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petitioner’s large stock investments in microcap companies, after
the market crash in 1987 and extending through the 1990s,
resulted in gains for petitioner.
Although petitioner was a relatively small company, during
the 1990s it acted as a market maker for several hundred
convertible securities. It listed and traded a much greater
number of those securities than its competitors. Because
petitioner was a boutique dealer in convertible securities, Mr.
Wechsler himself often would deal with and advise some of
petitioner’s better customers. During the 1980s, he developed
and improved a computer software program for petitioner to keep
track of the convertible securities that it listed and traded.
In the spring of 1997, petitioner formally adopted a plan to
reduce its institutional and convertible bond business and
concentrate on its own proprietary trading and short-term and
long-term investments. Even before its formal adoption of this
plan, Mr. Wechsler had begun to change the focus of petitioner’s
business in this manner. By 1997, Mr. Wechsler realized that the
prior advantages petitioner enjoyed as a market maker in the
convertible securities market no longer applied and that
petitioner faced increasing competition from a number of much
larger securities investment and trading companies. Among other
things, by the 1990s some major investment and trading companies
expanded into the convertible securities market as market makers.
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