News Release

NASD and Chicago Stock Exchange Fine and Suspend Traders for Cross-Market Manipulation

Washington, DC and Chicago, IL — Following a joint investigation, NASD and the Chicago Stock Exchange (CHX) today announced fines and suspensions against two traders for artificially inflating the price of the stock of Material Science Corporation (MSC), a New York Stock Exchange-listed company, in connection with MSC's repurchase of its stock.

NASD imposed a $25,000 fine and a three-month suspension on Klaus Offenbacher, a trader with NASD-registered First Analysis Securities Corporation of Chicago. Offenbacher is receiving credit for a 60-day suspension already imposed by his employing firm. Officials at First Analysis Securities detected the cross-market manipulation on the date it occurred and thereafter reported it to NASD.

CHX imposed a $20,000 fine and a two-month suspension on Bruce Kaminski, a floor broker with Dougall & Associates of Chicago, a CHX Participant firm.

Neither MSC, First Analysis Securities Corporation nor Dougall & Associates had knowledge that Offenbacher and Kaminski planned to artificially increase the price of MSC stock.

"Increasingly, trading volume is dispersed across multiple markets, with actions on each market affecting prices on the other markets," said Thomas Gira, NASD Executive Vice President for Market Regulation. "The cooperation between the Chicago Stock Exchange and NASD on this matter demonstrates our ability and willingness to detect and investigate improper cross-market activities."

"By working together, NASD and the Chicago Stock Exchange were able to discipline all the responsible individuals," said CHX Chief Regulatory Officer David Whitcomb. "This type of cooperation is essential in our increasingly connected markets."

The regulators' joint investigation found that Offenbacher was responsible for repurchasing MSC stock on behalf of the issuer pursuant to the company's stock repurchase program. MSC wanted its repurchases to fall within the safe harbor provision of the Securities and Exchange Commission's (SEC) rule governing issuer buy-backs, which provides that issuer purchases cannot be the opening purchase of the day and cannot exceed the highest independent bid or last independent transaction price.

The regulators found that on Aug. 21, 2006, Offenbacher received authorization from MSC to repurchase 100,000 shares of MSC stock pursuant to the repurchase program. The same day, Offenbacher located an institutional customer willing to sell a 174,300-share block of MSC stock with a limit price of $9.90. Later that day, Offenbacher attempted to contact the principals of MSC to get approval to purchase the entire block. MSC stock closed that day at a price of $9.80 per share. Early the following day, Offenbacher received approval from MSC's principals to purchase the block at $9.90 per share. Before the market opened, Offenbacher directed Kaminski to purchase 1,000 shares of MSC stock at $9.90 per share, in the event MSC opened below $9.90 per share. When MSC opened at $9.75 per share, Kaminski executed the 1,000 share transaction at $9.90 per share which artificially drove the stock's price up 15 cents to the level Offenbacher needed to execute the cross trade.

Kaminski's execution of the 1,000-share transaction on the New York Stock Exchange established an artificial reference price at which the larger block transaction was then executed on the CHX. As a result, the regulators found that Offenbacher and Kaminski knowingly and intentionally artificially increased the market price of MSC stock in an attempt to make it appear that the purchase fell within the SEC's safe harbor provision for issuer buy-backs.

In settling this matter, Offenbacher neither admitted nor denied the charges, but consented to the entry of NASD's findings that his conduct violated NASD's anti-fraud rule and other NASD rules. Similarly, Kaminski neither admitted nor denied the charges, but consented to the entry of the CHX's findings that his conduct violated the CHX's anti-fraud rule and other CHX rules.

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. In 2006, members of the public used this service to conduct more than 4.7 million searches for existing brokers or firms and requested more than 207,000 reports in cases where disclosable information existed on a broker or firm. Investors can link directly to BrokerCheck at Investors can also access this service by calling (800) 289-9999.

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CHX is an integral part of the National Market System offering competition to all U.S. equity markets and which trades most NYSE, Amex and Nasdaq issues. More information is available at