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December 2002


Welcome to this month's edition of the Securities Law Letter, an electronic newsletter for securities attorneys, securities professionals and investors, covering the law of the United States securities markets. This newsletter is a publication of, and is sponsored by Mark J. Astarita, Esq. Nothing contained in this newsletter should be construed as legal advice. If you have any questions relating to any of the matters addressed in this issue, please feel free to contact Mr. Astarita at


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NASD Dispute Resolution Seeks Arbitrators in Selected Cities
NASD Dispute Resolution is actively recruiting new Arbitrators, with special emphasis in particular cities.

Perino Arbitrator Disclosure Report Reviewed
Arbitrator Selection and Disclosure Analyzed; California Standards Rejected

NYSE Statements on California Arbitration
Comments on the Perino Report and the California Court Decision

Arbitrator Disclosure Report Released
The November 13, 2002 SEC News Digest summarizes the findings and recommendations of a study on arbitrator disclosures sparked by the California Judicial Council controversy.

News Items

NYSE Awards 10/02
Thirty Awards, Including a 9 Million Dollar Member-Member Award, and a Loss for a Customer in An Employee Stock Option Case Against Goldman

NASD Arbitration Stats - 10/02
Filings Up 38% over 2000, Open vs. Closed Gap Widens

SEC, NYSE, NASD Fine Firms $8.25 Million for Failure To Preserve E-Mail Communications
The Securities and Exchange Commission, the New York Stock Exchange and NASD today announced joint actions against five broker-dealers for violations of record-keeping requirements concerning e-mail communications. The firms consented to the imposition of fines totaling $8.25 million, along with a requirement to review their procedures to ensure compliance with record-keeping statutes and rules.

SEC Brings First Regulation FD Enforcement Actions
The first Reg FD enforcement actions were commenced against Raytheon Company, Secure Computing Corporation, Siebel Systems, Inc., and Motorola, Inc., Release No. 34-46898. These are the first Regulation FD enforcement actions taken by the Commission. The complaints allege that the companies had conveyed the market-moving information -- which moved the stock price as much as 20% in a single day -- either in one-on-one calls with analysts and investors, or at a conference with a group of institutional investors, without providing it simultaneously to the public.

Partial settlement seen in WorldCom case
A federal judge was expected to rule on a partial settlement of securities fraud charges against bankrupt WorldCom Inc. that would prevent the company from violating certain securities laws, an official with the Securities and Exchange Commission said on Tuesday.

NASD Extends Rule 2711 Compliance Deadline for Small Firms
NASD has filed with the SEC a proposed rule change to establish May 5, 2003 as the effective date for Rules 2711(b) and (c) for members that over the previous three years, on average per year, have participated in 10 or fewer investment banking transactions as manager or co-manager and generated $5 million or less in gross investment banking revenues from those transactions. Rules 2711(b) and (c) prohibit a research analyst from being subject to the supervision or control of any employee of a member's investment banking department and further require legal or compliance personnel to intermediate certain communications between the research department and the investment banking department or the company that is the subject of a research report or recommendation.

N.Y. attorney general takes lead in cleaning up Wall Street
Interesting story about AG Spitzer filling the Pitt void, but did Spitzer and the CA AG really "call each other out" for a fist fight?

Judge dismisses suit challenging California arbitration rules
A California Judge dismissed the NASD and NYSE lawsuit against the California Judicial Council which sought to undo California's overly strict arbitration standards for arbitrators.

SEC Accepts Resignation of Judge Webster
November 12, 2002 - SEC Chairman Pitt's comments as he accepted on behalf of the Commission the resignation of William H. Webster as chairman of the Public Company Accounting Oversight Board.

States seek stiffer penalties for securities fraud
Eager to jail more corporate crooks, state enforcers are seeking to strengthen state laws against financial fraud. It may not be a good idea.

Recent Court Decisions

Court Compels Arbitration in Selling Away Case
Customer is "customer" of broker, therefore he is a customer of the firm?

Unregistered Broker Voids Firm's Ability to Compel Arbitration
Court holds that customer agreement for account with unregistered broker is unenforceable.

Rule Changes and Proposals

SEC Proposes Implementation of Standards of Professional Conduct for Attorneys Rules
The SEC is soliciting comments on a proposed rule that would establish standards of professional conduct for attorneys who appear and practice before the Commission on behalf of issuers. Sarbanes-Oxley requires the SEC to adopt such standards, including a rule requiring an attorney to report evidence of a material violation of securities laws or breach of fiduciary duty or similar violation by the company or any agent thereof to the chief legal counsel or the chief executive officer of the company (or the equivalent); and, if they do not respond appropriately to the evidence, requiring the attorney to report the evidence to the audit committee, another committee of independent directors, or the full board of directors. Proposed Part 205 responds to this directive and is intended to protect investors and increase their confidence in public companies by ensuring that attorneys who work for those companies do not ignore evidence of material misconduct. Comment period expires December 18, 2002.

SEC Proposes New Retention of Records Relevant to Audits and Reviews Rules
The SEC is proposing rules requiring accounting firms to retain for five years certain records relevant to their audits and reviews of issuers' financial statements. Records to be retained would include an accounting firm's workpapers and certain other documents that contain conclusions, opinions, analyses, or financial data related to the audit or review. Comment period ends December 27, 2002

If you have any questions or comments about any of the issues raised in this newsletter, or about securities law in general, please contact Mark J. Astarita, Esq.

Beam Astarita, LLC
67 Wall Street, Suite 2211
New York, NY 10005

Discussions regarding these topics, and other securities law related issues are ongoing at The Securities Law Forums, the discussion center at The Securities Law Home Page. The Securities Law Letter is a monthly publication of The Securities Law Home Page,, and is available by email. It is for informational purposes only,
it does not constitute legal advice, and should not be used as such.

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Copyright 2001, VGIS Communications and Mark J. Astarita.