==========================================START OF PAGE 1====== . SECURITIES AND EXCHANGE COMMISSION Washington, D.C. SECURITIES EXCHANGE ACT OF 1934 Rel. No. 38454 / March 31, 1997 Admin. Proc. File No. 3-8952 _________________________________________________ : In the Matter of the Applications of : : BROOKLYN CAPITAL & SECURITIES TRADING, INC. : 1828 East 52nd Street : Brooklyn, New York 11234 : : and : : DAVID RYBSTEIN : 1828 East 52nd Street : Brooklyn, New York 11234 : : For Review of Disciplinary Action Taken by the : : NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. : : OPINION OF THE COMMISSION REGISTERED SECURITIES ASSOCIATION -- REVIEW OF DISCIPLINARY PROCEEDINGS Violation of Rules of Fair Practice Manipulation Where member firm of registered securities association and its president manipulated the price of a security, held, association's finding of violation and sanctions it imposed sustained. APPEARANCES: Ruthann G. Niosi, for Brooklyn Capital & Securities Trading, Inc., and David Rybstein. Alden S. Adkins and Carla J. Carloni, for NASD Regulation, Inc. Appeal filed: February 16, 1996 Last brief filed: June 12, 1996 I. Brooklyn Capital & Securities Trading, Inc. ("BCAP" or the "Firm"), a member of the National Association of Securities Dealers, Inc. (the "NASD"), and David Rybstein, BCAP's president (collectively "Applicants"), appeal from disciplinary action. The NASD found that BCAP and Rybstein "employed manipulative and deceptive devices" in the trading of a security, in violation of Article III, Sections 1 and 18 of the NASD's Rules of Fair Practice, and Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 thereunder. 1/ The NASD censured BCAP and Rybstein and imposed upon them a joint and several fine of $58,000. It also suspended BCAP and Rybstein in all capacities for one year each, and thereafter required BCAP to reapply for membership and Rybstein to requalify by examination for association in any capacity. Our findings are based on an independent review of the record. II. This case concerns Applicants' role, 2/ together with U.S. Securities Clearing Corp. ("USSCC"), a former NASD member; Richard Anders, a USSCC salesperson; and certain other USSCC personnel, in an effort to manipulate the price of the common stock of Photees Inc. ("Photees" or the "Company"), during the period March through April 1992. 3/ The facts are as follows. A. The Photees Offering. 1/ The NASD recently revised and renumbered its rules. No substantive changes were made to the rules at issue here. Article III, Section 1 (new Conduct Rule 2110) requires adherence to "high standards of commercial honor and just and equitable principles of trade." Article III, Section 18 (new Conduct Rule 2120) provides that "[n]o member shall effect any transaction in, or induce the purchase or sale of, any security by means of any manipulative, deceptive or fraudulent device or contrivance." 2/ Rybstein also was BCAP's majority shareholder and trader. The Firm operated out of the first floor of Rybstein's residence. 3/ The NASD brought disciplinary proceedings against USSCC and certain of its employees in connection with their roles in this manipulation. Anders, who was found to have "orchestrated the manipulation," was censured, fined $330,000, and barred from association with any NASD member. Kenneth Moreland, a USSCC salesman, and Anthony Miranti and Jimmy Villalobos, USSCC's president and chairman, respectively, were also sanctioned. None of these parties has appealed. ==========================================START OF PAGE 3====== Photees launched an initial public offering (the "Offering") on December 13, 1991. According to the prospectus, Photees was "a development stage company which was formed to market certain products and services involving the transfer of full color images to textile fabrics," primarily T-shirts. As of July 31, 1991, Photees had assets of $59,778 and a negative net worth of $43,658. 4/ The Offering was self-underwritten and scheduled to remain open for 90 days. It was for a minimum of 10,000 units and a maximum of 20,000 units, at a price of $3.00 per unit. Each unit consisted of one share of stock, ten Class A warrants and ten Class B warrants. The warrants were immediately detachable from the units and entitled the holder to purchase additional shares of the stock at $2.75 per share for a period of 24 months from the date of the prospectus in the case of the Class A warrants, and at $3.00 per share for a period of 48 months from the date of the prospectus in the case of the Class B warrants. The Offering generated little investor interest. After close to three months, Photees had sold no units. Finally, on March 2 and 3, four individuals (the "Subscribers") purchased a total of 15,666.33 units, and the Offering was closed. 5/ The Offering generated total proceeds of $46,999. 6/ B. The Photees Aftermarket. On January 17, 1992, well before the Offering had closed, Rybstein filed an application on Form 211 with the NASD to permit BCAP to enter quotations for Photees securities on the NASD's OTC Bulletin Board. 7/ Rybstein stated that he decided to make a market in Photees after about 10 or 12 retail customers and other broker-dealers called him to express interest in the Company's 4/ For the period October 4, 1990 to July 31, 1991, it had sales of $149,016 and a net loss of $46,137. 5/ Although Photees' president described one of the Subscribers as his "friend" and the remaining three as "friends" of Photees' chairman, Carl Canter, Canter denied knowing more than two of the Subscribers. The Subscribers purchased the units after being solicited by officers of Photees. 6/ The prospectus indicates that over half of the proceeds went to cover legal, accounting, and other expenses related to the Offering. 7/ BCAP proposed to enter initial quotes of $2-3/4 and $3 for the units, although there was no requirement that BCAP propose quotes in its Form 211. ==========================================START OF PAGE 4====== securities. 8/ Before the NASD, however, Rybstein could not recall the persons who purportedly made these inquiries. He also could not explain how these persons learned of BCAP's potential involvement with the Company, but speculated that they had been referred to the Firm by Photees. It is unclear from the record why, in the midst of the Offering, the Company would refer potential investors to BCAP, which was neither an underwriter of the Offering nor a dealer in Photees. Rybstein also could not recall whether anyone who expressed early interest in the Company purchased stock in the aftermarket. On February 21, 1992, Alexis Gahagen opened an account with BCAP. 9/ Applicants had no prior relationship with Gahagen. Rybstein testified that, when Gahagen opened her BCAP account, she told Rybstein that she was interested in being "an active buyer and seller" of Photees securities because "she like[d] the company or something." Rybstein also testified that Gahagen "was referred to me by the [C]ompany." Gahagen, however, never purchased any units in the Offering, although the Offering was open at the time that she opened her BCAP account. In a letter dated March 5, 1992, Photees notified Applicants that Photees had sold 15,666.33 units and the Offering had closed. Between March 13 and March 17, 1992, each of the Subscribers opened accounts at BCAP. At this time, BCAP's Rule 211 application had not been approved, and BCAP had not entered quotes in any quotation medium. 10/ Rybstein stated that he believed that the Subscribers were "flippers," who hoped to sell their Photees holdings "to make a quick buck." On March 23, 1992, Anders gave a $4 limit order to USSCC's trader, Thomas Richardson, for 15,666 shares of the stock. 11/ Since no firm listed Photees in any quotation medium, Richardson 8/ Canter testified that he told Rybstein that some of the Subscribers had expressed interest in the units as early as January 1992. 9/ Although it appears that Gahagen was married to Anders, Rybstein denies knowing this information. The NASD found "no evidence that Rybstein was aware of the relationship." 10/ Rybstein assumed that the Subscribers learned of BCAP's interest in Photees from Photees' management. 11/ According to Kenneth Moreland, another USSCC salesperson (see n. 3, supra), Photees was paying Anders a "consulting fee" to make a market in the stock. ==========================================START OF PAGE 5====== asked Anders whom to contact about buying the stock. 12/ Anders told Richardson to contact BCAP. 13/ At 1:34 p.m., on March 23, Richardson purchased 15,666 shares of the stock from BCAP for $4 per share. The $4 limit order given by Anders to Richardson matched BCAP's offer price and the number of units held by the Subscribers. After this initial sale to USSCC, BCAP was short 15,666 shares of the stock. At roughly the same time as this sale to USSCC, BCAP agreed to purchase the 15,666 units held by the Subscribers for $3-3/4 per unit. 14/ According to Rybstein, BCAP did not execute its purchase from the Subscribers until March 24 so that they would have the "chance to get their certificates into me." Shortly after its sale of the stock to USSCC and its agreement with the Subscribers to purchase the units, BCAP agreed to sell to Gahagen 156,660 Class A warrants and 156,660 Class B warrants for $.001 per warrant. 15/ These were all of the warrants attached to the units sold by the Subscribers to BCAP. Rybstein charged Gahagen what he deemed to be a "token amount" for the warrants because he considered them "worthless" in that "there was no market for Photees at this time." 16/ However, based upon the price USSCC had just paid for Photees common stock, $4, the 12/ The NASD cleared BCAP's Form 211 application on March 25, 1992. BCAP did not enter quotes in the stock until April 23, 1992, when it entered a bid of $6 and an ask of $6-1/2. By April 27, 1992, the spread had grown to $3 bid and $7 ask. Rybstein recorded quotations from another broker-dealer, William Frankel & Company, on BCAP order tickets, although that firm was not listed as a market maker in any price quotation service. It appears that Frankel effected no trades in Photees securities during the period at issue. 13/ When asked how Anders knew whom to contact, Rybstein stated "he most probably heard from [Photees] that Brooklyn Capital was in the process of making a 15c2-11 filing. I can't say for sure." 14/ These sales of Photees units were the only trades in the Subscribers' accounts during 1992. It appears that the remaining .33 unit purchased by one of the Subscribers was not sold to BCAP. 15/ As with its purchase of the units from the Subscribers, BCAP did not execute this trade until March 24. 16/ Applicants claim that the warrants were not "in the money" because Photees was not then being continuously quoted by any market maker "in a liquid market." ==========================================START OF PAGE 6====== warrants were deeply "in the money," i.e., their exercise price, $2-3/4 and $3, respectively, was substantially below the price paid in the most recent inter-dealer transaction in the stock. At 2:45 p.m., on March 23, shortly after agreeing to sell the warrants to Gahagen, BCAP sold an additional 55,300 shares of Photees stock to USSCC at a price of $6-1/4 per share. As in the earlier trade, Anders had given Richardson a limit order, $6-1/4 per share, that was identical to BCAP's offer price as set by Rybstein. Rybstein claimed that he raised the offer price by $2-1/4 because BCAP "didn't have any sellers." Gahagen, however, had just purchased 313,320 warrants and, according to Rybstein, had given him "basically broad parameters" to sell the stock (after exercise of the warrants) at a price of "4 or better." USSCC made two additional purchases of Photees stock from BCAP on March 23 at a price of $6-1/4 per share. Because BCAP did not execute the purchases of the units from the Subscribers until March 24, BCAP ended the day short a total of 70,966 shares of the stock. BCAP executed the purchase of 55,300 Class A warrants from Gahagen on March 25 for a price of $3-1/4 per warrant. Gahagen's profit from this trade alone was $179,172. BCAP then exercised the warrants to cover its short position, and thereby made a profit of $.25 per share, or a total of $13,825. 17/ A few days later, BCAP purchased an additional 16,300 Class A warrants from Gahagen in two transactions at prices of $3.16 and $3 per warrant, which it then exercised to cover additional short sales of Photees stock to USSCC. Over the next 8 days, Anders and 2 other USSCC salespersons sold over 88,000 shares of the stock to 10 different retail customers at prices ranging from $4 to $6-1/4. 18/ 17/ The NASD estimated that Applicants' total profits from the manipulation were $25,772. Photees received $152,075 from the exercise of the warrants, triple the amount raised in the Offering. 18/ BCAP also sold, in two transactions, a total of 3,000 shares of the stock to a retail customer and to a wholesale customer on March 26 and 27. In addition, BCAP facilitated three separate purchases by Gahagen of Photees stock from USSCC customers in April 1992. These purchases, at prices of $5-1/2 or $6-1/2, were clearly suspicious in light of Gahagen's continued possession of a large number of the warrants which would have permitted her to purchase the stock at substantially lower prices. The NASD's investigator estimated that USSCC customers lost a total of close to $400,000 on Photees trades as a result (continued...) ==========================================START OF PAGE 7====== III. We previously have defined manipulation as the "intentional interference with the free forces of supply and demand." 19/ In determining whether a manipulation has occurred, we have "depend[ed] on inferences drawn from a mass of factual detail" including "patterns of behavior," "apparent irregularities, and from trading data." 20/ We also have noted that the "earmarks" of a manipulation often include "a rapid price surge dictated by the firm that controlled the security's market, little investor interest, an abundant supply, and the absence of any known prospects for the issuer or favorable developments affecting it." 21/ All of these factors were present here. Over the span of roughly three weeks, the price of the Company's securities more than doubled from the Offering price, despite an abundant supply and the absence of either investor interest or favorable developments affecting the Company. 22/ As a result of this manipulation, Photees investors were defrauded in that prices charged for the stock were not "determined by the unimpeded interaction of real supply and real 18/(...continued) of this manipulation. The record suggests that some, but not all, of USSCC's retail customers purchasing Photees were knowing participants in the manipulation, who hoped to resell the stock after the price was manipulated even higher. 19/ Pagel, Inc., 48 S.E.C. 223, 226 (1985), aff'd, 803 F.2d 942 (5th Cir. 1986). 20/ Pagel, 48 S.E.C. at 226. 21/ Patten Securities Corporation, 51 S.E.C. 568, 573 (1993) (citations omitted). See also Gary E. Bryant, 51 S.E.C. 463, 468 (1993). 22/ Applicants argue that there was "news out that Photees was going to be getting the rights to the State of Texas and California for distribution of Air & Water Works' water machine," an "atmospheric water collection and disbursement device." They claim that this was a positive development affecting the Company's business that could explain the rapid rise in the price of the stock. We note that the record contains very little evidence regarding these devices, or the Company's involvement with them. Moreover, according to Supplement No. 1, dated August 18, 1992, to the Photees Prospectus, the Company did not reach agreement to distribute the devices until April 1992, after most of the trades at issue had already occurred. ==========================================START OF PAGE 8====== demand" but were, rather, the product of a "distorted" market and a "stage-managed performance." 23/ As indicated above, a finding of manipulation can be "inferred from the facts and circumstances of a given case because `manipulators seldom publicize their intentions.'" 24/ The facts and circumstances warrant such an inference here. According to Rybstein, Gahagen and various other unidentified investors approached BCAP in January and February 1992 about trading in Photees, despite the fact that the Firm was then neither an underwriter of, nor a market maker in, the stock. While Rybstein suggests that the Company referred these parties to BCAP, these approaches occurred during the Offering, at a time when Photees had not yet sold a single unit. In mid-March 1992, shortly after the Offering closed, the Subscribers, holding collectively Photees' entire public float, opened accounts at BCAP for the stated purpose of selling the stock for a quick profit. Yet, at the time the Subscribers opened their accounts, BCAP was not listed as a market maker for Photees in any quotation medium. Shortly after the Subscribers opened their accounts at the Firm, Applicants began trading the stock to effectuate the scheme. Although there had been very little interest in the Offering, which had closed just 20 days before, 25/ Rybstein set an initial asking price for the stock of $4. This price represented an increase of one-third over the price set in the 23/ Edward J. Mawod, 46 S.E.C. 865, 871-2 (1977), aff'd, 591 F.2d 588 (10th Cir. 1979). See also Ernst & Ernst v. Hochfelder, 425 U.S. 185, 199 (1976) (manipulation defined as conduct "designed to deceive or defraud investors by controlling or artificially affecting the price of securities"). 24/ Jay Michael Fertman, 51 S.E.C. 943, 949 (1994) (citations omitted). See also Pagel, 48 S.E.C. at 226. 25/ Applicants contend that the limited response to the Offering did not necessarily indicate a lack of investor interest in Photees. They claim that issuers "may prefer to do a minimum on an offering because then they may be able to do a private placement at a later date at a higher price, which event would be . . . less dilutionary to the original shareholders." Other than Rybstein's own testimony in support of this proposition, Applicants presented no support for their claim that this is industry practice. Nor did they establish that this was the Company's strategy in the Offering. In any event, we believe it would be more reasonable for Photees to attempt to maximize the Offering proceeds that it would receive. ==========================================START OF PAGE 9====== Offering for units, which included one share of the stock plus 20 warrants. 26/ This price also perfectly matched the price for the limit order for 15,666 shares placed with BCAP by USSCC. Immediately following this sale to USSCC, BCAP sold its entire inventory of the warrants to Gahagen, charging a token amount because Rybstein claims that he determined that there was no market for Photees securities. Little more than an hour after making this determination, however, Rybstein raised BCAP's ask price for the stock by $2-1/4, to $6-1/4 per share. 27/ The Firm's increased ask price was again matched perfectly by a limit order from USSCC. Based on the trades at issue and the surrounding circumstances, we conclude that Applicants were part of an effort to manipulate the stock's price to a higher level. Applicants claim to have been "unknowing and unwitting pawns" in what they describe as Anders' "scheme." 28/ Applicants argue that the NASD failed to establish a clear link between Rybstein, in New York, and Anders, in Austin, Texas. 29/ The record -- including the limit orders Anders 26/ Applicants further claim that Photees' rapid price rise was justified by "street interest" in the stock is belied by BCAP's extremely limited sales of the stock during March and April 1992, exclusive of those to USSCC. We also question this claim in light of Rybstein's limited ability to identify entities expressing such interest and Rybstein's contradictory assertion at the hearing that "there was no market out there" for the securities. 27/ Applicants' assertion that Gahagen demanded a price of $6- 1/4 for the stock (and thus was responsible for the price increase) is contradicted by Rybstein's testimony that she gave him "broad parameters" to sell at "4 or better." 28/ Applicants note that, in addition to the NASD proceedings mentioned in n. 3 supra, Anders was convicted in federal district court in 1994 of securities and wire fraud arising out of an unrelated scheme. Anders was sentenced to 51 months imprisonment, three years supervised release, and ordered to pay restitution of $2.5 million and a $75,000 fine. Anders thereafter consented to a bar from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, and from participating in an offering of penny stock. See Richard A. Anders, Securities Exchange Act Rel. No. 36553 (December 6, 1995), 60 SEC Docket 2582. 29/ For example, while conceding that Anders and Gahagen "were probably married" and acting together, Applicants deny knowledge of this fact. They note that the NASD's Market (continued...) ==========================================START OF PAGE 10====== entered at BCAP that matched the Firm's quotations and Anders' initial order to purchase 15,666 shares which happened to equal the number of units held by the Subscribers -- contradicts this assertion. Rybstein concedes, moreover, that he and Anders frequently talked by telephone during the period at issue. Rybstein claims that the purpose of these calls was to give Anders stock quote information because Anders "did not trust" USSCC's trader. We note, however, that Anders and Rybstein had at least 4 telephone conversations on March 23, including 1 which lasted over 17 minutes. At the hearing, Rybstein initially testified that he and Anders did not discuss BCAP and USSCC's trades in the stock, then conceded that, in fact, they did so, and finally stated that he wished to "retract" that concession because he could not remember "with certainty." By contrast, there is no evidence (other than Rybstein's testimony) of any calls between BCAP and Gahagen on that date, which weakens Rybstein's claim that he was merely Gahagen's agent in these trades. 30/ Although Rybstein claims to have believed that Gahagen resided in Florida -- the address listed on her new account form -- it appears he knew she lived in Texas with Anders. Gahagen's new account form at BCAP listed a Texas telephone number. Rybstein also admitted preparing a BCAP posting sheet for Gahagen that listed Anders' Austin, Texas address. The record also contains a facsimile transmission, dated March 25, 1992, from Anders' assistant to Rybstein, which directed BCAP to wire funds from Gahagen's account to a Texas bank. While Applicants deny ever receiving this facsimile (which was found by the NASD among USSCC's business records), the requested wire transfer was effected. 31/ 29/(...continued) Surveillance Committee found that Applicants "knew or was [sic] reckless in not knowing that Gahagen and Anders were acting in concert and were co-conspirators in the manipulative scheme." They claim that this finding is inconsistent with the committee's inability to find that Applicants were "on notice that the Gahagen account was in fact . . . . Anders' account." It was not necessary for Anders to have an interest in Gahagen's account (although the record suggests that he did so) for the two to have acted together. 30/ Anders and Gahagen both refused to testify. 31/ BCAP, which had allowed its Texas broker-dealer license to lapse in 1991, renewed it effective March 12, 1992, shortly before these trades occurred. Rybstein admittedly called (continued...) ==========================================START OF PAGE 11====== Applicants further argue that the small sum they generated from these trades provided insufficient motive for them to participate in this scheme. In light of the small size of the Offering and the short period of time involved, we do not consider Applicants' profits, which exceeded $18,000, insignificant. Other participants in this scheme, as indicated, had very substantial gains. Moreover, we have held that profit- making as a result of the conduct at issue "is not talismanic. The manipulator simply may not be clever or lucky enough to profit from his or her misdeed." 32/ We accordingly conclude that Applicants, acting with scienter, violated Article III, Sections 1 and 18 of the NASD's Rules of Fair Practice and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. IV. Applicants claim that they were denied a full and fair opportunity to be heard before the NASD. They claim that they repeatedly and unfairly were interrupted in their presentation of 31/(...continued) the Texas Securities Board six times between March 6 and 12, 1992 to expedite BCAP's application, but claimed his decision to reregister in Texas at that time "had nothing to do with" Gahagen. We consider it reasonable to infer that BCAP determined to reactivate its Texas license because Rybstein anticipated an imminent trading relationship with Gahagen, who was, as he knew, a Texas resident. Applicants claim that their "due diligence" efforts on behalf of Photees were inconsistent with a finding that they were involved with the manipulation. During an investigative interview, however, Rybstein could provide no more than a vague description of the Company because he said "[t]oo many companies go by me to know in detail what goes on." Applicants also point to the fact that Gahagen dealt directly with BCAP's clearing firm regarding transfer of funds and other matters affecting her account to suggest that she "carved Mr. Rybstein out whenever possible." As discussed supra, however, Gahagen did not exclude Applicants when she sent instructions through BCAP to its clearing firm to wire her profits from these trades to her bank account. Moreover, there is no indication in the record that Gahagen's decision to deal directly with BCAP's clearing firm on other occasions was done for an improper purpose. 32/ R.B. Webster Investments, Inc., 51 S.E.C. 1269, 1274 (1994). ==========================================START OF PAGE 12====== the evidence. The Chairman of the NASD's Market Surveillance Committee's ("MSC") hearing panel clearly stated his intention of conducting "a full and ample hearing of all of the issues that have been raised." 33/ Although the Chairman and other panel members interrupted the questioning of Applicants' counsel, as well as that of the NASD's enforcement staff, we do not consider this improper because it was intended to clarify the issues and evidence. Moreover, Applicants' counsel did not object to the Chairman's conduct of the hearing, and declined his offer to permit redirect testimony by Rybstein following the NASD enforcement staff's cross-examination. 34/ As noted, Applicants' primary defense was that they were unwitting pawns of Anders, a position that they fully set forth before the NASD (before both the MSC and the NASD's National Business Conduct Committee (the "National Committee")) and before us. Applicants identify no evidence or argument that they were unable to put forward. 35/ Applicants further complain about the "piecemeal manner" in which they had to present additional evidence on appeal. 33/ The Chairman also showed himself to be solicitous towards Applicants' position, at one point even apologizing when he perceived that he had "br[oken] up [Applicants' counsel's] train of thought" by asking his own questions during counsel's cross-examination of the staff's examiner. The Chairman's questioning of Rybstein, while possibly evidencing some disbelief in Rybstein's version of events, was not improper. It is well established that facts learned by a judge during a hearing do not create improper bias. U.S. v. Grinnell Corporation, 384 U.S. 563, 583 (1966) ("[D]isqualifying [bias] must stem from an extrajudicial source and result in an opinion on the merits on some basis other than what the judge learned from his participation in the case."). 34/ As we have held, we are not required to consider objections that were not raised at a time when the matter complained of could have been remedied. See Stephen Russell Boadt, 51 S.E.C. 683, 685 (1993). 35/ See Century Capital Corp. of South Carolina, 51 S.E.C. 486, 490 (1993) (no prejudice where the amount of time given to respondents to present their case was curtailed because they did not show what additional evidence they would have presented if more time had been allotted), aff'd, 22 F.3d 1184 (D.C. Cir. 1994) (table). ==========================================START OF PAGE 13====== Specifically, they complain because the National Committee refused to remand the case to the MSC to hear testimony from Photees' chief executive officer, Carl Canter. 36/ The National Committee's determination to hear the testimony itself was consistent with the NASD's procedural rules, and an appropriate exercise of discretion. 37/ Moreover, we have reviewed the testimony, and doubt that it would have altered the finding of manipulation by the MSC. We do not believe that Applicants have been prejudiced. 38/ V. Applicants argue that the sanctions are excessive. Among other things, they note that they have been the subject of only one other disciplinary action, which they agreed to settle. 39/ They further claim that they "were as much the victims as anyone else," and that the "consequences of these proceedings against [them] have been tremendous." We emphatically disagree with Applicants' characterization of themselves as victims of this scheme. Their actions undermined market forces in the trading of the stock, and resulted in substantial gains to Applicants and their co- conspirators. We have previously observed that "elimination of manipulative schemes was one of the central goals of the federal 36/ Applicants also complain that they were unable to ask Rybstein additional questions following Canter's testimony because of the 30 minute time limit imposed on each side before the National Committee. Applicants, however, failed to make a request for additional time before the National Committee. Indeed, Applicants' counsel stated before the National Committee that she had "had a full and fair opportunity to be heard on the appeal . . . ." Moreover, Applicants have not shown how additional testimony by Rybstein would have been, as they contend, "beneficial." 37/ See Article III, Section 3 of the NASD's Code of Procedure. 38/ The NASD has moved to exclude a portion of the Applicants' brief which discusses BCAP's business philosophy, under Section 452 of our Rules of Practice. Although we question the relevance of this information to this appeal, we deny the NASD's motion. 39/ Applicants consented, without admitting or denying the allegations, to NASD findings that they violated just and equitable principles of trade in failing to make a "bona fide public distribution" in connection with a public offering in which they were participating. Applicants were censured and fined $2,500. ==========================================START OF PAGE 14====== securities laws," and that such misconduct constitutes "a very grave violation." 40/ Under the circumstances, we consider the sanctions assessed by the NASD to be neither excessive nor oppressive. An appropriate order will issue. 41/ By the Commission (Chairman LEVITT and Commissioners WALLMAN, JOHNSON, and HUNT). Jonathan G. Katz Secretary 40/ R.B. Webster, 51 S.E.C. at 1278 (citations omitted). 41/ All of the arguments advanced by the parties have been considered. They are rejected or sustained to the extent that they are inconsistent or in accord with the views expressed in this opinion. UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Rel. No. Admin. Proc. File No. 3-8952 _________________________________________________ : In the Matter of the Applications of : : BROOKLYN CAPITAL & SECURITIES TRADING, INC. : 1828 East 52nd Street : Brooklyn, New York 11234 : : and : : DAVID RYBSTEIN : 1828 East 52nd Street : Brooklyn, New York 11234 : : For Review of Disciplinary Action Taken by the : : NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. : _________________________________________________: ORDER SUSTAINING DISCIPLINARY ACTION TAKEN BY REGISTERED SECURITIES ASSOCIATION On the basis of the Commission's opinion issued this day, it is ORDERED that the disciplinary action taken by the National Association of Securities Dealers, Inc. against Brooklyn Capital & Securities Trading, Inc. and David Rybstein be, and it hereby is, sustained. By the Commission. Jonathan G. Katz Secretary