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Serious Remorse Means More Than Saying You Are Sorry - FINRA Bar For False Research Reports Upheld

Vincent M. Uberti, Exchange Act Rel. 58917, November 7, 2008

Time since appeal - 9 months 2 days
Time since last brief - 5 months 9 days
Pages - 12
Footnotes - 30


In a 2007 opinion the Commission sustained NASD findings that Uberti had prepared and disseminated twenty-four false research reports and failed to disclose compensation received for those reports. The Commission remanded for reconsideration of the sanctions. On remand Uberti was barred for transactions while at Donner Corp. and assessed costs. It fined him $20,000 and suspended him for six months and required him to requalify as a general representative and principal for transactions occurring at Lincoln Equity Research.

On appeal the Commission sustained the sanctions concerning the Donner transactions, but set aside the Lincoln Equity sanctions.

In the Donner transactions Uberti was paid to create research reports on various stocks. He hired an independent contractor to actually prepare the reports who had no securities background and did not understand the information he was summarizing to create the reports. Among other things, the reports ignored going concern qualifications in the financial statements of many of the companies that were subject of the research reports. All the reports were positive in tone and ignored public information such as negative earnings, operating losses, and significant lawsuits. Nor did the reports disclose, contrary to the anti-touting provisions of Securities Act Section 17(b), that Donner was being compensated by the companies for preparing the reports.

In the Lincoln transactions the research reports were also generally positive and ignored negative information such as going concern and other negative information about the companies.

The Commission reversed the Lincoln sanctions because the NASD's notice to Uberti on the scope of the remand did not specifically designate the Lincoln transactions as subject to additional sanctions. It upheld the Donner sanctions finding that it had appropriately explained a bar was appropriate despite the fact that the hearing panel found mitigating factors.


The Commission remanded because it found that NASD had not adequately explained why a bar was appropriate in the Donner transactions in light of mitigating factors found by the initial hearing panel. The hearing panel found Uberti's expressions of remorse sincere. On remand NASD concluded that the panel's credibility determination should be reversed because Uberti had not actually been remorseful. He claimed that no reasonable investor would rely on a research report, that a going concern qualification was not material, and demonstrated a general "buyer beware" concept of the securities laws. The Commission found that given this evidence, while Uberti's professions of remorse were personally sincere, they did not outweigh the danger to the investing public resulting from the threat his "buyer beware" philosophy presents to the investing public. The bar was also deemed appropriate because Uberti had issued twenty-two misleading Donner reports over a two year period all of which failed to disclose the compensation he received for the reports.


Serious fraud will not be excused by even the most sincere professions of remorse at the dock. Real remorse means more than saying you are sorry.  To be effective one must not minimize the seriousness of one's violations.