Not-So-Hot IPO: The NASD fined San Francisco-based Thomas Weisel Partners $1.75 million for levying what the NASD deemed exorbitant commission charges on “hot” IPO shares. The firm sometimes charged commissions of more than $1 per share for attractive initial public offerings between 1999 and 2000, when a typical commission charge for such a transaction was roughly 6 cents per share. “There was no legitimate reason to pay hundreds of thousands of dollars more than other firms would have charged to carry out routine trades,” said NASD vice chairman Mary Schapiro.
Expelled, Reinstated, Expelled: Boca Raton-based brokerage firm LH Ross was officially expelled from the securities industry and fined more than $12 million on March 31, and its owner and president, Franklyn Michelin, was barred for life from working in the industry. The firm was scheduled to go before an NASD panel in the coming weeks to appeal charges of manipulation, fraud, excessive markups and sales of unregistered securities, among other violations that were part of pending enforcement actions. Michelin and the firm withdrew the appeal, rendering the expulsion final. (LH Ross had been initially expelled in January, but a body within the NASD — the National Adjudicatory Council — reversed the decision.)
Big Brother SEC: The SEC settled an enforcement action against the New York Stock Exchange to the tune of $20 million, for four years of failing to police specialists who conducted illegal proprietary trading on the floor of the NYSE. The SEC found the specialists caused $158 million in investor harm through improper trading methods, including “interpositioning” the firm's dealer accounts between customer orders, profiting from the spread and “trading ahead” for their own accounts. As part of the settlement, the NYSE agreed to 18 months of video and audio surveillance of its trading floor, and a regulatory audit every two years until 2011. Mark Schonfeld, director of the commission's Northeast office, said the action “will raise the bar for regulation at the NYSE.”
