3. The Client opened an account at Georgia Pacific in
1995 and the account was transferred to Sikula in April 1996.
4. Sikula conducted the first discretionary trade in the
Client’s account on May 7, 1997, by the purchase of 10,000 shares of VSE listed
Markatech Industries Corp ("Markatech") at a price of $.25. The Client
questioned Sikula about the Markatech trade and Sikula advised the Client that it was an
error and that the trade would be corrected. The trade was never corrected despite
Sikula’s assurances to the Client that it would be. This pattern of discretionary
trading continued throughout the Relevant Period.
5. Sikula agreed to cover losses made in the Client account by
virtue of a June, 1997 discretionary trade. Sikula made two cash deposits to the
Client’s account on July 4, 1997 and February 13, 1998, in the amounts of $2,000 and
$1,800 respectively.
6. As the discretionary trading by Sikula continued, on August 21,
1998, the Client wrote a letter of complaint to Georgia Pacific.
7. The Client never provided Sikula or Georgia Pacific with written
authorization for Sikula to exercise discretion in his account. Further, Georgia Pacific
was never made aware by Sikula that the Client account was being treated as a
discretionary account and as a result, Georgia Pacific never accepted the account as
discretionary.
The Second Client Unauthorized Trades
8. The Second Client opened an account at Georgia Pacific on June
15, 1989 and the account was transferred to Sikula in 1997.
9. The Second Client, upon receipt of her monthly statements,
noticed the first unauthorized trade, on March 26, 1998, a purchase of 2,000 shares of VSE
listed Aruma Vens Inc. ("Aruma") at a price of $.38. The Second Client
questioned Sikula about the Aruma unauthorized trade and Sikula advised the Second Client
that it was an error and that the trade would be corrected. The trade was not corrected
until after Sikula left the employ of Georgia Pacific.
10. In April and May 1998, the Second Client once again identified
trades in the account that she had not authorized. The Second Client again contacted
Sikula and Sikula insisted that the trades were an error and that they would be taken care
of. The trade was not corrected until after Sikula left the employ of Georgia Pacific.
11. Between June 14, 1998 and July 10, 1998, the Second Client was
out of the country. During the Second Client’s absence Sikula conducted four
unauthorized trades.
12. As the unauthorized trading by Sikula continued, on September 1,
1998, the Second Client sent a letter of complaint to Georgia Pacific advising of 12
unauthorized trades between May 26, 1998 and August 26, 1998, for a total value of
$15,266.
13. The Second Client never provided Sikula or Georgia Pacific with
written authorization for Sikula to exercise discretion in his account. Further, Georgia
Pacific was never made aware by Sikula that the Second Client account was being treated as
a discretionary account and as a result, Georgia Pacific never accepted the account as
discretionary.
VIOLATIONS
14. In total, Sikula conducted 55 discretionary trades in the Client
account. Sikula had not received the Client’s written authorization to exercise
discretion over the account and Georgia Pacific had not accepted the Client’s account
as discretionary. Sikula thereby violated VSE Rule F.2.22(2)(a).
15. In total, Sikula conducted 12 unauthorized
trades in the Second Client account without the Second Client’s knowledge or
authorization. Sikula had not received the Second Client’s written authorization to
exercise discretion over the account and Georgia Pacific had not accepted the Second
Client’s account as discretionary. Sikula thereby violated VSE Rule F.2.22(2).
16. The cash deposit by Sikula into the Client’s account to
cover the Client’s losses was conduct unbecoming and thereby violated VSE By-Law
5.01(2).
No fault was attributed to the Member Firm.
