99/29

November 9, 1999

By way of an Offer of Settlement, Peggy Singer ("Singer"), an Approved Person, at the time of the infraction employed by Merit Investment Corporation ("Merit"), has agreed to the imposition of the following penalties by the Exchange for violation of Exchange By-Law 5.01(2) and 5.02(4):

1. payment of a fine in the amount of $30,000;
2. disgorgement of commissions in the amount of $7,383;
3. withdrawal of exchange approval for a period of 60 days, and
4. an assessment of investigative costs in the amount of $1,500.

By-Law 5.01(2) states in part, that an "Infraction" means any conduct, proceeding or method of business, which is unbecoming or inconsistent with just and equitable principles of trade or detrimental to the interests of the public.

By-Law 5.02(4)(a) states in part that a specific infraction includes the purchasing and selling of securities where the person knows or ought to have know that the effect of such a purchase or sale would be to unduly disturb the normal position of the market or create an abnormal market condition in which market prices do not fairly reflect current market values.

Digital Fusion Multimedia Corp. ("Digital")

During the Period of March 1, 1995, to July 25, 1995, (the "Relevant Period") Singer’s husband, and stepson, were Chairman and President respectively, of former Exchange listed Digital. As of March 1995, Singer’s husband and stepson collectively owned 49.5% of the outstanding Digital shares, which placed them in a control position. Digital was also quoted on the US over-the-counter bulletin board ("OTCBB").

During the Relevant Period, Digital’s share price on the Exchange increased in price from $1.10 to $3.75.

Merit was the dominant Digital buying Member Firm ("the Merit Trading"). Singer’s clients dominated the Merit Digital trading.

Trades conducted on the Exchange, in the shares of Digital during the Relevant Period, are as follows:

• Total trade days:73 days

• Total market volume traded:201,550 shares
• Merit total buy volume:137,100 shares or 68% of market total
• Singer’s total client buy volume:130,200 shares or 64.5% of market total
• Singer’s total client sell volume:22,100 shares or 10.9% of market total

• Total market upticks:75
• Merit total upticks:62 or 83% of market total
• Singer’s client uptick total:56 or 74.6% of market total

• Total market new highs:24
• Merit total new highs:21 or 87.5% of market total
• Singer’s client new highs:16 or 66.6% of market total

Three of Singer’s client accounts, ("Singer’s Clients") one of which included Singer’s husband’s account, executed approximately 97% of Singer’s total client Digital Exchange buy trading. This trading also accounted for 64.5% of the total Exchange market buy volume for the shares of Digital.

Singer’s Digital Sales

During the Relevant Period, Singer’s Clients and two other family related accounts sold Digital shares OTCBB ("the OTCBB Sales"). These sales were, mainly to one US Broker Dealer, Rimson and Company ("the Broker Dealer"). The majority of the OTCBB Sales were executed at substantial premiums to the Exchange market.

Bulletin Board Trades

During the Relevant Period, a total of 738,290 Digital shares were reported as OTCBB trades ("the OTCBB Volume"). Of the OTCBB Volume, the reported OTCBB Sales from Merit to the Broker Dealer accounted for 86% of the total reported OTCBB Volume. There was no bid or ask quoted in Digital at the time of the reported OTCBB trades.

VIOLATIONS

By-Law 5.01(2) & 5.02.4(a)

Singer ought to have known that Singer’s Clients unduly disturbed the normal position of the market in that:

• Singer’s Clients, by executing approximately 75% of the total market upticks and 67% of the total market new highs, were responsible for the Exchange Digital price increase from $1.10 to $3.75;
• as Singer’s Clients led the Exchange Digital market higher, Singer’s Clients executed the OTCBB Sales to the Broker Dealer at substantial premiums to the Exchange market price;
• no Digital bid/ask was quoted on the OTCBB and the majority of the Digital trade volume reported on the OTCBB originated from Singer’s Clients;

• the Broker Dealer contacted Merit looking for a price in which they could purchase Digital;

• Singer’s Clients dictated the trade price in the OTCBB Sales;
• the OTCBB sales permitted Singer’s Clients to continue their dominant Digital Exchange buy trading and price leadership;
• the OTCBB Sales to the Broker Dealer was the only route for Singer’s Clients to sell Digital, since Singer’s Clients were effectively the buy side of the market on the Exchange, and

• Singer’s immediate family were the chairman and president of Digital and Digital controlling shareholders.

Singer’s Clients Digital trading unduly disturbed the normal position of the Digital market. Singer ought to have known that Singer’s Client trading created an abnormal market condition in which market prices did not reflect fair market values. Singer thereby violated By-Law 5.01(2) and 5.02.4(a).

The conduct of the member firm remains under review by the Exchange.

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