Notice of Disciplinary Action Against PTR, Inc., a Member
Organization.
To:Members, Member Organizations, Participants and Participant Organizations

From:John C. Pickford, Enforcement Counsel, NASDAQ OMX PHLXSMDATE:April 1, 2013

FINRA Matter Nos. 20100212132 et al
Enforcement No. 2013-01
On March 25, 2013, the Business Conduct Committee (the “Committee”) issued adisciplinary decision against PTR, Inc. (“PTR” or the “Firm”), a member organization of theNASDAQ OMX PHLX LLC (“PHLX” or the “Exchange”). In response to a Statement ofCharges issued in this action, PTR submitted an Offer of Settlement, Stipulation of Facts andConsent to Sanctions (“Offer”). Solely to settle this proceeding, and without admitting ordenying the charges, PTR consented to findings that at various times between June 2009
and June 2012 (the “Review Period”), it had committed violations of Sections 11(a),15(a)(1), 15(b)(6)(B)(ii), and 17 of the Securities Exchange Act of 1934, as amended (the“Exchange Act”), Rules 11a-1, 17a-3, 17a-3(a)(2), 17a-3(a)(19)(ii), 17a-5, and 17f-2
promulgated thereunder, and Exchange Rules 119, 120, 600(b), 604, 610, 623, 703,703(c)(vi), 705, 707, 708, 748(e)(1), 748(g), 757, 760, 761, 1014, 1024(b), 1025,1051(a), 1067, and 1084.
Specifically, PTR consented to findings that during the Review Period, it had, among otherthings: (i) executed 116 options transactions that traded through the Exchange’s Best Bidand Offer and/or the National Best Bid and Offer markets or traded ahead of customer
orders on the Exchange’s Limit Order Book (the “Book”) and/or ahead of Streaming Quote
Trader and/or Remote Stream Quote Trader quotations with established priority; (ii)effected two proprietary options transactions to satisfy customer orders residing on theBook, which enabled the Firm to cross large options orders from clients, and thereafter
placed them in its error account; (iii) failed to report 10% or more of its executed optionstransactions to the consolidated tape within 90 seconds of execution; (iv) engaged thebookkeeping services of an independent contractor whose principal had, unbeknownst toPTR, been permanently barred by the U.S. Securities and Exchange Commission(“Commission”) from association with any broker, dealer, municipal securities dealer,investment adviser, or investment company; and (v) authorized and paid transaction-based
compensation to three non-broker-dealer entities that had been owned and controlled byindividuals who were registered and association with the Firm, and had thereby caused theentities to operate as unregistered broker-dealers.
Additionally, PTR consented to findings that during the Review Period, it had committed anumber of reporting, books and records, anti-money laundering compliance-related (“AML”),
supervisory and other violations. Among the violations were the Firm’s failure to: (i) fileaccurate Financial and Operational Combined Uniform Single reports with the Exchange; (ii)secure written senior management approval of its AML Program; (iii) properly account for its
prepaid expenses, aged floor brokerage receivables, and paid-in capital; (iv) maintainadequate written employment agreements with a number of its associated persons; (v)maintain accurate records relating to the Insider Trading Securities Fraud Enforcement Actof 1988, and/or conduct a timely review of the brokerage account statements of numerous
associated persons of the Firm; (vi) timely submit to FINRA for processing and identification
the fingerprint records of four of its employees; (vii) update an employee’s Uniform
Application for Securities Industry Registration or Transfer filing; and (viii) carry fidelity
bond coverage to cover potential losses resulting from fraudulent trading as mandated byapplicable Exchange Rule.
Finally, PTR consented to findings that it had failed to: (i) document, or otherwise ensure,that an employee attended its annual AML Compliance training program; (ii) provide one ofits customers, or could not provide evidence that it had provided that customer, with a copyof the Special Statement for Uncovered Options Writers; and (iii) establish, maintain andenforce written supervisory procedures, and a system for applying such procedures, thatreasonably addressed, among other things: (a) the requirement to notify the Commission ofany capital withdrawals and books and records deficiencies; (b) compliance with momentto-moment net capital requirements; (c) the Firm’s risk management system, data storage,
maintenance and recovery and business continuity and emergency management plan; (d)the requirements for heightened supervision of associated persons, including statutorily
disqualified persons; (e) the designation of Offices of Supervisory Jurisdiction; (f) updates
to the Firm’s AML procedures as necessary and notification to the Exchange of changes to
the Firm’s business model; (g) compliance with the Exchange’s order priority rules; (h) theappointment of one or more individuals meeting the Exchange’s qualifications forsupervisors to assume supervision of PTR when qualified supervisors are physically absent;and (i) compliance with the Firm and Regulatory Elements of its Continuing Educationprogram.
The Offer submitted by PTR was accepted by the Committee and was the basis of its
Decision. The Committee found that had violated Sections 11(a), 15(a)(1), 15(b)(6)(B)(ii),and 17 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) andExchange Rules 11a-1, 17a-3, 17a-3(a)(2), 17a-3(a)(19)(ii), 17a-5, and 17f-2 promulgatedthereunder, and Exchange Rules 119, 120, 600(b), 604, 610, 623, 703, 703(c)(vi), 705,707, 708, 748(e)(1), 748(g), 757, 760, 761, 1014, 1024(b), 1025, 1051(a), 1067, and1084 and ordered the imposition of the following sanctions against them: (i) a censure; and(ii) a fine in the amount of $60,000.
For more information, contact:
John C. Pickford, Enforcement Counsel, NASDAQ OMX PHLX, at +1 215 496 5273

 Copyright 2009 The NASDAQ OMX Group, Inc. All Rights Reserved.

2