UNITED STATES OF AMERICA Before the SECURITIES AND EXCHANGE COMMISSION SECURITIES EXCHANGE ACT OF 1934 Release No. 34-40919 / January 11, 1999 ADMINISTRATIVE PROCEEDING File No. 3-9803 ______________________________ : In the Matter of : ORDER MAKING FINDINGS : AND IMPOSING SANCTIONS CERTAIN MARKET MAKING : AS TO PAINEWEBBER INC., ACTIVITIES ON NASDAQ : RICHARD A. BRUNO, PETER F. : COMAS, ROBERT D. COPPOLA, : GERARD KANE, JOSEPH J. : PALMA, ARTHUR A. RAIOLA, : JOSEPH H. RAIOLA, AND : REUBEN G. TAUB ______________________________: I. In the accompanying Order Instituting Proceedings Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 and Findings of the Commission ("Order Instituting Proceedings"), the Securities and Exchange Commission ("Commission") instituted these public administrative proceedings against PaineWebber Inc., former PaineWebber employees Richard A. Bruno, Peter F. Comas, Robert D. Coppola, Gerard Kane, Joseph J. Palma, Arthur A. Raiola, Joseph H. Raiola, and Reuben G. Taub, and other firms and individuals. Contemporaneously, PaineWebber Inc., Richard A. Bruno, Peter F. Comas, Robert D. Coppola, Gerard Kane, Joseph J. Palma, Arthur A. Raiola, Joseph H. Raiola, and Reuben G. Taub ("Respondents") have submitted Offers of Settlement ("Offers") in anticipation of the institution of these proceedings, which the Commission has determined to accept. In their Offers, Respondents, solely for the purposes of these proceedings and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, prior to a hearing pursuant to the Commission’s Rules of Practice, and without admitting or denying the findings herein, except for the findings of Section II.A., which are admitted, have consented to the entry of the Order Instituting Proceedings and this Order Making Findings and Imposing Sanctions as to PaineWebber Inc., Richard A. Bruno, Peter F. Comas, Robert D. Coppola, Gerard Kane, Joseph J. Palma, Arthur A. Raiola, Joseph H. Raiola, and Reuben G. Taub ("Orders"). The Commission has determined that it is appropriate and in the public interest to accept the Respondents’ Offers and accordingly is issuing this Order. II. On the basis of this Order and Respondents’ Offers, the Commission finds[1] the following: A. Respondents PaineWebber Inc., a Delaware corporation, is registered with the Commission as a broker-dealer pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act"). At all relevant times, PaineWebber Inc., through its OTC Desk, made markets in a number of securities traded in the Nasdaq market. PaineWebber Inc.'s principal place of business during the relevant time period was New York, New York. PaineWebber Inc. traded Nasdaq stocks for its own accounts and for the accounts of institutional and retail investors. At all times relevant herein, PaineWebber Inc. was a member of the National Association of Securities Dealers, Inc. ("NASD"), a national securities association registered with the Commission under Section 15A of the Exchange Act. PaineWebber Inc., a Delaware corporation, is a subsidiary of PaineWebber Group Inc., a Delaware corporation which has common stock registered with the Commission pursuant to Section 12(b) of the Exchange Act and is listed on the New York Stock Exchange and the Pacific Stock Exchange. Richard A. Bruno, age 52, resides in Island Park, New York and, at all relevant times was the head Nasdaq trader at PaineWebber Inc. As the head Nasdaq trader, Richard A. Bruno was responsible for making markets in certain securities traded on the Nasdaq Stock Market, and for supervising the activities of other personnel assigned to the PaineWebber Over-The-Counter ("OTC") Desk. Peter F. Comas, age 36, resides in Scarsdale, New York and, at all relevant times, was a Nasdaq trader at PaineWebber Inc. As a Nasdaq trader, Peter F. Comas was responsible for making markets in certain securities traded on the Nasdaq Stock Market. Robert D. Coppola, age 29, resides in New York, New York and, at all relevant times, was a Nasdaq trader at PaineWebber Inc. As a Nasdaq trader, Robert D. Coppola was responsible for making markets in certain securities traded on the Nasdaq Stock Market. Gerard Kane, age 40, resides in Glenrock, New Jersey and, at all relevant times, was a Nasdaq trader at PaineWebber Inc. As a Nasdaq trader, Gerard Kane was responsible for making markets in certain securities traded on the Nasdaq Stock Market. Joseph J. Palma, age 48, resides in Syosset, New York and, at all relevant times, was a Nasdaq trader at PaineWebber Inc. As a Nasdaq trader, Joseph J. Palma was responsible for making markets in certain securities traded on the Nasdaq Stock Market. Arthur A. Raiola, age 58, resides in Massapequa, New York and, at all relevant times, was a Nasdaq trader at PaineWebber Inc. As a Nasdaq trader, Arthur A. Raiola was responsible for making markets in certain securities traded on the Nasdaq Stock Market. Joseph H. Raiola, age 31, resides in New York, New York and, at all relevant times, was a Nasdaq trader at PaineWebber Inc. As a Nasdaq trader, Joseph H. Raiola was responsible for making markets in certain securities traded on the Nasdaq Stock Market. Reuben G. Taub, age 40, resides in New York, New York and, at all relevant times was a registered representative at PaineWebber Inc. As a registered representative, he handled orders to transact in securities on behalf of PaineWebber Inc.’s customers. B. Factual Summary In connection with its activities as a Nasdaq market maker, PaineWebber Inc., Richard A. Bruno, Peter F. Comas, Robert D. Coppola, Gerard Kane, Joseph J. Palma, Arthur A. Raiola, Joseph H. Raiola, and Reuben G. Taub engaged in the following activities, as more fully described in the applicable sections of the accompanying Order Instituting Proceedings, in the following securities and on the following dates. 1. The Fraudulent Coordination of Quote Movements PaineWebber Inc. engaged in, or caused, the manipulative coordinated entry of quotations on Nasdaq in violation of Sections 15(c)(1) and (2) of the Exchange Act and Rules 15c1-2 and 15c2-7 thereunder, in one or more of the respects described in the manner described in Section Section II.C.1. of the Order Instituting Proceedings in a market making transaction or a related series of market making transactions in: connection with making markets in: a. the stock of Abbey Healthcare Group, Inc. ("ABBY") on August 4, 1994; b. the stock of Spiegel, Inc. - Class A, ("SPGLA") on August 25, 1994; c. the stock of Legent Corp. ("LGNT") on May 31, 1994, aided and abetted by its trader Peter F. Comas; d. the stock of Legent Corp. ("LGNT") in two violationsinstances on June 15, 1994, aided and abetted by its trader Peter F. Comas; e. the stock of Legent Corp. ("LGNT") in two violationsinstances on October 21, 1994, aided and abetted by its trader Peter F. Comas; f. the stock of Adobe Systems, Inc. ("ADBE") on June 6, 1994, aided and abetted by its trader Peter F. Comas; g. the stock of Adobe Systems, Inc. ("ADBE") on June 16, 1994, aided and abetted by its trader Peter F. Comas; h. the stock of Special Devices, Inc. ("SDII") on August 8, 1994, aided and abetted by its trader Peter F. Comas; i. the stock of Special Devices, Inc. ("SDII") on September 20, 1994, aided and abetted by its trader Peter F. Comas; j. the stock of Lotus Development Corp. ("LOTS") on August 1, 1994, aided and abetted by its trader Peter F. Comas; k. the stock of Intel Corp. ("INTC") on August 2, 1994, aided and abetted by its trader Peter F. Comas; l. the stock of Microsoft Corp. ("MSFT") on June 13, 1994, aided and abetted by its trader Peter F. Comas; m. the stock of Microsoft Corp. ("MSFT") on August 8, 1994, aided and abetted by its trader Peter F. Comas; n. the stock of Microsoft Corp. ("MSFT") on October 20, 1994, aided and abetted by its trader Peter F. Comas; o. the stock of Price/Costco, Inc. ("PCCW") on June 10, 1994, aided and abetted by its trader Peter F. Comas; p. the stock of 3 Com Corp. ("COMS") on October 19, 1994, aided and abetted by its trader Peter F. Comas; q. the stock of Scitex Corp. LTD ("SCIFX") on October 5, 1994, aided and abetted by its trader Robert D. Coppola; r. the stock of Cisco Systems, Inc. ("CISCO") on August 2, 1994, aided and abetted by its trader Gerard Kane; s. the stock of Novellus Systems, Inc. ("NVLS") on September 13, 1994, aided and abetted by its trader Gerard Kane; t. the stock of Gateway 2000, Inc. ("GATE") on August 9, 1994, aided and abetted by its trader Gerard Kane; u. the Class A stock of United Video Satellite Group, Inc. ("UVSGA") on August 9, 1994, aided and abetted by its trader Joseph J. Palma; v. the stock of UST Corp. ("USTB") on August 4, 1994, aided and abetted by its trader Arthur A. Raiola; w. the stock of National Commerce Bancorp. ("NCBC") on August 31, 1994, aided and abetted by its trader Arthur A. Raiola; x. the stock of First Essex Bancorp ("FESX") on August 2, 1994, aided and abetted by its trader Arthur A. Raiola; y. the stock of Midlantic Corp. ("MIDL") on August 30, 1994, aided and abetted by its trader Arthur A. Raiola; z. the stock of Grove Bank ("GROV") on August 31, 1994, aided and abetted by its trader Arthur A. Raiola; aa. the stock of Center Bank ("CTBX") on August 31, 1994, aided and abetted by its trader Arthur A. Raiola; bb. the stock of Leader Financial Corp. ("LFCT") on August 25, 1994, aided and abetted by its trader Arthur A. Raiola; cc. the stock of Aldus Corp. ("ALDC") on May 20, 1994, aided and abetted by its trader Joseph H. Raiola; **FOOTNOTES** [1]: The findings herein are solely for the purpose of these proceedings, and are not binding on any person not a respondent in these proceedings. 1 dd. the stock of Aldus Corp. ("ALDC") on May 24, 1994, aided and abetted by its trader Joseph H. Raiola; ee. the stock of Aldus Corp. ("ALDC") in three violationsinstances on June 6, 1994, aided and abetted by its trader Joseph H. Raiola; and ff. the stock of Genzyme Corp. ("GENZ") on August 24, 1994, aided and abetted by its trader Joseph H. Raiola. 2. Undisclosed Arrangements to CoordinateEntry of Fictitious Quotations PaineWebber Inc. entered, or caused to be entered, in the Nasdaq market fictitious quotations in one or more respects the manner described in Section II.C.2. of the Order Instituting Proceedings in violation of Section 15(c)(2) of the Exchange Act and Rule 15c2-7 thereunder, in a market making transaction or related series of market making transactions in: in connection with making markets in: a. the stock of Microsoft Corp. ("MSFT") on August 8, 1994, aided and abetted by its trader Peter F. Comas; b. the warrants of Intel Corp. A ("INTCW") on April 20, 1994, aided and abetted by its trader Peter F. Comas; c. the stock of Legent Corp. ("LGNT") on May 31, 1994, aided and abetted by its trader Peter F. Comas; d. the stock of Adobe Systems, Inc. ("ADBE") on June 9, 1994, aided and abetted by its trader Peter F. Comas; e. the stock of Adobe Systems, Inc. ("ADBE") on August 10, 1994, aided and abetted by its trader Peter F. Comas; f. the stock of Lotus Development Corp. ("LOTS") on August 5, 1994, aided and abetted by its trader Peter F. Comas; g. the stock of Applied Materials ("AMAT") on September 27, 1994 aided and abetted by its trader Peter F. Comas; h. the stock of Arch Communications Group, Inc. ("APGR") on October 20, 1994, aided and abetted by its trader Peter F. Comas; i. the stock of Dell Computer Corp. ("DELL") in two violationsinstances on September 16, 1994, aided and abetted by its trader Robert D. Coppola; j. the stock of Dell Computer Corp. ("DELL") on November 29, 1994, aided and abetted by its trader Robert D. Coppola; k. the stock of Fresh Choice, Inc. ("SALD") on October 6, 1994, aided and abetted by its trader Robert D. Coppola; l. the stock of Informix Corp. ("IFMX") on May 9 1994, aided and abetted by its trader Robert D. Coppola; m. the stock of Gentex Corp. ("GNTX") on September 26, 1994, aided and abetted by its trader Robert D. Coppola; n. the stock of Spectrum Signal Processing, Inc. ("SSPIF") on August 26, 1994, aided and abetted by its trader Robert D. Coppola; o. the stock of Integrated Devices Technology ("IDTI") on October 5, 1994; p. the stock of Gateway 2000, Inc. ("GATE") on August 9, 1994, aided and abetted by its trader Gerard Kane; q. the stock of Cisco Systems, Inc. ("CISCO") on August 2, 1994, aided and abetted by its trader Gerard Kane; r. the stock of Altera Corp. ("ALTR") on October 11, 1994, aided and abetted by its trader Gerard Kane; s. American Depository Receipts for the stock of Bell Cablemedia PLC ("BCMPY") on August 29, 1994, aided and abetted by its trader Joseph J. Palma; t. the stock of Magna Bancorp., Inc. ("MGNL") on June 14, 1994, aided and abetted by its trader Arthur A. Raiola; u. the stock of Bank South Corp. ("BKSO") on August 4, 1994, aided and abetted by its trader Arthur A. Raiola; v. the stock of Aldus Corp. ("ALDC") in two violationsinstances on May 20, 1994, aided and abetted by its trader Joseph H. Raiola; w. the stock of Aldus Corp. ("ALDC") on June 13, 1994, aided and abetted by its trader Joseph H. Raiola; x. the Class A stock of Comcast Crop. ("CMCSK") on August 26, 1994, aided and abetted by its trader Joseph H. Raiola; y. the stock of Genzyme Corp. ("GENZ") on August 24, 1994, aided and abetted by its trader Joseph H. Raiola; z. the stock of Orbotech LTD ("ORBKF") on August 29, 1994, aided and abetted by its trader Joseph H. Raiola; aa. the stock of Immunex Corp. ("IMNX") on August 25, 1994, aided and abetted by its trader Joseph H. Raiola; bb. the stock of Altera Corp. ("ALTR") on June 22, 1994, aided and abetted by its trader Joseph H. Raiola; and cc. the stock of Primadonna Resorts, Inc. ("PRMA") on August 5, 1994, aided and abetted by its trader Joseph H. Raiola. 3. Other Market Maker MisconductFraudulent Market Maker Conduct Through Other Means PaineWebber Inc. engaged in, or caused, other manipulative conduct in one or more of the respects the manner described in Section II.C.4. of the Order Instituting Proceedings in violation of Section 15(c)(1) of the Exchange Act and Rule 15c1-2 thereunder, in a market making transaction or related series of market making transactions connection with making markets in: a. the stock of DSC Communications Corp. ("DIGI") on August 25, 1994. 2 4. Best Execution Violations PaineWebber Inc. failed, or caused the failure, to provide best execution in the handling of customer orders in one or more of the respects the manner described in Section II.C.5. of the Order Instituting Proceedings in violation of Section 15(c)(1) of the Exchange Act and Rule 15c1-2 thereunder, in a market making transaction or related series of market making transactions connection with making markets in: a. the stock of Cisco Systems, Inc. ("CISCO") on August 1, 1994, aided and abetted by its trader Gerard Kane; b. the stock of Gateway 2000, Inc. ("GATE") on August 9, 1994, aided and abetted by its trader Gerard Kane; and 3 c. the stock of Primadonna Resorts, Inc. ("PRMA") on August 5, 1994, aided and abetted by its trader Joseph H. Raiola. In addition, on June 13, 1994, PaineWebber Inc. failed to provide best execution for a customer order to sell the common stock of Spectrum Signal Processing, Inc. ("SSPIF"), in that the registered representative then employed at PaineWebber who received the order delayed the execution of the order in an effort to obtain a price in the market that would allow him to receive additional compensation in the form of a sales credit called "add credit." When the order was later executed, the market price had declined, which resulted in a less favorable execution than the customer would have received with timely execution of the order. 5. Improper DSPG Trading Beginning in August 1994 and continuing through November 1994, PaineWebber Inc., Cowen & Co., CIBC Oppenheimer Corp. and Herzog, Heine, Geduld, Inc., certain Nasdaq traders employed at these firms and a PaineWebber registered representative, engaged in manipulative conduct with respect to the stock of DSP Group, Inc. ("DSPG"). This conduct involved coordinating the quotations disseminated by these firms on the Nasdaq market, and engaging in other improper conduct, to create prices favorable to certain of the above-referenced respondent firms and detrimental to the customers of such firms. As a result of these activities, certain customers sold DSPG stock to PaineWebber at artificially low prices and certain other customers purchased DSPG stock from PaineWebber at artificially high prices.[2] a. Improper Market Maker Coordination in DSPG Trading On numerous occasions in the period August through November, 1994, traders at PaineWebber and one or more of the other above-referenced respondent firms coordinated their quotations and trading activities in the stock of DSPG, in attempts, often successful, to deliberately depress the inside bid price or raise the inside ask price, so that one or more of them could either purchase DSPG stock more cheaply or sell DSPG stock at higher prices. These coordinated activities were directed at securing a trading advantage for one or more of the firms involved, often at the expense of customers or other market participants. Much of the coordinated activity among these firms was similar to the kinds of activity described in Section II.C.1. of the Order Instituting Proceedings. In addition, PaineWebber and certain of its traders sought to take advantage of an institutional customer that placed a number of "buy on close" orders (i.e., orders to buy that were filled at the closing inside ask price) for DSPG stock. PaineWebber traders Coppola and J. Raiola sought to increase the prices at which they could sell stock to fill the buy on close orders by coordinating their quotations in DSPG stock on various occasions with traders at respondents Cowen, Herzog and Oppenheimer, including respondents Richard S. Striefler, Ronald F. Cullen, Jr. and William G. Clark, Jr. This coordination of quotations improperly elevated the closing inside ask price at which the buy on close orders were executed. The prices they created in this manner were more favorable to the firm’s proprietary interests and less favorable to the interests of the customer placing these orders.[3] In addition, Coppola coordinated PaineWebber’s quotations in a similar manner on one occasion with Striefler in order to assist him in filling a buy on close order from an institutional customer of Cowen at an improperly elevated price. b. Improper Enhancements of Sales Credits Certain customers of PaineWebber, whose registered representative was respondent Reuben Taub, held substantial quantities of DSPG stock and began selling their stock on August 18, 1994 and thereafter. These sales provided Taub with an opportunity to obtain substantial income for himself and he endeavored to maximize the income he could obtain from these sales. In doing so, however, he sought to obtain, with respect to a number of these sales, less than best execution for his customers’ orders, which, in turn facilitated the improper coordinated activities of PaineWebber’s DSPG traders, Coppola and J. Raiola, in DSPG stock. PaineWebber allowed its Nasdaq traders to provide compensation to registered representatives in the form of sales credits called "add credit." Add credits were paid on a per trade basis in addition to commissions, and were typically taken from the effective spread at which the Nasdaq traders bought and sold stock.[4] In 1994, add credits were not set at any fixed amount or percentage of the effective spread, and, in some instances, were determined through negotiation between the relevant trader and registered representative. When handling customer orders for large quantities of stock, a registered representative could obtain substantial amounts of compensation from add credits in addition to commission income. Respondent Taub sought to increase the amount of add credits he obtained from his customers’ sales of DSPG stock. Because his customers had sizablesizeable quantities of stock to sell, and therefore represented an important source of stock for the PaineWebber Nasdaq traders, the traders paid substantial amounts of add credit to Taub. The undisclosed add credits paid to Taub for sales by his customers of DSPG stock were often fifty percent or more of the effective spread, and on one occasion equaled one hundred percent of the effective spread. The volume of sales by Taub’s customers was so great that he was able to obtain as much as tens of thousands of dollars of add credits in a single trading day (in addition to commission income).[5] Taub’s demands for add credit affected the way in which the PaineWebber OTC Desk handled customer orders. Taub knew from his dealings with Coppola and J. Raiola that they were able to coordinate quotations with other market makers or otherwise take action that would raise or depress the market price, and that they were receiving large buy on close orders. In order to enhance the amounts of add credit that he could obtain from his customers’ sales of DSPG stock, Taub endeavored to sell their stock at prices altered by the traders, or at prices he and the traders believed were comparatively low, inconsistent with the obligation to provide best execution. On 12 occasions, Taub authorized the sale of his customers’ stock at prices that had been deliberately depressed. On five of these occasions, Taub informed Coppola or J. Raiola that he was willing to sell his customers’ stock at prices that were below the prevailing inside bid, which provided Coppola and J. Raiola with an incentive to depress the inside bid price. Coppola and J. Raiola, sometimes in coordination with other of the above- referenced respondent firms and traders, in fact did act to depress the inside bid price in these instances in order to purchase DSPG stock from Taub’s customers at lower prices. On 10 other occasions, Taub authorized the sale of his customers’ stock at prices that he and Coppola or Raiola believed to be comparatively low. [6] In addition, on five occasions, Taub, Coppola and J. Raiola sought to use stock purchased from Taub’s customers at comparatively low or deliberately depressed prices to fill buy on close orders at closing ask prices elevated by improper quote coordination among traders at the above-referenced firms, in order to profit from the larger effective spread resulting from such trades.[7] Taub transacted, in the aggregate, at least 386,280 shares from accounts of his customers in the various improper ways described herein. By virtue of the foregoing, respondents PaineWebber, Taub, Coppola, J. Raiola, Bruno and Palma participated in various courses of conduct in violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and, in the case of PaineWebber, Coppola and J. Raiola, also in violation of Section 15(c)(2) of the Exchange Act and Rule 15c2-7 thereunder. In addition, PaineWebber, Coppola and J. Raiola aided and abetted similar courses of conduct by Cowen and its respondent traders, in violation of Sections 10(b) and 15(c)(2) of the Exchange Act and Rules 10b-5 and 15c2-7 thereunder. **FOOTNOTES** [2]: On August 17, 1994, DSPG announced that a unit of AT&T Corp. had entered into an agreement to use DSPG’s voice-compression technology. This announcement spurred demand for DSPG stock and its price rose 15% on August 17, 1994. Because of these developments, certain shareholders of DSPGwho were customers of PaineWebber began selling their stock, while othercustomers of PaineWebber sought to buy the stock. [3]: During the relevant period of time, PaineWebber traders Coppola and J. Raiola deliberately elevated the inside ask price with respect to 11 of the institutional customer’s buy on close orders involving approximately 161,000 shares of DSPG stock. On one occasion, respondent Coppola discussed with respondent Palma, a senior trader on the PaineWebber Nasdaq desk, such a course of coordination of quotes in connection with executing a buy on close order, and Palma gave his approval to this course of conduct. [4]: For the purposes herein, the term "effective spread" means the difference between the price at which stock is purchased and the price at which it is sold. Thus, it is the transactional spread, and not the quoted spread. [5]: In addition, on one day, respondent Bruno, the head trader of the PaineWebber OTC Desk, authorized the purchase by the desk of DSPG stock from certain Taub customers at a price $1/4 per share below the inside bid, in order to avoid loss to the desk from having agreed to pay Taub add credit of $1/4 per share. On another occasion, respondent Bruno failed to provide certain of Taub’s customers with the best execution of their sell orders when he suggested that Coppola "get" the sole market maker at the inside bid to lower its price before purchasing stock from the Taub customers. Coppola sold stock to the other market maker to induce it to lower its bid price, and then purchased DSPG stock from those Taub customers. [6]: During the relevant period, Taub discussed the market for DSPG stock with Coppola and J. Raiola on a daily basis whenever he had orders to sell, and specifically focused on their perception of the direction prices would take over the course of the trading day. He often deliberately sought to sell shares of his customers’ DSPG stock at prices that the traders believed were comparatively low for the trading day, so that the shares could be resold later when prices rose, at a greater profit from which he could obtain larger amounts of add credit. By executing customer sell orders without seeking the best price reasonably available under the prevailing circumstances, Taub, Coppola, J. Raiola and PaineWebber failed to provide best execution for Taub’s customers. [7]: On one additional occasion, Taub delayed the sale of DSPG stock from a customer account, so that it could be sold at a future date when the PaineWebber OTC desk had a buy on close order. The price of DSPG stock fell thereafter for a number of weeks, to the detriment of the customer whose order to sell was not timely executed. 4 6. Failure to Keep Accurate Books and Records PaineWebber Inc. failed to keep and maintain accurate books and records in one or more of the respects in the manner described in Section II.C.78. of the Order Instituting Proceedings in violation of Section 17(a) of the Exchange Act and Rule 17a-3 thereunder, in a market making transaction or related series of market making transactions connection with making markets in: a. the stock of Novellus Systems, Inc. ("NVLS") in two violationsinstances on September 13, 1994; b. the stock of Cisco Systems, Inc. ("CSCO") in two violationsinstances on August 1, 1994; c. the stock of OPTI, Inc. ("OPTI") in two violationsinstances on August 10, 1994; d. the stock of OPTI, Inc. ("OPTI") on August 12, 1994; e. the stock of Spectrum Signal Processing, Inc. ("SSPIF") on June 13, 1994; f. the stock of Spec Music, Inc. ("SPEX") on August 31, 1994; g. the stock of Center Bank ("CTBX") on August 31, 1994; h. the stock of Bell Cablemedia PLC - ADR ("BCMPY") on August 25, 1994; i. the stock of National Commerce Bancorp ("NCBC") on August 31, 1994; j. the stock of Grove Bank ("GROV") on August 31, 1994; and k. the stock of Dell Computer Corp. ("DELL") in two violationsinstances on September 16, 1994; 5 In addition, as part of the manipulative course of conduct with respect to the stock of DSPG described in Section II.B.5. above, PaineWebber Inc. failed to maintain accurate books and records of orders and transactions in the securities of DSPG in the following manner: a. in seven instances order tickets had inaccurate or unrecorded time(s) of execution; b. in 47 instances failed to keep accurate time of entry or record time of entry; and c. in eight instances failed to note all of the terms and conditions of the order. 7. Failure to Reasonably Supervise Nasdaq Trading PaineWebber Inc. failed reasonably to supervise its Nasdaq market making activities with a view to preventing future violations within the meaning of Section 15(b)(4)(E) of the Exchange Act, in one or more of the respects the manner ddescribed in Section II.C.8.a9. and b. of the Order Instituting Proceedings, and in the other following respects: . In addition, in 1994, Respondent PaineWebber failed reasonably to supervise with a view to preventing violations of the federal securities laws in the following respects: a. Respondent did not conduct adequate surveillance for activity in price and volume that could indicate market manipulation in the manner that occurred in connection with making markets in DSPG stock; b. Respondent did not conduct surveillance for indications that market on close orders might have been subjected to market manipulation or failure to provide best execution in the manner that occurred in connection with making markets in DSPG stock; c. Respondent had inadequate supervisory and surveillance policies and procedures with respect to add credits given to sales personnel, in that it did not have measures to ensure proper handling of customer orders in light of the potential for conflict between the firm’s and its sales personnel’s interests and the customer’s interest arising from the negotiability of add credits; and d. Respondent’s compliance manuals contained inadequate provisions concerning the proper documentation of orders, in that the general requirements for such proper documentation were not fully described, and inadequate supervisory attention was paid to the proper documentation of orders. This hampered the effective supervision and surveillance of, among other things, order handling and trade reporting. 6 III. By reason of the foregoing, PaineWebber Inc. willfully violated Sections 10(b), 15(c)(1) and (2), and 17(a) of the Exchange Act, and Rules 10b-5, 15c1-2, 15c2-7, and 17a-3 thereunder, and failed reasonably to supervise its Nasdaq trading personnel within the meaning of Section 15(b)(4)(E) of the Exchange Act. Richard A. Bruno willfully violated Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, and failed reasonably to supervise PaineWebber Inc.’s Nasdaq trading personnel within the meaning of Section 15(b)(4)(E) of the Exchange Act. Peter F. Comas willfully aided and abetted and caused violations of Sections 15(c)(1) and (2) of the Exchange Act, and Rules 15c1-2 and 15c2-7 thereunder. Robert D. Coppola willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and aided and abetted and caused violations of Sections 15(c)(1) and (2) of the Exchange Act, and Rules 15c1-2 and 15c2-7 thereunder. Gerard Kane willfully aided and abetted and caused violations of Sections 15(c)(1) and (2) of the Exchange Act, and Rules 15c1-2 and 15c2-7. Joseph J. Palma willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and aided and abetted and caused violations of Sections 15(c)(1) and (2) of the Exchange Act, and Rules 15c1-2 and 15c2-7 thereunder. Arthur A. Raiola willfully aided and abetted and caused violations of Sections 15(c)(1) and (2) of the Exchange Act, and Rules 15c1-2 and 15c2-7 thereunder. Joseph H. Raiola willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and aided and abetted and caused violations of Sections 15(c)(1) and (2) of the Exchange Act, and Rules 15c1-2 and 15c2-7 thereunder. Reuben G. Taub willfully violated and caused violations of Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder. IV. In view of the foregoing and Respondents’ Offers, IT IS HEREBY ORDERED, pursuant to Sections 15(b) and 21C of the Exchange Act, that: 1. PaineWebber Inc. shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Sections 10(b), 15(c)(1) and (2), and 17(a) of the Exchange Act, and Rules 10b-5, 15c1-2, 15c2-7, and 17a-3 thereunder; 2. PaineWebber Inc. shall, within 105 business days of the entry of this Order, pay a civil penalty in the amount of $6,300,000 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies PaineWebber Inc. as a Respondent in these proceedings and provides the caption and file number for these proceedings, with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; 3. PaineWebber Inc. shall, within 105 business days of written notice from the Commission staff or the Independent Consultant (as defined below), pay disgorgement of illicit profits in the amount of $381,685 pursuant to Section 21C(e) of the Exchange Act; 4 PaineWebber Inc. shall, within 90 days of the date of the entry of this Order, provide to the independent consultant appointed by the Commission in connection with these proceedings (the "Independent Consultant") a description of its policies, procedures and practices relating to prevention or detection of the types of improper conduct involving PaineWebber Inc. described in Section II of this Order. Within such time as the Commission directs, the Independent Consultant shall review such policies, procedures and practices with a view to determining if they would reasonably be expected to prevent and detect, insofar as practicable, any of the types of improper conduct involving PaineWebber Inc. described in Section II of this Order. PaineWebber Inc. shall cooperate with the Independent Consultant’s review of PaineWebber Inc.’s policies, procedures and practices, and shall, among other things, provide such further information as the Independent Consultant reasonably requests or that PaineWebber Inc. deems relevant to the Independent Consultant’s review, provided, however, that PaineWebber Inc. need not provide any information to which it asserts a valid claim of the attorney-client privilege. The Independent Consultant shall maintain the confidentiality of all materials provided by PaineWebber Inc. and shall not provide the materials to any person, provided, however, that such materials may be provided to the Commission or its staff. If the Independent Consultant concludes that PaineWebber Inc.’s policies, procedures and practices, as presented, would reasonably be expected to prevent and detect, insofar as practicable, any of the types of improper conduct involving PaineWebber Inc. described in Section II of this Order, the Independent Consultant shall inform PaineWebber Inc. of this conclusion in writing, and his or her responsibilities with respect to PaineWebber Inc. shall conclude. If the Independent Consultant cannot conclude that PaineWebber Inc.’s policies, procedures and practices meet the aforesaid standard, he or she may recommend changes in or additions to PaineWebber Inc.’s policies, procedures or practices for the purpose of improving their ability to meet the aforesaid standard. PaineWebber Inc. shall implement all such recommended changes or additions in a timely manner, but in any event no later than three months after receiving the recommendations of the Independent Consultant or such other reasonable time as determined by the Independent Consultant; provided, however, if PaineWebber Inc. believes that a change or addition to its policies, procedures and practices recommended by the Independent Consultant is unduly burdensome or unreasonable, it may: (a) propose an equally effective alternative to the Independent Consultant, and, with the Independent Consultant’s approval, implement that alternative in lieu of the Independent Consultant’s recommended change or addition; or (b) petition the Commission, with notice to the Independent Consultant and the Division of Enforcement, for relief from the recommendation of the Independent Consultant. Within three months of receiving recommendations of the Independent Consultant for changes in or additions to its policies, procedures and practices, PaineWebber Inc. shall report in writing to the Independent Consultant with respect to the implementation of the recommendations and/or any equally effective alternatives approved by the Independent Consultant. If PaineWebber Inc.’s report on implementation is without qualification and states that said recommendations and/or alternatives have been fully and effectively implemented, the Independent Consultant’s responsibilities with respect to PaineWebber Inc. shall conclude. If PaineWebber Inc.’s report on implementation is qualified, or in any respect indicates that implementation is not full and effective, PaineWebber Inc. shall cooperate with all further efforts of the Independent Consultant to ensure that said recommendations and/or alternatives are fully and effectively implemented. When the Independent Consultant concludes that PaineWebber Inc. has fully and effectively implemented said recommendations and/or alternatives, he or she shall inform PaineWebber Inc. in writing of this conclusion and his or her responsibilities with respect to PaineWebber Inc. shall conclude. The fees and expenses of the Independent Consultant arising from his or her review of the policies, procedures and practices of PaineWebber Inc. and the other respondent firms subject to the Independent Consultant’s review shall be prorated evenly among such firms, and in such prorated amounts, be paid by each such firm, provided however, that if the Independent Consultant recommends changes or additions to PaineWebber Inc.’s policies, procedures or practices, the fees and expenses of the Independent Consultant relating to the making and implementation of those recommendations and/or any alternatives approved by the Independent Consultant, and any disagreements relating thereto, shall be paid by PaineWebber Inc.;. PaineWebber Inc. shall, within 90 days of the date of the entry of this Order, provide to the independent consultant appointed by the Commission in connection with these proceedings (the "Independent Consultant") a report describing its policies, procedures and practices relating to compliance with the federal securities laws and all rules and regulations of the appropriate self-regulatory organization concerning any or all aspects of Nasdaq market- making and order handling. PaineWebber Inc. shall cooperate with the Independent Consultant’s review of the report, including, among other things, the provision of such further information as the Independent Consultant requests. PaineWebber Inc. shall implement such changes in or additions to its policies, procedures and practices as requested by the Independent Consultant in a timely manner, but in any event no later than three months after receiving the recommendations of the Independent Consultant; provided, however, if PaineWebber Inc. believes that a change or addition to its policies, procedures and practices recommended by the Independent Consultant is unduly burdensome or unreasonable, it may petition the Commission, with notice to the Independent Consultant and the Division of Enforcement, for relief from the recommendation of the Independent Consultant. Within three months of receiving recommendations of the Independent Consultant for changes in or additions to its policies, procedures and practices, PaineWebber Inc. shall report in writing to the Independent Consultant with respect to the implementation of the recommendations, and shall cooperate with any further efforts of the Independent Consultant to ensure that the recommendations are fully and effectively implemented. The fees and expenses of the Independent Consultant arising from his or her engagement in connection with these proceedings shall be prorated evenly among and, in such prorated amounts, paid by the firms required to provide a report to the Independent Consultant, including PaineWebber Inc. 5. Richard A. Bruno shall cease and desist from committing or causing any violation of, and committing or causing any future violation of, Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder; 6. Richard A. Bruno shall, within 105 business days of the entry of this Order, pay a civil penalty in the amount of $45,000 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies Richard A. Bruno as a Respondent in these proceedings and provides the caption and file number for these proceedings, with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; 7. Richard A. Bruno be, and hereby, is suspended from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, for a period of two months and one week, effective one day after the date of this Order. Richard A. Bruno shall provide to the Commission, within 10 days after the end of the two month and one week suspension described above, an affidavit that he has complied fully with the sanctions described in this Section; 8. Peter F. Comas shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Sections 15(c)(1) and (2) of the Exchange Act, and Rules 15c1-2 and 15c2-7 thereunder; 9. Peter F. Comas shall, within 105 business days of the entry of this Order, pay a civil penalty in the amount of $210,000 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies Peter F. Comas as a Respondent in these proceedings and provides the caption and file number for these proceedings, with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; 10. Peter F. Comas be, and hereby is, barred from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, with the right to reapply for association after 18 months to the appropriate self-regulatory organization, or if there is none, to the Commission; 11. Robert D. Coppola shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Sections 10(b), 15(c)(1) and (2) of the Exchange Act, and Rules 10b-5, 15c1-2 and 15c2-7 thereunder; 12. Robert D. Coppola shall, within 105 business days of the entry of this Order, pay a civil penalty in the amount of $445,000 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies Robert D. Coppola as a Respondent in these proceedings and provides the caption and file number for these proceedings, with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; 13. Robert D. Coppola be, and hereby is, barred from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, with the right to reapply for association after three years to the appropriate self-regulatory organization, or if there is none, to the Commission; 14. Gerard Kane shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Sections 15(c)(1) and (2) of the Exchange Act, and Rules 15c1-2 and 15c2-7 thereunder; 15. Gerard Kane shall, within 105 business days of the entry of this Order, pay a civil penalty in the amount of $65,000 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies Gerard Kane as a Respondent in these proceedings and provides the caption and file number for these proceedings, with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; 16. Gerard Kane be, and hereby is, suspended from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, for a period of three and one half months, effective one day after the date of this Order; Gerard Kane shall provide to the Commission, within 10 days after the end of the three and one half month suspension described above, an affidavit that he has complied fully with the sanctions described in this Section; 17. Joseph J. Palma shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Sections 10(b), 15(c)(1) and (2) of the Exchange Act, and Rules 10b-5, 15c1-2 and 15c2-7 thereunder; 18. Joseph J. Palma shall, within 105 business days of the entry of this Order, pay a civil penalty in the amount of $25,000 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies Joseph J. Palma as a Respondent in these proceedings and provides the caption and file number for these proceedings, with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; 19. Joseph J. Palma be, and hereby is, suspended from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, for a period of seven weeks effective one day after the date of this Order; Joseph J. Palma shall provide to the Commission, within 10 days after the end of the seven week suspension described above, an affidavit that he has complied fully with the sanctions described in this Section; 20. Arthur A. Raiola shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Sections 15(c)(1) and (2) of the Exchange Act, and Rules 15c1-2 and 15c2-7 thereunder; 21. Arthur A. Raiola shall, within 105 business days of the entry of this Order, pay a civil penalty in the amount of $80,000 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies Arthur A. Raiola as a Respondent in these proceedings and provides the caption and file number for these proceedings, with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; 22. Arthur A. Raiola shall be, and hereby is, suspended from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, for a period of four months and three weeks, effective one day after the date of this Order; Arthur A. Raiola shall provide to the Commission, within 10 days after the end of the four month and three week suspension described above, an affidavit that he has complied fully with the sanctions described in this Section; 23. Joseph H. Raiola shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Sections 10(b), 15(c)(1) and (2) of the Exchange Act, and Rules 10b-5, 15c1-2 and 15c2-7 thereunder; 24. Joseph H. Raiola shall, within 105 business days of the entry of this Order, pay a civil penalty in the amount of $260,000 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies Joseph H. Raiola as a Respondent in these proceedings and provides the caption and file number for these proceedings, with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; 25. Joseph H. Raiola be, and hereby is, barred from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, with the right to reapply for association after two years to the appropriate self-regulatory organization, or if there is none, to the Commission; 26. Reuben G. Taub shall cease and desist from committing or causing any violation of, and committing or causing any future violation of Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder; 27. Reuben G. Taub shall, within 105 business days of the entry of this Order, pay a civil penalty in the amount of $300,000 by wire transfer in accordance with instructions furnished by the Commission staff, or by U.S. Postal money order, certified check, bank cashier’s check, or bank money order, made payable to the Securities and Exchange Commission, which shall be hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Mail Stop O-3, Alexandria, VA 22312, under cover of a letter that identifies Reuben G. Taub as a Respondent in these proceedings and provides the caption and file number for these proceedings, with (a) written confirmation of payment by such wire transfer, or (b) a copy of such cover letter and money order or check to be sent to Leonard W. Wang, Division of Enforcement, Securities and Exchange Commission, 450 5th Street, N.W., Mail Stop 7-1, Washington, D.C. 20549; 28. Reuben G. Taub shall, within 105 business days of written notice from the Commission staff or the Independent Consultant, pay disgorgement in the amount of $103,727 pursuant to Section 21C(e) of the Exchange Act; and 29. Reuben G. Taub be, and hereby is, barred from association with any broker, dealer, municipal securities dealer, investment adviser or investment company, with the right to reapply for association after three years to the appropriate self-regulatory organization, or if there is none, to the Commission. By the Commission. Jonathan G. Katz Secretary 7