NASD N/K/A FINRA

SECTION 5 OF THE SECURITIES ACT OF 1933, SECTION 10(B) OF THE SECURITIES AND EXCHANGE ACT OF 1934 AND RULE 10B-5 THEREUNDER, NASD RULES 2110, 2120, 3040 - RESPONDENT DIRECTLY OR INDIRECTLY MADE USE OF THE MEANS OR INSTRUMENTS OF TRANSPORTATION OR COMMUNICATION IN INTERSTATE COMMERCE OR OF THE MAILS TO OFFER TO SELL AND TO SELL SECURITIES IN THE FORM OF PROMISSORY NOTES, OR DIRECTLY OR INDIRECTLY, CARRIED OR CAUSED SUCH SECURITIES TO BE CARRIED THROUGH THE MAILS OR IN INTERSTATE COMMERCE, FOR THE PURPOSE OF SALE OR FOR DELIVERY AFTER SALE OF THE SECURITIES; DIRECTLY OR INDIRECTLY, IN CONNECTION WITH THE PURCHASE OR SALE OF SECURITIES, BY THE USE OF MEANS OR INSTRUMENTALITIES OF INTERSTATE COMMERCE OR OF THE MAILS, EMPLOYED DEVICES SCHEMES OR ARTIFICES TO DEFRAUD, MADE UNTRUE STATEMENTS OF MATERIAL FACTS OR OMITTED TO STATE MATERIAL FACTS NECESSARY IN ORDER TO MAKE THE STATEMENTS TRUE, IN THE LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING, ENGAGED IN ACTS, PRACTICES OR COURSES OF BUSINESS WHICH OPERATED OR WOULD OPERATE AS A FRAUD OR DECEIT UPON PURCHASERS OR PROSPECTIVE PURCHASERS IN CONTRAVENTION OF SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1937 AND RULE 10B-5 PROMULGATED THEREUNDER; PARTICIPATED IN PRIVATE SECURITIES TRANSACTIONS WITHOUT PROVIDING PRIOR WRITTEN NOTIFICATION TO HIS MEMBER FIRM.

Decision

Bar (Permanent)

All Capacities

Indefinite

5/24/2005

Monetary Penalty other than Fines

$5,141.21

HEARING PANEL DECISION RENDERED 02/09/04, WHEREIN GEBHART, WAS SUSPENDED FROM ASSOCIATION WITH ANY NASD MEMBER IN ANY CAPACITY FOR 12 MONTHS AND FINED $100,000. THE PANEL ORDERED HIM TO PAY $5,141.21 IN HEARING COSTS, JOINTLY AND SEVERALLY. 03/08/04-CALLED FOR REVIEW BY THE NAC. NAC DECISION RENDERED MAY 24, 2005 WHEREIN ALVIN GEBHART IS BARRED FROM ASSOCIATION WITH ANY NASD MEMBER IN ANY CAPACITY, WHICH IS EFFECTIVE UPON SERVICE OF THIS DECISION. NAC IMPOSED $5,141.21 IN COSTS AGAINST GEBHART, JOINTLY AND SEVERALLY. NAC DECISION APPEALED TO SEC 06/14/05. ON 01/18/06, SEC AFFIRMED THE DISCIPLINARY ACTION TAKEN BY NASD AND THE SANCTIONS IMPOSED. IN EARLIER PROCEEDINGS, THE NAC FOUND THAT RESPONDENT: SOLD UNREGISTERED SECURITIES THAT WERE REQUIRED TO BE REGISTERED, IN VIOLATION OF SECTION 5 OF THE SECURITIES ACT OF 1933 AND NASD CONDUCT RULE 2110; ENGAGED IN PRIVATE SECURITIES TRANSACTIONS WITHOUT PROVIDING PRIOR WRITTEN NOTICE TO, OR RECEIVING PRIOR WRITTEN APPROVAL FROM, THEIR FIRM, IN VIOLATION OF NASD CONDUCT RULES 3040 AND 2110; AND RECKLESSLY OMITTED MATERIAL FACTS IN CONNECTION WITH THE SALES OF SECURITIES, IN VIOLATION OF THE ANTIFRAUD PROVISIONS OF THE FEDERAL SECURITIES LAWS AND NASD RULES, SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934, RULE 10B-5 THEREUNDER, AND NASD RULES 2120 AND 2110. FOR THESE VIOLATIONS, NASD BARRED RESPONDENT FROM ASSOCIATION WITH ANY NASD MEMBER IN ANY CAPACITY AND NASD'S ASSESSMENT OF COSTS IS SUSTAINED. APPEALED TO THE U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT ON 02/27/06. ON 11/21/07, THE U.S.COURT OF APPEALS AFFIRMED IN PART AND REVERSED IN PART AN SEC ORDER. REMANDED TO THE SEC ON 11/21/07. SEC DECISION NOVEMBER 14, 2008 ON REMAND: SEC HELD, GEBHART RECKLESSLY MADE MATERIAL MISREPRESENTATIONS AND OMISSIONS, AND THE FINDINGS OF LIABILITY AND SANCTIONS IMPOSED ARE SUSTAINED. PETITIONED THE COURT OF APPEALS FOR REVIEW ON DECEMBER 1, 2009. ON FEBRUARY 17, 2010, THE COURT OF APPEALS DENIED THE PETITION FOR REVIEW, SUPPORTING THE SEC'S CONCLUSION THAT GEBHART ACTED WITH SCIENTER. FEBRUARY 17, 2010 - DECISION IS FINAL. ON MAY 18, 2010, GEBHART PETITIONED THE SUPREME COURT OF THE UNITED STATES. ON JUNE 21, 2010, THE PETITION WAS DENIED.

ALVIN GEBHART APPEALED THE DECISION OF THE NAC ON JUNE 14, 2005 TO THE U.S. SECURITIES AND EXCHANGE COMMISSION. ON JANUARY 18, 2006, THE SEC UPHELD THE RULING OF THE NAC. ON FEBRUARY 23, 2006, ALVIN GEBHART APPEALED, IN PART, THE DECISION OF THE SEC TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT. ON NOVEMBER 21, 2007, THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT REVERSED THE SEC'S SCIENTER DETERMINATION WITH RESPECT TO SECTION 10(B), RULE 10B-5 AND NASD CONDUCT RULE 2120. THE COURT OF APPEALS VACATED THE SANCTIONS IMPOSED BASED THEREON AND REMANDED THE ISSUE TO THE SEC FOR FURTHER FINDINGS. THE COURT RULED THAT THE GEBHART'S CLAIMS OF ERROR WITH RESPECT TO NASD CONDUCT RULE 3040 WERE WITHOUT MERIT. ON OR ABOUT NOVEMBER 14, 2008, ON REMAND, THE U.S. SECURITIES AND EXCHANGE COMMISSION HELD THAT THE GEBHARTS CONDUCT DID SATISFY THE DEFINITION OF RECKLESSNESS AND SUSTAINED THE NASD'S (NOW KNOWN AS FINRA) FINDING OF LIABILITY AND THE SANCTIONS IMPOSED THEREON. ON OR ABOUT DECEMBER 2, 2008, THE GEBHARTS FILED A PETITION FOR REVIEW OF THE SEC'S DECISION, IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT. ON OR ABOUT FEBRUARY 17, 2010, THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT DENIED THE GEBHARTS' PETITION FOR REVIEW. THE GEBHARTS SOUGHT FURTHER REVIEW FROM THE U.S. SUPREME COURT VIA WRIT OF CERTIORARI. ON OR ABOUT JUNE 21, 2010, THE U.S. SUPREME COURT DENIED THE WRIT OF CERTIORARI FILED BY THE GEBHARTS. THERE WERE SEVERAL LAWSUITS AND ARBITRATIONS THAT AROSE FROM THE UNREGISTERED SECURITIES IN WHICH THE GEBHARTS WERE INVOLVED. THROUGH THE EFFORTS OF THE GEBHARTS, A TOTAL OF 84% OF THE CLIENTS' FUNDS WERE RETURNED TO THEM. THERE WAS A CLASS ACTION LAWSUIT THAT RESULTED IN MUTUAL SERVICE CORPORATION ("MSC") AND ITS INSURER, CNA, AGREEING TO PAY $925,000 TO THE GEBHARTS' CLIENTS. (THE GEBHARTS WERE NOT REQUIRED TO PAY ANY MONIES RELATIVE TO THE SETTLEMENT IN THAT CASE). IN THE MUTUAL ARBITRATION CLAIMS BETWEEN MSC AND THE GEBHARTS, A SETTLEMENT WAS REACHED THAT INVOLVED MUTUAL DISMISSALS BETWEEN MSC AND THE GEBHARTS. THE GEBHARTS' CLAIM AGAINST FIRST REGIONAL BANK ("FRB") FOR FRB'S NEGLIGENCE IN HANDLING THE ESCROWS INVOLVING THE UNREGISTERED SECURITIES WAS SETTLED BY FRB AGREEING TO PAY THE GEBHARTS $10,000.