NASD fines, banishes 9 brokers for test fraud Licensing exams taken by imposters


WASHINGTON -- The National Association of Securities Dealers fined nine New York-area brokers as much as $50,000 apiece yesterday and permanently barred them from the securities industry for paying impostors to take their licensing exams.

Several of the brokers, all from penny-stock firms, also were ordered to refund illegal profits, which amounted to $440,000 in one case.

The charges are the second wave connected to the most widespread brokerage test-taking fraud in recent years. In August, 10 brokers and two brokerage employees were fined and permanently barred by the NASD for paying stand-ins to take the Series 7 licensing exams.

"In a business built on trust and confidence, there is no room for any person who would cheat on the exam," said Mary Schapiro, president of NASD Regulation Inc. The broad investigation by the NASD, a self-policing industry body, is continuing, and is expected to lead to charges against still more brokers, NASD spokesman Reid Walker said.

The inquiry has been examining the possibility that an organized ring might have been involved. NASD officials have said some of the impostors might have been brokers, while others apparently were outsiders who bought study materials or took preparation courses. The New York district attorney and the New York attorney general's office have also been investigating.

The test-taking fraud allegedly occurred between 1993 and 1995, before the NASD started fingerprinting all exam takers. Several firms that employed brokers disciplined yesterday -- defunct Hanover Sterling & Co., A. S. Goldmen & Co., and Harriman Group -- also were employers of brokers fined in August.

The Series 7 test is a three-hour national exam that allows brokers to sell a broad range of securities.

The nine brokers whose charges were announced yesterday agreed to settle administrative charges without admitting or denying misconduct. All were fined $25,000 for cheating on the exam, six were fined an additional $25,000 for failing to cooperate with the NASD, and three were ordered to pay refunds as well.

Pub Date: 11/20/96

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