Initiated By
FINRA
Allegations
WILLFULLY VIOLATED SECTION 15(A)(1) OF THE SECURITIES EXCHANGE ACT OF 1934, WILLFULLY AIDED AND ABETTED THE VIOLATIONS OF SECTION 15(A)(1) OF THE SECURITIES EXCHANGE ACT OF 1934, AND VIOLATED FINRA RULES 2010, 3310(A), 3310(B), NASD RULES 2110, 2520, 3010, 3011(A), 3011(B): YEH AND HIS MEMBER FIRM OPERATED TWO UNREGISTERED BROKER-DEALERS THROUGH MASTER AND SUBACCOUNT ARRANGEMENTS AT THE FIRM. IN PARTICULAR, YEH AND CERTAIN EMPLOYEES OF THE FIRM ENCOURAGED DAY TRADERS TO OPEN SUBACCOUNTS WITH ONE OF THE UNREGISTERED BROKER-DEALERS AND TO TRADE THROUGH THE UNREGISTERED BROKER-DEALER ACCOUNT AT THE FIRM. IN ADDITION, YEH AND KEY EMPLOYEES OF THE FIRM HANDLED SUBACCOUNT TRADERS' FUNDS, WHICH WERE USED FOR SECURITIES TRANSACTIONS, AND PROVIDED BUYING POWER TO THE UNREGISTERED BROKER-DEALER SUBACCOUNT TRADERS BY ALLOWING SUBACCOUNT TRADERS TO TRADE AGAINST THE EQUITY OF THE ENTIRE POOLED OF THE ACCOUNT AT THE FIRM, RATHER THAN JUST THEIR OWN EQUITY. YEH ESTABLISHED AND CONTROLLED THE BANK ACCOUNT OF THE UNREGISTERED BROKER-DEALER, PAYING TRADING PROFITS TO SUBACCOUNT TRADERS FROM THAT ACCOUNT. SIMILARLY, YEH FORMED THE OTHER UNREGISTERED BROKER-DEALER, OPENED A MASTER ACCOUNT FOR IT AT THE FIRM AND, WITH THE ASSISTANCE OF THE FIRM'S EMPLOYEES, CONTROLLED AND MANAGED THE ACCOUNT AT THE FIRM IN SIMILAR MANNERS AS WITH THE OTHER UNREGISTERED BROKER-DEALER. YEH ESTABLISHED AND CONTROLLED THE OFFSHORE BANK ACCOUNT OF THE UNREGISTERED BROKER-DEALER, PAYING TRADING PROFITS TO SUBACCOUNT TRADERS FROM THAT ACCOUNT. THROUGH THE OPERATION OF THE UNREGISTERED BROKER-DEALERS' MASTER ACCOUNTS, THE FIRM RECEIVED APPROXIMATELY $5.8 MILLION IN TRADING COMMISSIONS. YEH AND HIS FIRM PROVIDED KNOWING AND SUBSTANTIAL ASSISTANCE TO SEVERAL MASTER ACCOUNTS OWNED BY DOMESTIC CORPORATE ENTITIES SO THAT THEY COULD OPERATE AS UNREGISTERED BROKER-DEALERS. YEH AND HIS FIRM PROVIDED THE STRUCTURE AND SUPPORT BY WHICH THE MASTER ACCOUNTS COULD OPERATE AS UNREGISTERED FIRMS. YEH AND HIS FIRM WERE AWARE THAT THE SUBACCOUNTS AND MASTER ACCOUNTS HAD DIFFERENT BENEFICIAL OWNERS, THAT THE MASTER ACCOUNTS CHARGED THE SUBACCOUNTS TRANSACTION-BASED COMPENSATION, AND THAT THE MASTER ACCOUNTS PROFITED BY CHARGING COMMISSION RATES THAT WERE HIGHER THAN THE RATES THEY PAID THE FIRM. THE FIRM EARNED APPROXIMATELY $7.2 MILLION IN COMMISSIONS FROM THE TRADING OF THESE MASTER ACCOUNTS. YEH AND HIS FIRM OPERATED THE UNREGISTERED BROKER-DEALERS SO AS TO CIRCUMVENT THE DAY-TRADING LIMITATIONS. YEH AND THE FIRM ALLOWED THE SUBACCOUNT TRADERS TO DAY TRADE WITHOUT MAKING A MINIMUM EQUITY CONTRIBUTION OF $25,000, AND PROVIDED THEM BUYING POWER OF MORE THAN FOUR TIMES THEIR MAINTENANCE MARGIN EXCESS. FURTHER, YEH AND THE FIRM PERMITTED SUBACCOUNTS, WHICH WERE PURCHASING AND SELLING THE SAME SECURITY ON THE SAME DAY, AND DOING SO MORE THAN FOUR TIMES WITHIN FIVE BUSINESS DAYS, TO TRADE AS PATTERN DAY TRADERS FOR OTHER MASTER ACCOUNTS WITHOUT MAINTAINING EQUITY OF $25,000, THE MINIMUM REQUIREMENT FOR PATTERN DAY TRADERS UNDER FINRA RULES. IN ADDITION, YEH AND THE FIRM ALLOWED THESE OTHER MASTER ACCOUNTS TO DETERMINE THE BUYING POWER OF THE SUBACCOUNTS, SOMETIMES IN AMOUNTS IN EXCESS OF FOUR TIMES THEIR EQUITY. YEH WAS HIS FIRM'S AML OFFICER AND MANAGED THE DAY-TO-DAY OPERATIONS OF THE FIRM AS ITS PRESIDENT. YEH WAS RESPONSIBLE FOR MANY OF THE POLICIES THAT LED TO THE AML VIOLATIONS BY THE FIRM. YEH WAS AWARE OF THE MULTIPLE REGULATORY REQUESTS ABOUT POTENTIALLY MANIPULATIVE TRADING BY THE FIRM'S CUSTOMERS. HOWEVER, YEH TOOK NO EFFECTIVE STEPS TO MONITOR SUCH TRADING, OR CURB POTENTIALLY MANIPULATIVE TRADING. YEH ALSO PARTICIPATED IN POTENTIALLY SUSPICIOUS ACTIVITY. YEH ESTABLISHED OFFSHORE BANK ACCOUNTS FOR AN UNREGISTERED BROKER-DEALER USING HIS RELATIVE'S NAME AND OPERATED UNDER THE PRETENSE THAT SHE WAS MANAGING THE ENTITY. (CONT. IN COMMENT SECTION)
Resolution
Decision & Order of Offer of Settlement
Bar
Bar (Permanent)
Registration Capacities Affected
All Capacities
Start Date
5/15/2012
Regulator Statement
YEH NOMINATED THE RELATIVE AS THE CONTACT PERSON FOR UNREGISTERED BROKER-DEALERS' ACCOUNTS, WHEN IN REALITY HIS RELATIVE HAD NOTHING TO DO WITH THE OPERATION OF THOSE ACCOUNTS. YEH SIGNED EMAILS TO THE BANKS ON BEHALF OF AN UNREGISTERED BROKER-DEALER USING THE RELATIVE'S NAME. AS A RESULT, YEH FAILED TO ESTABLISH AND IMPLEMENT POLICIES AND PROCEDURES THAT COULD HAVE BEEN REASONABLY EXPECTED TO DETECT AND CAUSE THE REPORTING OF SUSPICIOUS ACTIVITY OR OTHERWISE WERE REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH THE BANK SECRECY ACT AND THE IMPLEMENTING REGULATIONS. YEH HAD INDIVIDUAL SUPERVISORY OBLIGATIONS THAT HE FAILED TO CARRY OUT. YEH ESTABLISHED THE MASTER-SUBACCOUNT STRUCTURE AT THE FIRM, YET HE FAILED TO TAKE ADEQUATE STEPS TO ENSURE THAT THE FIRM HAD A SUPERVISORY SYSTEM AND WSPS TAILORED TO THAT BUSINESS. YEH DIRECTLY SUPERVISED THE SALES REPRESENTATIVES FOR MASTER AND SUBACCOUNTS USING THE FIRM'S PROPRIETARY TRADING PLATFORM SYSTEM, YET TOOK NO ACTION TO MEANINGFULLY REVIEW THE TRADING OF THOSE SALES REPRESENTATIVES, EVEN THOUGH THOSE REPRESENTATIVES COULD SEE THE TRADING OF THEIR CLIENTS.
WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, YEH CONSENTED TO THE DESCRIBED SANCTION AND TO THE ENTRY OF FINDINGS; THEREFORE HE IS BARRED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY.
