Compliance Conundrums at Newbridge Securities

What is the story with Newbridge Securities Corporation, a Fort Lauderdale, Florida broker-dealer?  When we first heard of Newbridge earlier this year, the brokerage firm was something of a footnote to a "pump and dump" scheme involving shares of a tiny company called Concorde America (Pink Sheets: CNDD).  Concorde America, and the promoters and brokers orchestrating the scheme, claimed that the Company would be providing Latin American workers to Western European companies.  The story played well, but it had no substance.  Concorde America barely existed and had no realistic prospects – other than its apparent role as a tool for pump and dumpers.  See Concorde America, Inc. - Never Mind

Then, on February 14, 2005, the Securities and Exchange Commission delivered a Valentine's Day surprise, filing a Complaint in the United States District Court for the Southern District of Florida, that outlined the alleged scheme to manipulate Concorde America.  According to the SEC's complaint, accounts at Newbridge securities had been used to hold and sell shares of Concorde America as part of the pump and dump scheme. See Concorde America - Gotcha.

Newbridge was not named as a defendant in the SEC action, and may well have been an unwitting tool for the conspirators – who garnered at least $5 million in profits through the Newbridge account.  Should that level of activity, involving shares of an obscure company, have alarmed the Newbridge Compliance Department?  The SEC did not speculate on that issue.

Newbridge may not have been the focus of the SEC complaint, but its activities recently drew fire from NASD.  In May 2005, the brokerage firm was fined $57,000 and sanctioned after NASD charged that Newbridge improperly executed short sales.  NASD claimed, among other things, that the firm executed short sales in certain securities for proprietary accounts and failed to make an affirmative determination that it could borrow the securities or otherwise provide for their delivery  by settlement date. 

Overall, NASD painted an uncomplimentary picture of Newbridge's record keeping practices.  NASD's findings noted that Newbridge failed to enter correct symbols indicating whether a transaction was a buy, sell, sell short, sell short exempt or cross for transactions in eligible securities, and whether executed transactions in eligible securities were in a principal, riskless principal or agency capacity.  The regulator also found that Newbridge failed to report trade executions properly or to file required reports. 

Newbridge consented to the penalties, although it neither admitted nor denied the NASD allegations.

About Hartley Bernstein: Hartley Bernstein is a corporate and securities attorney and civil litigator with a specialty in business transactions and civil litigation.

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