Notice, Pursuant to Exchange By-law 18-2, of Disciplinary
Action Against PTR, Inc., Member Organization
To:Members, Member Organizations, Participants and Participant Organizations

From:

John C. Pickford, Enforcement Counsel, NASDAQ OMX PHLXSM

DATE:

September 24, 2010

NASDAQ OMX PHLX No. 10-17
Enforcement No. 2010-14
On September 22, 2010, the Business Conduct Committee (the “Committee”) issued adisciplinary decision against PTR, Inc. (“PTR” or the “Firm”), a member organization of theExchange. In response to a Statement of Charges issued in this action, PTR submitted an
Offer of Settlement, Stipulation of Facts and Consent to Sanctions (“Offer”). Solely tosettle this proceeding, and without admitting or denying the charges, PTR consented tofindings that during the periods between January 1, 2009 and November 30, 2009, andJanuary 1, 2008 and October 31, 2008 (collectively, the “Relevant Period”), it had violated
Section 17 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
Rules 17a-3, 17a-3(a)(2), 17a-3(a)(19)(ii), 17a-4(b)(3), 17a-4(b)(7), 17a-5, 17a-5(d)and Rule 200(g) of Regulation SHO promulgated under the Exchange Act, and Exchange
Rules 600(b), 603, 604(a), 604(b), 620(b), 703, 705, 712, 746, 748(e)(1), 748(g), 757,760, 761, 1024(a)(i), 1024(b)(i), 1024(b)(ii), 1024(b)(iv), 1024(c)(v), 1025, 1029, and1070, by, among other things: (i) failing to keep accurate books and records; (ii) filinginaccurate Financial and Operational Combined Uniform Single and Financial Condition
Reports with the Exchange; (iii) failing to utilize the Web CRD database to submit and/oramend Uniform Application for Securities Industry Registration or Transfer filings for
employees and/or associated persons who were permit holders and members of theExchange or who were dually employed by, and affiliated with, the Firm and an affiliatedentity; (iv) failing to utilize the Web CRD database to amend the Uniform Termination
Notice for Securities Industry Registration of an associated person; (v) failing to make,maintain and preserve written records to reflect its relationship and compensation
arrangement with eight associated persons; (vi) failing to preserve a record of 31 invoices
relating to its business; (vii) improperly marking 30 options orders as “sell long” ratherthan as “sell short;” (viii) failing to document that an associated person had attended theFirm’s 2008 anti-money laundering (“AML”) compliance training program, or to provide
the training materials utilized in its 2009 annual compliance meeting and training sessions
from which the Exchange could determine whether any such training had been conducted
and the adequacy of any such training; and (ix) conducting business with numerous publiccustomers, but failing to: (a) conduct, or provide evidence that it had conducted, anannual testing of its AML program in 2009; (b) request and obtain from public customers
New Account forms that adequately required and captured certain information about thecustomers, their financial condition and investment objectives; (c) ensure that the publiccustomers had been approved and/or confirmed by a qualified options principal for options
trading; (d) provide the public customers with a Special Statement for Uncovered Options

Writers notice explaining the risks associated with writing uncovered short options; (e)deliver the requisite Options Disclosure Document to public customers; (f) file with theExchange an Annual Audit within 60 calendar days of the end of its 2008 and 2009 fiscalyears; and (g) carry fidelity bond coverage to cover potential losses resulting frommisplacements, fraudulent trading and forgery, and various other public customer-relateddeficiencies.
The Firm also consented, without admitting or denying the charges, to findings by theCommittee that during the Relevant Period, PTR had failed to establish, maintain andenforce written supervisory procedures (“WSPs”), and a system for applying suchprocedures, that resulted in numerous supervisory deficiencies, including, but not limited
to, the failure to address: (i) real-time monitoring of the Firm’s net capital to ensure thatit did not fall below the minimum required level; (ii) the maintenance of appropriate
barriers to monitor the flow of information between PTR’s market making, proprietary
trading and investment advisory operations and a risk management system to monitor its
proprietary trading; (iii) the frequency of PTR’s branch office inspections and the mannerin which such inspections were to be conducted and supervised; (iv) the identity of theperson(s) responsible for conducting a monthly review of the brokerage accountstatements of associated persons; (v) review and supervision of the trading activity of theFirm’s dually affiliated employees to ensure compliance with applicable rules andregulations and PTR’s WSPs; (vi) the requirement that PTR exercise due diligence to learn
the essential facts relative to every customer, order and account; (vii) PTR’s compliancewith the requirements under Regulation SHO promulgated under the Exchange Act
regarding the establishment of a written plan of organization, the strategies andobjectives of, and the assignment of traders to, aggregation units, and the manner inwhich the net position in individual securities is determined within each of PTR’s
aggregation units; (viii) the circumstances under which the Firm’s Uniform Application for
Broker-Dealer Registration is amended and the period within which it must be amended;(ix) the prohibition against the use by PTR’s personnel of squawk boxes, electronic mail,instant messages, video conferencing equipment and other electronic devices toeavesdrop on the trading and/or trading strategy of other broker-dealers, hedge funds,banking institutions, and investment advisors, and against the use of material, non-public
information; and (x) the requirement that financial reports, such as the FOCUS Reports,
and all requests for extensions to file such reports, be made through the WebFOCUS
financial application.
PTR’s Offer was accepted by the Committee and was the basis of its Decision.
The Committee found that PTR had violated Section 17 of the Exchange Act, Rules 17a-3,17a-3(a)(2), 17a-3(a)(19)(ii), 17a-4(b)(3), 17a-4(b)(7), 17a-5, 17a-5(d) and Rule 200(g)of Regulation SHO promulgated under the Exchange Act, and Exchange Rules 600(b),603, 604(a), 604(b), 620(b), 703, 705, 712, 746, 748(e)(1), 748(g), 757, 760, 761,1024(a)(i), 1024(b)(i), 1024(b)(ii), 1024(b)(iv), 1024(c)(v), 1025, 1029, and 1070,
concurred in the sanctions consented to by it, and ordered the imposition of the following
sanctions: (i) a censure; (ii) a fine in the amount of $90,000.
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.

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