Commentary

Elaine Wah

Modern Markets, Modern Metrics - A Blog By IEX

In this blog by IEX's Elaine Wah, the newest public exchange looks to refute public claims that the metrics it uses are designed to inflate its own volume numbers and mislead people.

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June 30, 2001

NASD Hammers Controversial Day Trader

By Gregory Bresiger

Harvey Houtkin, a day trading honcho, has been censured and fined. His firm, All-Tech in Montvale, New Jersey, along with other executives were fined about $380,000 for day trading and advertising violations, according to NASD Regulation.

Houtkin and his firm, NASD officials said in a release, made misleading statements in a number of print and radio advertisements. Houtkin, an early proponent of day trading, was once knicknamed the "Godfather of SOES" because of its negative connotations with alleged abuses of day trading on Nasdaq.

Among the controversial statements credited to All-Tech:

* Most of my customers have enjoyed successes virtually unheard of in the trading community.

* [A]nyone with the financial capability and desire has the opportunity to participate in the market with the same advantages as a market making pro.

* If you meet the parameters set forth in this guide...your probability of success will be exceptionally high.

* Electronic Day Trading appeals to executives, retirees, graduating college students and anyone who recognizes the unlimited earnings potential and quality of life which an Electronic Day Trader may achieve.

* Perhaps three in ten or four in ten people trained as day traders will become successful.

Officials Fined

Besides the fines imposed on the firm, Houtkin was also fined $50,000, suspended from associating with any NASD member in all capabilities for 15 days and suspended as a principal and supervisor for 105 days. Other officials of his firm were also fined.

Besides the controversial claims, the NASD also contended that All-Tech failed to adequately supervise the activities of employees who routinely arranged loans between customers.

NASDR, the regulatory arm of NASD, said the employees "misrepresented" the risks of the loans, telling them the loans were guaranteed.

The Securities and Exchange Commission said that All-Tech made some 100 improper margin loans totaling some $3.6 million over an eight month period in 1998.

Houtkin and his firm agreed to pay the fines without denying or admitting the wrongdoing.