| Thursday, October 16, 1997
Nancy A. Condon - (202) 728-8379
Barry R. Goldsmith - (202) 974-2850
NASD Regulation Brings Sales Practice Charges Against 33 Former Stratton Oakmont Principals and Brokers
Washington, D.C.-- NASD Regulation, Inc., today announced that it has filed disciplinary charges against 33 former principals, brokers, and employees of the now defunct Long Island brokerage firm of Stratton Oakmont, Inc. The firm was expelled from the National Association of Securities Dealers, Inc. (NASD) in December 1996 because it posed "an on-going risk to the investing public."
Today’s complaint, which alleges a wide range of serious sales practice violations by 33 individuals, is one of the largest complaints of its type ever brought by NASD Regulation and results from a continuing investigation into Stratton Oakmont’s operations. The complaint alleges that 33 individuals, who were based at Stratton Oakmont’s headquarters in Lake Success, N.Y., engaged in a number of fraudulent sales practices and other misconduct from 1993 through 1996. NASD Regulation also alleges that in many instances, Stratton Oakmont used prepared scripts (six of which are part of the complaint) as part of their aggressive telemarketing efforts to sell speculative securities.
Today’s complaint identifies at least 70 specific customers who were allegedly victimized through fraudulent practices including: unauthorized trading; baseless or improper price predictions; inadequate or inaccurate risk disclosure; churning and excessive trading; sale of unsuitable investments to risk-averse customers; advising customers to disregard information in prospectuses; falsely promising to limit losses to a specific amount; claiming access to inside information; making false statements regarding specific securities and issuers; making improper comparisons to other stocks; tying the purchase of initial public offerings to a commitment to buy stock in the aftermarket; guaranteeing customers against loss; promising to make up losses with new trades; refusing to execute or aggressively discouraging orders to sell stocks; use of false and misleading scripts; supervision failures; falsifying account documentation; failing to appear for testimony before the NASD; and lying during testimony.
The complaint names the following principals:
Named brokers include:
Prior to its expulsion by NASD Regulation, Stratton Oakmont and its principals were repeatedly fined, censured and, in some cases, barred by federal and state securities regulators. Since June 1989, the firm and its principals have been the subject of numerous NASD Regulation disciplinary actions, including fines, censures, suspensions, and bars. In recent years, the Securities and Exchange Commission (SEC) and a number of state securities regulators around the nation have also sanctioned both Stratton Oakmont and its principals. In early 1994, the SEC settled an enforcement action against Stratton Oakmont and its President, Daniel M. Porush, after alleging that the firm engaged in securities fraud through its "boiler room" sales operation. By late 1994, the SEC had charged Stratton Oakmont with violating the settlement agreement and obtained a permanent injunction against the firm requiring future compliance. At the time of its expulsion in December 1996, the firm had been barred by a number of state regulators.
Stratton Oakmont is currently being liquidated in accordance with the Securities Investors Protection Act (SIPC) of 1970.
The filing of an NASD Regulation complaint represents the initiation of a formal proceeding. At this time, the allegations have not been proven and no decision has been made. Under NASD Regulation rules, the respondents can file a response to these charges and request a hearing before an NASD Regulation disciplinary panel. Possible sanctions include a fine, suspension, or bar from the securities industry.
Investors can obtain the disciplinary record of any NASD-registered broker or brokerage firm by calling 800-289-9999.
NASD Regulation oversees all U.S. stockbrokers and brokerage firms. NASD Regulation, along with The Nasdaq Stock Market, Inc., are subsidiaries of the National Association of Securities Dealers, Inc. (NASDÒ), the largest securities-industry self-regulatory organization in the United States.
Investors who have questions should contact NASD Regulation at (301) 590-6500.