SECURITIES AND EXCHANGE COMMISSION Washington, D.C. SECURITIES EXCHANGE ACT OF 1934 Rel. No. 39443 / December 11, 1997 Admin. Proc. File No. 3-9254 _________________________________________________ : In the Matter of the Applications of : : KO SECURITIES, INC. : 2416 - 32nd Avenue West : Seattle, Washington 98199 : : and : : TERRANCE Y. YOSHIKAWA : : 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 Violations of Rules of Fair Practice Conduct Inconsistent with Just and Equitable Principles of Trade Member firm of registered securities association and its president engaged in transactions for the purpose of overstating the firm's net capital. Held, association's finding of violation and sanctions it imposed sustained. APPEARANCES: Terrance Y. Yoshikawa, for Ko Securities, Inc., and pro se. Alden S. Adkins, Norman Sue, Jr. and Shirley H. Weiss, for NASD Regulation, Inc. Appeal filed: February 21, 1997 Last brief filed: June 9, 1997 ======END OF PAGE 1====== I. Ko Securities, Inc. ("Ko" or the "Firm"), a member of the National Association of Securities Dealers, Inc. ("NASD"), and Terrance Y. Yoshikawa, Ko's president and sole shareholder, appeal from NASD disciplinary action. The NASD found that Yoshikawa caused Ko to engage in a series of transactions for the purpose of overstating the Firm's capital in violation of Article III, Section 1 of the NASD's Rules of Fair Practice. <(1)> The NASD censured applicants, fined them $10,000 jointly and severally, suspended Ko from proprietary trading and market making for five days, and required Yoshikawa to attend a "compliance conference" with the NASD's Market Regulation staff. <(2)> We base our findings on an independent review of the record. II. The pertinent facts are undisputed. Between 1991 and December 1993, applicants engaged in a series of transactions between Ko's proprietary inventory account (the "Inventory Account") and two personal accounts owned by Yoshikawa: Yoshikawa's personal trading account (the "Trading Account") and his individual retirement account (the "IRA"). Each of these trades involved the common stock of DDI Pharmaceuticals, Inc., a drug research and development company. DDI's stock was traded through the National Market System of Nasdaq. Yoshikawa admits that he was responsible for each of these transactions. A. On December 30, 1991, Yoshikawa caused the Inventory Account to sell 14,500 shares of DDI at $6-1/8 to the IRA. Yoshikawa testified that he executed this trade because he was concerned that, if he left this block of DDI stock in the Inventory Account, Ko's net capital would fall below $100,000. During the period at issue, Ko was required under our net capital rule, 17 C.F.R. Section 240.15c3-1, to maintain minimum net capital of $30,000. <(3)> Ko also was directed by its clearing firm, PaineWebber Incorporated ("PW"), to maintain minimum net capital of $100,000. Ko was required, in calculating its net capital, to take an appropriate deduction, <(1)> The NASD has revised and renumbered its rules, but no substantive changes were made to the particular rule at issue here. Article III, Section 1 [new NASD Conduct Rule 2110] requires adherence to "high standards of commercial honor and just and equitable principles of trade." <(2)> The NASD also assessed costs. <(3)> In July 1994, Ko's net capital requirement was raised to $50,000. ======END OF PAGE 2====== or "haircut," from the market value of the DDI stock owned by the Firm. <(4)> As of the end of each month, Ko was required to file with the NASD a Financial and Operational Combined Uniform Single ("FOCUS") Part I Report setting forth the Firm's net capital. <(5)> PW also required Ko to file its FOCUS Reports with PW. On Friday December 27, 1991, according to applicants' calculations Ko's net capital was $76,524, substantially below the net capital level set by PW. On Monday December 30, Ko sold DDI stock as well as other securities, which caused Ko's net capital to rise to $132,591. By removing these shares of DDI from the Inventory Account, applicants avoided taking haircuts that otherwise would have been required and thereby increased the Firm's net capital. Yoshikawa admits that, if he had failed to sell the DDI shares out of the Inventory Account on December 30, Ko's net capital would have been only $108,490. <(6)> After performing the net capital calculation for the Firm's December FOCUS Report on January 2, 1992, Yoshikawa caused the IRA to sell 14,500 DDI shares back to the Inventory Account at $6-1/2. Yoshikawa stated that he had the Inventory Account repurchase these shares after enough other securities had been sold to ensure that Ko satisfied its net capital requirements. B. On March 13, 1992, Yoshikawa caused the Inventory Account to sell 79,000 DDI shares at $7-1/8 to the Trading Account. At the opening of the market, DDI had announced that the Food and Drug Administration had raised questions about the efficacy of a DDI drug in treating osteoarthritis. Yoshikawa testified that he effected this DDI transaction because he anticipated a drop in DDI's stock price following announcement of the trial's results and feared that that price decline would cause Ko's net capital to fall below required levels. <(4)> When calculating its net capital, a broker-dealer must deduct 15% of the market value of the greater of its long or its short equity position. If the smaller of the long or short equity position exceeds 25% of the greater position, a broker-dealer must also take a deduction of 15% on the market value of that smaller position. If a broker-dealer holds a single class of securities of any issuer that has a market value of more than ten percent of the broker-dealer's net capital, before certain adjustments, the broker-dealer must also take a so-called "Undue Concentration" deduction. See 17 C.F.R. Sections 240.15c3- 1(c)(2)(vi)(J) and (M). <(5)> See 17 C.F.R. Section 240.17a-5. <(6)> Applicants state that, by December 31, 1991, Ko's net capital had risen to $162,282. Ko reported net capital of $163,000 on its December FOCUS Part I Report. ======END OF PAGE 3====== DDI's stock price in fact declined from between $6 and $7 at 9:30 a.m. on March 13 to between $3 and $4 by 10:00 a.m. Yoshikawa stated that, as a result of the sale, the Firm's net capital was $109,863 at the end of the day, but would have been negative $247,901 without the sale from the Inventory Account. <(7)> On the following trading day, Monday March 16, 1993, Yoshikawa sold the 79,000 DDI shares in the Trading Account to the Inventory Account because he had received a margin call in the Trading Account. The sale price for this trade was $3 per share. Because DDI's share price had fallen substantially, the Trading Account suffered a loss of $325,000 on the trade. The Inventory Account immediately resold 75,000 DDI shares to the IRA because of Yoshikawa's continuing net capital concerns. Yoshikawa testified, during the NASD's investigation, that Ko would have taken an "approximate $79,000 net capital hit to leave [the 75,000 DDI shares] there at $3.00," if Ko had not sold the stock out of the Inventory Account. Over the next three days, the IRA resold the 75,000 shares back to the Inventory Account, at prices ranging from $3-3/8 to $3-5/8. Yoshikawa effected these trades to cover short positions in DDI in the Inventory Account and to finance a loan by the IRA to the Trading Account so that the Trading Account could meet its margin call. <(8)> C. After the close of the market on Friday December 3, 1993, DDI announced that it was terminating merger discussions with another company. In Yoshikawa's view, this was a negative development for DDI. On December 7, 1993, the Inventory Account sold 35,825 DDI shares to the IRA at $4-1/4. Yoshikawa stated that this trade was executed "to avoid the possibility of losing money in the firm account if the stock price declined substantially, which in fact, did occur over the next eight days." On December 14, 1993, the IRA sold 20,000 DDI shares to the Inventory Account at $3. On December 15, 1993, the IRA sold 36,581 DDI shares to the Inventory Account at $2- 3/4. These sales were made in part to permit the IRA to make a $350,000 <(7)> The record indicates that at the time applicants reported this sale of 79,000 DDI shares at $7-1/8, the prevailing market price had already fallen to roughly half that amount. Yoshikawa stated that, because "there was like lots of things going on," he executed this trade "after the fact." The record indicates that Ko reported on time other DDI trades on that day. <(8)> Yoshikawa stated that he had shorted DDI in the Inventory Account in anticipation of a further drop in its stock price. DDI instead rose in price. ======END OF PAGE 4====== loan to Yoshikawa. On December 17, 1993, the Inventory Account sold 20,000 DDI shares back to the IRA at $3-3/8. <(9)> III. Our net capital rule, which was "designed to assure financial responsibility of brokers and dealers," is "one of the most important weapons in the Commission's arsenal to protect investors." <(10)> The rule's requirements are intended "to ensure that broker-dealers have sufficient liquid capital to protect the assets of customers and to meet their responsibilities to other broker-dealers." <(11)> These requirements "involve fundamental safeguards imposed for the protection of the investing public on those who wish to engage in the securities business." <(12)> We agree with the NASD that applicants' conduct constituted what is commonly known as "parking," and is inconsistent with just and equitable principles of trade. <(13)> Applicants have admitted that these <(9)> We note that the NASD erroneously reversed the order of the trades, stating that the IRA purchased 20,000 DDI shares on December 14 from the Inventory Account and resold them on December 17. In fact, the record reflects the order of the transactions as described above. <(10)> Livada Securities Co., 45 S.E.C. 598, 600 (1974), citing Blaise D'Antoni & Associates, Inc. v. SEC, 289 F.2d 276, 277 (5th Cir. 1961). <(11)> Lowell H. Listrom, 50 S.E.C. 883, 886 (1992). <(12)> Id. at 888. <(13)> See Sumner B. Cotzin, 45 S.E.C. 575 (1974). In Cotzin we held that a firm and its sole proprietor violated just and equitable principles of trade by selling securities from the firm's inventory account to the proprietor and a principal of the firm immediately prior to the firm's net capital computation dates and then repurchasing them shortly thereafter for the purpose of misstating the firm's net capital. Although not critical to our finding of violation in that case, we also characterized the trades as "parking." Id. at 577. See also Whiteside & Company, Inc., 49 S.E.C. 963, 965 (1988) (finding parking where firm used "contrived transactions designed to remove securities from the firm's inventory" to avoid required haircuts and a deduction for an unrealized loss on options), aff'd, 883 F.2d 7 (5th Cir. 1989); Hibbard & O'Connor (continued...) ======END OF PAGE 5====== trades were done to shift losses or anticipated losses out of the Inventory Account and to avoid haircuts that otherwise would have been required. Applicants' actions thereby alleviated actual or perceived problems for the Firm with its net capital requirements or PW's "guideline" that Ko maintain net capital of $100,000. <(14)> Applicants' actions had the effect of inflating the Firm's net capital, misleading or potentially misleading this Commission, the NASD and other regulatory authorities, as well as PW about the true state of Ko's finances. Applicants' actions created a false and misleading picture of Ko's financial situation. The net capital requirements are designed to "operate as an early warning system" of potential financial difficulties at a firm. <(15)> We have further noted that "accurate and current records are essential to enable a broker-dealer to determine compliance with net capital and other requirements." <(16)> Thus, the fact that Ko would not actually have fallen below net capital requirements in two of the three instances involved here is not determinative in establishing applicants' misconduct. <(13)>(...continued) Securities, Inc., 46 S.E.C. 328, 329-30 (1976) (settled case); Higgs, Inc., 45 S.E.C. 318 (1973) (parking occurred where firm sold securities from its inventory to its officers for the purpose of making the firm's net capital appear greater and then promptly repurchased them). <(14)> Applicants deny that they were "required" by PW to maintain $100,000 in net capital. They contend that the $100,000 figure was set pursuant to an "informal agreement" between Ko and PW, and was merely a "guideline." In two letters and repeatedly during testimony before the NASD, however, Robert Basso, a PW official with responsibility for its clearing operations, stated that Ko was "required" to maintain minimum capital of at least $100,000, although there apparently was some flexibility in PW's enforcement of that requirement. Yoshikawa himself also used the term "requirement" at one point during the hearing when referring to the $100,000 figure. In addition, Yoshikawa stated, during the NASD's investigation, that he "tr[ied] to comply with the $100,000 capital requirement . . . I treat it like, you know, something that I want to take care of. If I could, I do. You know, I mean I agreed to do that." <(15)> William J. Blalock, Securities Exchange Act Rel. No. 35002 (Nov. 23, 1994), 58 SEC Docket 155, 166 n.30. <(16)> See Livada Securities Co., 45 S.E.C. at 600. ======END OF PAGE 6====== While parking transactions "are usually utilized to circumvent net capital requirements, no such purpose is necessary to establish a violation of NASD rules." <(17)> Applicants argue that this case is distinguishable from the parking cases relied on by the NASD <(18)> because Ko never attempted to disguise ownership of the DDI stock as Yoshikawa effected these transactions among the three accounts. Applicants further suggest that, since Yoshikawa is the sole owner of Ko and of the IRA and Trading Account, Ko's overall DDI position did not change during these transactions. This argument suggests, incorrectly, that all of these accounts would be included to determine Ko's net capital. However, the assets of Ko, a corporation, are considered without regard to Yoshikawa's personal assets in calculating the Firm's net capital. Applicants also point to the fact that most of these trades were done between the prevailing bid and ask quotation and not at what they assert are the artificial prices typical of many parking cases. Yoshikawa testified, however, that the DDI market was illiquid and a sale of large blocks of DDI stock likely would have depressed DDI's price. Thus, it seems likely that, if applicants had attempted to sell these large blocks of DDI stock to the market rather than to Yoshikawa's personal accounts, such action would have depressed further DDI's market price. Applicants argue that, unlike the typical parking case, there was no prearrangement to repurchase the DDI stock after it had been sold out of the Inventory Account. Yoshikawa's control of all three accounts made a prearrangement unnecessary. <(19)> Yoshikawa asserts that, if he had believed that there was anything improper about trading with his personal accounts to alleviate net capital problems, he would have taken alternative measures. He claims substantial personal net worth and notes that his banker testified before the NASD that Yoshikawa could have borrowed the funds needed to bring the Firm into compliance without resorting to the challenged trading. Yoshikawa also notes that the purchase by the Trading Account on March 13 had the effect of infusing over $300,000 of Yoshikawa's personal funds into the Firm. If Yoshikawa was concerned that a decline in DDI's stock price could cause net capital problems, he should have deposited additional capital <(17)> W.N. Whelen & Co., Inc., 50 S.E.C. 282, 284 (1990). We also observed there that "applicants' motive in parking the securities in question is irrelevant." Id. at 285. <(18)> See, e.g., Mayer Amsel, Securities Exchange Act Rel. No. 37092 (April 10, 1996), 61 SEC Docket 2119, 2121- 22. <(19)> See Cotzin, 45 S.E.C. 575, discussed in n.13, supra. ======END OF PAGE 7====== directly into Ko or effected a subordinated loan on Ko's behalf. <(20)> The fact that a firm or an individual had the ability to avoid a violation -- but failed to do so -- is not a valid defense. <(21)> Moreover, the NASD's Market Surveillance Committee ("MSC"), which heard him testify, found "it difficult to credit Yoshikawa's claim that he did not know he was violating the Association's Rules." <(22)> At the time of this misconduct, Yoshikawa, who had owned and operated Ko since its formation in 1980, had been employed in the securities industry for close to twenty years. In light of that extensive experience, we consider it likely that Yoshikawa was aware that his approach to dealing with Ko's net capital position was impermissible. <(23)> Applicants further claim that there are no cases or rules that specifically prohibit the precise conduct at issue. They argue that the cases relied upon by the NASD are readily distinguishable from the facts at <(20)> See, e.g., 17 C.F.R. Section 240.15c3-1d (satisfactory subordination agreements). <(21)> See W.N. Whelen & Co., Inc., 50 S.E.C. at 283 (firm's apparent ability to deposit additional funds to satisfy net capital requirements no defense to finding of violation of just and equitable principles of trade where firm parked securities in non-proprietary accounts). <(22)> We have repeatedly held that credibility determinations of an initial fact finder are entitled to considerable weight and can be overcome only where the record contains "substantial evidence" for doing so. See, e.g., Anthony Tricarico, 51 S.E.C. 457, 460 (1993). See also Universal Camera v. N.L.R.B., 340 U.S. 474 (1950). <(23)> Applicants state that, during the numerous audits that have been conducted by the NASD at the Firm, NASD examiners "looked at and commented on the very trades involved in this complaint" without ever questioning the "legality or propriety of these trades." We have repeatedly held, however, that "a broker-dealer cannot shift its responsibility for compliance with applicable requirements to the NASD or to us. A regulatory authority's failure to take early action neither operates as an estoppel against later action nor cures a violation." Variable Investment Corporation, 46 S.E.C. 1352, 1354 n. 4 (1978). See also Richard R. Perkins, 51 S.E.C. 380, 384 n.20 (1993); Don D. Anderson & Co., Inc., 43 S.E.C. 989, 991 (1968), aff'd, 423 F.2d 813 (10th Cir. 1970). ======END OF PAGE 8====== issue here. The NASD's requirement of compliance with just and equitable principles of trade sets forth a standard intended to encompass a wide variety of conduct that may tend to undermine the integrity of the securities industry and its regulatory structure. This requirement repeatedly has been upheld against challenges for vagueness as "sufficiently specific and [as] provid[ing] an adequate standard for compliance." <(24)> Applicants' actions, in creating a false and misleading picture of Ko's financial situation, were inconsistent with just and equitable principles of trade. <(25)> We therefore sustain the NASD's findings that applicants violated Article III, Section 1 of the NASD's Rules of Fair Practice. IV. Applicants raise various procedural objections. First, they argue that an NASD staff attorney acted "illegally" when she distributed a package of sixteen administrative decisions to members of the hearing panel at the MSC hearing. Applicants argue that NASD rules require that this material should have been -- but was not -- given to them at least five days before the hearing. Article II, Section 7 of the NASD's Code of Procedure provides that the MSC staff "shall upon request make available to respondents . . . any documentary evidence the staff intends to present at the hearing no later than five (5) business days prior to the hearing." These decisions are not documentary evidence and thus were not subject to this requirement. <(26)> <(24)> Daniel J. Alderman, Securities Exchange Act Rel. No. 35997 (July 20, 1995), 59 SEC Docket 2528, 2532, aff'd, 104 F.3d 285 (9th Cir. 1997). See also Henry E. Vail, Securities Exchange Act Rel. No. 35872 (June 20, 1995), 59 SEC Docket 1805, 1809 n.12, aff'd, 101 F.3d 37 (5th Cir. 1996); Conrad C. Lysiak, 51 S.E.C. 841, 847 (1993), aff'd, 47 F.3d 1175 (9th Cir. 1995) (Table); Benjamin Werner, 44 S.E.C. 622, 625 & n.11 (1971), aff'd without opinion (D.C. Cir. 1972). <(25)> W.N. Whelen & Co., Inc., 50 S.E.C. at 284. <(26)> Applicants further complain that the NASD, after initially providing applicants with certain administrative decisions they had requested, declined to provide additional cases. The record indicates that NASD staff provided applicants with several administrative decisions on May 4, 1995 and March 28, 1996. On April 4, 1996, less than two weeks before the MSC hearing, applicants made a third request for "any cases which directly relate to examples of `parking' in which all of the accounts involved are 100%-owned by the same individual." On April 8, 1996, the NASD staff responded to applicants that "we cannot continue to conduct legal research for you." We do not believe (continued...) ======END OF PAGE 9====== Applicants' further contention, that by providing these administrative decisions, the NASD staff attorney somehow exercised "undue influence" on the MSC panel members, is unsupported by the record. In particular, we note that the MSC declined to find applicants liable for fraud, as the staff had advocated. Moreover, there was nothing improper about providing panel members with arguably relevant case law. Indeed, applicants have exercised the opportunity before the NASD and before us to distinguish these holdings from the facts of this case. <(27)> Applicants also complain that one of the MSC panel members "has a reputation for harassing" traders, including Yoshikawa. He contends that this panelist questioned one of applicants' witnesses about matters that were not pertinent to the hearing. We have reviewed the hearing transcript as part of our de novo review, and find nothing inappropriate in the panelist's questioning of witnesses. Moreover, although applicants were notified about the membership of the MSC hearing panel more than two weeks before the MSC hearing, applicants did not object to the panelist's inclusion in the MSC panel until after the MSC issued its opinion. Applicants thus failed to raise this issue when remedial action could have been taken. We believe that, under these circumstances, there is no merit to applicants' challenge to the panelist's participation. <(28)> <(26)>(...continued) that the NASD acted improperly since it was under no obligation to provide applicants with legal assistance. To the extent the NASD staff provided legal assistance, it did so as a courtesy. Applicants, who initially had retained legal representation and then for economic reasons terminated that representation well before the hearing, were responsible for providing their own defense to the NASD's charges. See Richard R. Perkins, 51 S.E.C. 380, 386 (1993). <(27)> Applicants further contend that, in alleging that applicants used the trades at issue to "maintain[] the firm's net capital at $100,000 or more," the NASD "has now completely changed the charges from the original complaint." The NASD's complaint stated, however, that applicants' trading was done "to reduce the risk of, or to prevent [Ko] from falling below the minimum net capital requirements set by the Securities and Exchange Commission and/or its clearing firm . . . ." <(28)> See, e.g., Brooklyn Capital & Securities Trading, Inc., Securities Exchange Act Rel. No. 38454 (March 31, 1997), 64 SEC Docket 584 (Commission not required to consider objections that were not raised at a time when the matter complained of could have been remedied). We have previously observed that "it is inappropriate for (continued...) ======END OF PAGE 10====== Applicants claim that the NASD was "extremely menacing in that they continually asked for more and more information" about the Firm and Yoshikawa's personal finances. Ultimately, they assert, applicants were required to provide thousands of pages of data, encompassing more than 14,200 transactions, over a forty-one month period. They also claim that the NASD predetermined applicants' guilt prior to any investigation and "manufactured" its case based on the "prejudice" of the MSC. The NASD initiated its investigation after being contacted by a trader who had identified as "unusual and suspicious" block trades in DDI during 1993 and 1994. The trader also identified Ko as being responsible for the trades. This information raised serious issues and justified a thorough investigation. The record reflects that the staff considered applicants' information, testimony, and a February 1995 written submission to the MSC by Yoshikawa contending that proceedings should not be instituted, <(29)> before seeking authority from the MSC to file this complaint. <(30)> Applicants' charges of prejudice are further belied by the MSC's decision to dismiss the allegation of fraud. In any event, we have conducted a de novo review of the record and find ample support for the NASD's findings of violation. <(31)> V. <(28)>(...continued) a party to `suppress his misgiving while waiting anxiously to see whether the decision goes in his favor.'" Mayer A. Amsel, 61 SEC Docket at 2127 n.16 (quoting Marcus v. Director, 548 F.2d 1044, 1051 (D.C. Cir. 1976)). <(29)> Applicants and the NASD referred to this filing as a "Well's Submission." <(30)> We note that applicants have alleged that particular NASD staff members were hostile to applicants during the course of the investigation and these proceedings. It is not the NASD staff, however, but the individual NASD committees that make the determination of whether charges should be brought or, ultimately, whether a finding of liability is warranted. See David G. Gingras, 50 S.E.C. 1286, 1292 (1992) (noting that, although the NASD staff may be involved in the drafting of a panel decision, that decision "is reviewed and must be accepted by the [panel] before the opinion is issued"). <(31)> See Thomas C. Kocherhans, Securities Exchange Act Rel. No. 36556 (Dec. 6, 1995), 60 SEC Docket 2589, 2596 n.27 (allegations of procedural abuse by NASD countered by Commission's de novo review of proceedings). ======END OF PAGE 11====== The sanctions imposed by the NASD, which applicants do not specifically challenge, are fully warranted by our finding of violation. Although the NASD found that applicants did not intend to deceive the NASD, they concluded that applicants' actions had the intended effect of overstating Ko's net capital. The NASD also found that it was "clear that Yoshikawa persists in viewing the transactions at issue as legitimate business transactions." We agree with the NASD that Yoshikawa must be "disabused of this notion," and consider the sanctions imposed by the NASD to be an appropriate means of furthering this objective. ======END OF PAGE 12====== We therefore do not conclude that the sanctions are either excessive or oppressive. An appropriate order will issue. <(32)> By the Commission (Chairman LEVITT, Commissioners JOHNSON, HUNT, CAREY, and UNGER) Jonathan G. Katz Secretary <(32)> 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. ======END OF PAGE 13====== UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Rel. No. Admin. Proc. File No. 3-9254 _________________________________________________ : In the Matter of the Applications of : : KO SECURITIES, INC. : 2416 - 32nd Avenue West : Seattle, Washington 98199 : : and : : TERRANCE Y. YOSHIKAWA : : 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 Ko Securities, Inc. and Terrance Y. Yoshikawa, and the Association's assessment of costs, be, and they hereby are, sustained. By the Commission. Jonathan G. Katz Secretary