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Finra Firm Revocation and Bar Upheld For Manipulation, Trader's Bar Reduced To Five Years With Right To Reapply

Kirlin Securities, Inc., Anthony Kirincic, Andrew Israel, Exchange Act Rel. 61135, December 10, 2009

Time since appeal – 8 months 15 days
Time since last brief – 4 months 28 days

Finra found that Kirlin, Kirincic, and Israel manipulated the price of the stock of Kirlin's publicly traded parent. Kirlin was expelled. Kirincic was barred. Israel was also barred. The Commission upheld the expulsion of the firm. It upheld the bar against Kirincic based on the manipulation, but set aside a sanction based on a Finra finding that he had falsified customer documents. The bar against Israel for manipulation was set aside and instead he was barred with a right to reapply after five years. Finally a restitution order against Kirlin and Israel for failure to provide best execution of a customer trade was set aside.

The manipulation was prompted by a decline in the price of the stock of Kirlin's parent that threatened it to be delisted by Nasdaq. The manipulation was accomplished through a series of crossed orders between accounts held by Kirincic's family. He also placed buy orders at escalating prices through accounts of family members. Kirincic was Kirlin's co-CEO and Israel was a trader who executed the trades.

Manipulation constitutes deliberate interference with the "free forces of supply and demand" and is almost always involves an extremely fact intensive investigation of market and trading activity. A rapid price rise in a thinly traded stock that is controlled by a firm with abundant supply, little investor interest, and the absence of favorable news about the company are emblematic of manipulation. The opinion is worth reading for its summary of the law of manipulation.

The Commission set aside Israel's bar because it found that he recklessly executed Kirincic's orders rather than knowingly participated in a manipulation. He was found reckless because Kirincic's orders were at successively higher bids despite circumstances that should have caused him to be alert to a possible manipulation.

It was not necessary for Finra to produce expert testimony to prove a manipulation as it is an expert body itself.