed to honor the firm's quotes, and published negative research comments about the company to support the fraudulent scheme. The complaint also alleged that Key West Securities and Elgindy violated NASD's advertising rule by disseminating a negative report about Saf T Lok which failed to disclose that Key West Securities was a registered market maker and held a proprietary short position in the stock. At the time of the manipulation, in October 1997, Saf T Lok was listed on the NASDAQ SmallCap Market.

In reversing the Hearing Panel's dismissal of the market manipulation charges, the NAC found that the conduct of Elgindy and Key West was fraudulent and violated NASD rules and federal securities laws. The NAC concluded that the Hearing Panel incorrectly required NASD to prove that Elgindy and Key West Securities controlled the market for Saf T Lok shares to reach a finding of manipulation. Rather, the NAC ruled that Elgindy's actions violated NASD fraud rules because he took steps to artificially influence the market price for Saf T Lok shares.

The NAC also overruled the Hearing Panel's conclusion that the evidence did not prove manipulation because it did not have certain "hallmarks" of a classic "pump and dump" manipulation. The NAC pointed out that there is no one exclusive blueprint for market manipulation and emphasized that the securities laws contain a catchall provision that may be applied flexibly to allow regulators to deal with unique manipulative schemes.

The NAC is a 14-person committee composed of seven industry and seven non-industry members that decides appeals from disciplinary, membership, and exemption decisions; rules on statutory disqualification applications; and advises on other policy matters. Before being appealed to the NAC, the Elgindy/Key West case was heard by an NASD Hearing Panel. A Hearing Panel consists of an NASD Hearing Officer along with two members of the securities industry.

NASD is the leading private-sector provider of financial regulatory services, dedicated to bringing integrity to the markets and confidence to investors 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 member firms. For more information, please visit our Web Site at