NASD Hearing Panel Suspends, Fines Former GunnAllen Broker for Threatening Public Company
Washington, DC — An NASD hearing panel has suspended former stockbroker Shawn Aaron for two years and fined him $50,000 for threatening and intimidating Optelecom-NKF, Inc. (OPTC), a Nasdaq SmallCap company, while he was registered with GunnAllen Financial, Inc., of Tampa, FL. NASD had charged that Aaron engaged in a scheme to defraud and extort OPTC by threatening to drive down the price of its stock from $13 to $6 per share unless it provided him with confidential business information.
The hearing panel found that Aaron purchased 5,180 shares of OPTC for his own account and another 134,540 shares for 54 of his customers in early April 2004. By mid-April, Aaron and his clients together held 139,720 shares, or about 4% of OPTC's outstanding shares. On April 16, 2004, Aaron left a voicemail with OPTC's Chairman and CEO stating that he owned 10% of the company's stock and that he wanted to talk to him about taking the stock to "the next level."
On April 19, 2004, Aaron talked to OPTC's investor liaison consultant. Aaron again claimed that he owned 10% of the company, or about 300,000 shares. Aaron asked OPTC's investor liaison consultant for reasons to keep buying OPTC. Otherwise, Aaron stated, he "could drive the stock down to six bucks if I dumped 300,000 shares on the market, unless you have institutions lined up." Aaron boasted that he was GunnAllen's top producer and claimed to have a special relationship with its president, with whom he shared his "best ideas" about promoting stocks. Aaron also claimed he was instrumental in increasing the stock prices of at least two other publicly traded companies.
The hearing panel concluded that Aaron made material misrepresentations and threatened OPTC, and that these "misrepresentations, threats, and intimidation plainly overstepped the bounds" of permissible behavior, violating NASD rules requiring brokers to observe high standards of commercial honor and just and equitable principles of trade. In arriving at its sanctions, the hearing panel noted that Aaron's conduct was intentional, was for the purpose of some monetary or other gain, and that he did not take responsibility for his actions. It also noted that in 1999, Aaron agreed to withdraw his registration in Massachusetts and not re-apply for 25 years to resolve the state regulator's charges that he "used high pressure sales tactics, did not disclose material facts and made false and misleading statements" to investors to sell speculative stocks.
Optelecom-NKF is a Germantown, MD-based company that designs and manufactures communications products that transport data, video, and audio over the Internet and fiber optic cables.
Because the hearing panel's decision was not appealed, the decision is now final and the sanctions the panel imposed take effect today. Aaron's two-year suspension will continue through April 18, 2008.
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 more than 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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