NASD Hearing Panel Bars Municipal Securities Broker for Fraudulent Sales Practices
Washington, D.C.— An NASD Hearing Panel has barred Marshall J. Field of Woodland Hills, CA, from the securities industry for fraudulent sales of municipal securities and for making unauthorized transactions in customer accounts.
The panel also ordered monetary sanctions against Field, the majority owner of now-defunct American National Municipal Corp. Field must offer rescission for transactions - that is, he must offer to repurchase bonds he sold customers at the original purchase price - totaling approximately $422,000. Field must also pay restitution of approximately $63,000, plus interest, to investors who suffered losses because of his misconduct.
The Hearing Panel found that from January 1999 through October 2002, Field made intentional misrepresentations and omissions of material fact to customers in recommending the purchase and sale of eight special, limited obligation bonds that were not backed by any public agency. Instead, they were payable solely from the anticipated revenues of the projects the bonds were funding - including a housing project and a golf course. The prospectus and official statement for each bond explicitly cautioned that investing in the bond involved substantial risks - including the potential loss of the entire investment, since anticipated revenues might be insufficient to pay the principal and/or interest; and because the underlying project was dependent on a developer/consultant with a limited operating history and no independent sources of revenues. The official statements also noted that the bonds could lose their tax-exempt status.
Nevertheless, Field promoted the bonds as safe and secure investments offering generous interest, the panel found. He did not inform his customers that the bonds were special, limited obligations, he did not disclose the risks associated with them, and he failed to furnish his customers with official statements or prospectuses that accurately described the bonds and their risks - even when those documents were specifically requested by customers.
Field also failed to disclose to his customers, either orally or through the delivery of official statements or prospectuses, that the managing underwriter for each of the bonds and two of its principal officers had been accused by the State of California and the Securities and Exchange Commission of securities law violations in connection with municipal securities offerings associated with developments in California.
The Hearing Panel noted that Field targeted unsophisticated, vulnerable, often elderly customers who relied on him for investment advice. Most of the customers contacted Field after seeing his television advertisements extolling the safety and security of municipal bonds. But "rather than recommend safe and reliable investments," the panel wrote in its decision, Field induced his customers "to invest in speculative municipal bonds that were underwritten by a firm and its principals who had been accused by state and federal regulatory authorities of securities fraud."
The panel also found that Field executed a total of eight unauthorized transactions, most involving both an unauthorized purchase and an unauthorized sale, in the accounts of six different investors. The Hearing Panel found that the unauthorized transactions were accompanied by deception about the nature of the bonds and the reasons for the unauthorized transactions. Finally, the Hearing Panel found that Field guaranteed an investor against loss in connection with her purchase of a municipal security.
The Hearing Panel found that Field violated federal securities laws and the rules of the Municipal Securities Rulemaking Board (MSRB), which are enforced by NASD. Noting the egregious nature of the violations and that Field has not accepted responsibility for his misconduct, the panel said it "believes that to remediate the misconduct and to protect the investing public, Field should be barred from associating with any (registered firm) in any capacity" - NASD's most severe sanction for an individual. The panel ordered restitution and rescission to customers as well.
The Hearing Panel's Decision will become the final decision of NASD after 45 days unless the matter is appealed to the National Adjudicatory Council (NAC) or the NAC calls the Decision for review. Upon appeal or review, the NAC may affirm, dismiss, modify or reverse any of the findings made by the Hearing Panel. The NAC may affirm, modify, reverse, increase or reduce the sanctions imposed by the Hearing Panel, or may impose any other fitting sanctions.
Investors can obtain more information about, and the disciplinary record of, any NASD-registered broker or brokerage firm by using NASD's BrokerCheck. NASD makes BrokerCheck available at no charge to the public. In 2005, members of the public used this service to conduct more than 4.3 million searches for existing brokers or firms and requested almost 194,000 reports in cases where disclosable information existed on a broker or firm. Investors can link directly to BrokerCheck at www.nasdbrokercheck.com. Investors can also access this service by calling 1-800-289-9999.
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