NASD Regulation Issues Complaint Against Monitor Investment Group, Inc. and 17 Principals, Brokers
Washington, D.C.—NASD Regulation, Inc., today issued a complaint against Monitor Investment Group, Inc., and 17 principals and brokers alleging fraud and other violations of National Association of Securities Dealers, Inc. (NASD®) rules and federal securities laws in connection with the sale of common shares of Accessible Software (ASWI), an OTC Bulletin Board® security, and other activities. The complaint alleges that Monitor and others made more than $600,000 in illegal profits. Monitor, which was headquartered in New York City, withdrew its membership from the NASD in October 1996.
In addition to the firm, the complaint names Monitor’s owner and Chief Executive Officer, William Palla; President, John Montelbano; and Compliance Director, Emanuel Gennuso. Also named are Jeffrey Pokross and Salvatore Piazza who, according to the complaint, are believed to have secretly controlled Monitor by participating in the day-to-day operations of the firm, infusing capital into the firm, directing brokers’ activities, and bringing investment banking transactions to the firm.
The complaint alleges that Monitor—acting through Palla, Piazza and Pokross—engaged in a scheme to manipulate the price of Accessible Software, Inc. The complaint also alleges that Monitor exploited its position as Accessible Software’s only market maker to illegally raise the per share price from $1 to $6 3/4 over a two-hour period. As a result of its sales of previously acquired stock, Monitor, its principals, and others are alleged to have illegally profited by more than $600,000 in two days.
The complaint further alleges that Monitor used concerted and high-pressure sales tactics to sell a large volume of Accessible Software’s shares during the two-day period. Specifically, investors were subjected to false and deceptive sales pitches. In addition, Monitor and its employees ignored the suitability of this particular investment, a speculative and low-priced security with a history of operating losses, in sales presentations to prospective investors.
The complaint alleges that brokers at Monitor were told that they would receive compensation of up to 33 percent of the proceeds as compensation for selling Accessible Software, which would not be disclosed to investors. Customers were charged undisclosed mark-ups of at least 14 to 33 percent on purchases of Accessible Software, according to the complaint. Generally, NASD Regulation considers mark-ups in excess of 10 percent to be fraudulent.
The complaint also alleges that Monitor permitted at least one unregistered individual to act as a broker. The firm is charged with lying to regulators about the use of unregistered personnel and with creating false and fictitious records in an attempt to conceal their misconduct. NASD supervision rules were also allegedly violated by the failure to implement, maintain and enforce supervisory systems and adequate written supervisory procedures that would have detected and prevented the violations.
Accessible Software continues to be traded on the OTC Bulletin Board. In the complaint, NASD Regulation does not allege that Accessible Software knew that the price of its shares were being manipulated.
The issuance of a disciplinary complaint represents the initiation of a formal proceeding by the Association in which findings as to the allegations in the complaint have not been made and does not represent a decision as to any of the allegations contained in the complaint. Because this complaint is unadjudicated, you may wish to contact the respondents before drawing any conclusion regarding the allegations in the complaint.
Under NASD Regulation rules, the individuals and the firms named in the complaint can file a response and request a hearing before an NASD Regulation disciplinary panel. Possible sanctions include a fine, suspension, bar, or expulsion from the NASD.
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, and The Nasdaq Stock Market, Inc., are subsidiaries of the National Association of Securities Dealers, Inc. (NASD®), the largest securities-industry self-regulatory organization in the United States.