- 6 -
Joseph Leo (Leo) of Twenty-First was responsible for
arranging the execution of the purchase and resale trades of
ADR's for petitioner. Bear Stearns & Co., Inc. (Bear Stearns),
was used as the clearing broker for petitioner's trades, and the
securities selected for the transaction were ADR shares of Royal
Dutch Petroleum Company (Royal Dutch). Royal Dutch ordinary
capital shares were trading in 21 organized markets throughout
the world in 1992, but primarily on the NYSE in the United States
as ADR's. Before agreeing to enter into the transaction,
petitioner had no specific knowledge of Royal Dutch, and
Tempesta's research of Royal Dutch was limited to reading in the
Wall Street Journal that Royal Dutch declared a dividend and to
observing the various market prices of Royal Dutch ADR's.
In preparation for the trades, Leo determined the number of
Royal Dutch ADR's to be included in each purchase and resale
trade. He also selected the market prices to be paid, varying
the prices in different trades so the blended price per share
equaled the actual market price plus the net dividend. Leo did
not, however, discuss the size of the trades or the prices
selected for the trades with any employee or representative of
petitioner. Leo also chose to purchase the Royal Dutch ADR's
from Arthur J. Gallagher and Company (Gallagher). Gallagher had
been a client of Twenty-First since 1985 and participated in
various investment strategies developed by Twenty-First over the
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011