Eva Yee May Sung forged the signatures of public customers and a branch manager on forms authorizing Sung to become the new representative of certain “orphaned” brokerage accounts.
OK, now, no peeking — what sanction do you think the NASD imposed on Sung when she was caught? If you guessed that she was permanently barred, you're dead on. In February, pursuant to an Acceptance, Waiver and Consent (AWC), in which NASD respondents neither admit nor deny any allegations but consent to the entry of findings of fact and the imposed sanction, Sung, indeed, was barred.
And it seems a fair enough punishment — until you factor in the inconsistency with which the NASD and the NYSE treat similar offenses.
A Case in Point
In April 2001, Juan-Carlos Lacey, a former rep with Merrill Lynch, Pierce, Fenner & Smith, applied for a home loan through XYZ, a mortgage company. XYZ sent a verification of deposit (VOD) form to Lacey's firm to verify the current balance of Lacey's personal brokerage account, and the returned form indicated a $9,996.73 balance. The document was signed by “J Lacey” and contained the name and signature of “Assistant Administrative Manager [TM]” as the firm representative. As part of a random audit at XYZ, Lacey's firm received a request for verification of the VOD, but the firm determined it did not have an employee named TM and that the forwarded March account statement had 10 alterations designed to increase the actual balance of $996.73.
Now for the payoff: In January 2005, the NYSE censured Lacey and barred him for three years.
If you're wondering why Lacey received a limited bar, not a permanent sanction like Sung, you're not alone. Granted, the NYSE and the NASD are separate entities, and there are some important differences in the particulars of these cases. But the disparity in the intensity of the punishments is nonetheless striking. Both reps forged securities-related documents, and one is free to come back to the brokerage business in a few years while the other is banished forever.
These are hardly the only two examples of the regulators' inconsistency on matters of punishment.
Take the case of Alex Livak — a rep who prepared and submitted (or caused to be submitted) a letter to his landlord that contained a fabricated story as to why he could not pay his rent. The letter was written on his member firm's letterhead and was purportedly signed by the “Director of Security, NASD.” The individual who signed the letter was Livak's friend who, needless to say, had never been an employee of the NASD or of the member firm. In addition, Livak prepared and submitted a variable life insurance policy application to his member firm that contained false and inaccurate information.
In March 2005, pursuant to an AWC, Livak was fined $25,000 and suspended for two years in all capacities. That's right — two offenses net Livak a lighter slap than either Lacey or Sung.
Then there's Scott Steven Powell, who, without his wife's knowledge or consent, affixed her signature to a letter requesting the registration and taxpayer I.D. number of her securities account be changed. Powell effectively transferred control of the account from his wife to himself.
What was the punishment for this serious offense? At this point in our story, it should come as little surprise that the sentence does not fit the crime, or, at the very least, seems disconnected from other industry punishments for forgery.
In March, pursuant to an AWC, Powell was fined $20,000 and suspended for three months in all capacities.
Perhaps the NASD and the NYSE need to get together and compare scorecards, because these numbers just aren't adding up.