Lehl v. Securities And Exchange Commission

90 F.3d 1483 (10th Cir. 1996)

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Nature of the Case

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Facts

D was a securities salesman associated with First Choice Securities in Denver. First Choice was a registered member of the NASD and D was a registered representative. D sold 285,000 shares of stock in Champions Sports, Inc., to retail customers in eleven separate transactions. D charged his customers 6.5 cents per share, the 'execution price' established by his firm. First Choice obtained the stock from the firm at a 'strike price' of 5 cents per share. Each of these prices was posted daily on a board in the front of the Denver office. The difference between the strike price and the execution price constituted the firm's 'gross commission' on each transaction. D knew these facts. D did not know and never inquired into, the price per share the firm had paid for its Champions stock, which was in fact 3.125 cents in nine of the transactions and 3.5 cents in the other two. The NASD commenced disciplinary proceedings. The NASD found that D had violated the NASD Rules of Fair Practice by charging unfair and excessive prices without proper disclosure to his customers. D was ordered to requalify by examination as a registered representative. On appeal, NASD added a $5000 fine, plus costs. P found D violated Sections 1 and 4 of the NASD Rules of Fair Practice, Article III. P affirmed and sustained the NASD's sanctions. D appealed.