Former Jesup Analyst Settles NASD Charges
A former analyst for Jesup & Lamont Securities Corp. agreed to pay $130,000 to settle NASD allegations that he sold stocks he was recommending to customers.
The NASD, formerly the National Assn. of Securities Dealers, said Gary Davis made more than $116,500 by selling 215,657 shares in seven different biotechnology companies he had rated “buy” or “strong buy” during 2002 and 2003. He neither admitted nor denied wrongdoing and was suspended from associating with NASD brokerage firms as a research analyst for 18 months.
“The rules are clear,” said NASD Vice Chairwoman Mary L. Schapiro in a statement Wednesday. “Analysts may not profit from the recommendations in their research reports.”
The NASD also said it sued New York-based Jesup & Lamont and its chief compliance officer, Robert Strong, for failing to supervise Davis. Jesup & Lamont is responding to the NASD’s complaint and “disputes a number of the allegations made,” the firm said.
Strong’s lawyer, Michael Miller, and Davis’ lawyer, William Cunningham, did not return calls seeking comment.
According to the NASD, Davis sold shares of CollaGenex Pharmaceuticals Inc., Discovery Laboratories Inc., Nastech Pharmaceutical Co., Med-Design Corp., Emisphere Technologies Inc., AVI BioPharma Inc. and InKine Pharmaceutical Co. Each were rated at “buy” or “strong buy.”
Davis, who left the firm last year, also allegedly purchased shares of CollaGenex, Nastech, and AVI BioPharma within the NASD’s restricted period. NASD rules prohibit analysts from buying or selling a security for a company they cover 30 days before or five days after they publish a report on that company.
“Jesup & Lamont stands by the integrity of the research Mr. Davis performed during his tenure with the firm,” the brokerage said.
Strong, the compliance officer, was responsible for ensuring that trading among the firm’s analysts didn’t violate NASD rules, according to the regulator. Strong also failed to disclose Davis’ financial interest in the companies he covered in at least three of the research reports, the NASD said.
The NASD’s complaint against the brokerage firm also included unrelated allegations it failed to accurately report 31 corporate bond transactions between July 1, 2003, and Sept. 30, 2003.
