Nasd Nevwest

8/6/2019 Nasd Nevwest

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NASDOFFICE OF HEARING OFFICERS

DEPARTMENT OF ENFORCEMENT,Complainant,

NEVWEST SECURITIES CORPORATION(CRD No. 46464),SERGEY RUMYANTSEV(CRD No. 4009791),andANTONY M. SANTOS(CRD No. 3239243),

Respondents.

Disciplinary ProceedingNO. E0220040112-01Hearing Officer - APORDER ACCEPTING OFFER OFSETTLEMENT

DATE: March 13,2007

INTRODUCTIONDepartment of Enforcement of NASD (Complainant) initiated this Disciplinary

Proceeding on September 25,2006. Respondents NevWest Securities Corporation, SergeyRumyantsev and AntonyM. Santos submitted an Offer of Settlement to Complainant onFebruary 26,2007. Pursuant to Code of Procedure Rule 9270(e), the Complainant and theNational Adjudicatory Council (NAC) Review Subcommittee or the Office of DisciplinaryAffairs (ODA) have accepted the uncontested Offer. Accordingly, this Order now is issuedpursuant to Code of Procedure Rule 9270(e)(3). The findings, conclusions and sanctions setforth in this Order are those stated in the Offer as accepted by the Complainant and approved bythe NAC.

OFR03Rev 06/19/03


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Under the terms of the Offer, Respondents have consented, without admitting or d enyingthe allegations of the Com plaint, and solely for the purposes of this proceeding and an y otherproceeding brought by or on behalf of NAS D, o r to which NA SD is a party, to the entry offindings and violations consistent with the allegations of the Com plaint, and to the imposition ofthe sanctions set forth below, and fully understand that this Order will become part ofRespo ndents' respective perman ent disciplinary records and may be considered in an y futureactions brought by NASD .

BACKGROUND

NevW est has been a member of NA SD since October 19, 1999. Since September 4,2001, NevWest has been registered with the MSRB . NevW est is headquartered in Las Vegas,Nevad a and emp loys approximately 10 registered representatives. During all times relevant tothe Com plaint, NevW est primarily engaged in the liquidation of low-priced secu rities, soldlargely in the over-the-counter market (O TC) including the Pink Sheets. NevW est also acts as amarket mak er in low-p riced securities and participates in private placement offerings.

Rumyantsev has been associated with NevWest since August 1, 1999. Rumyantsevbecam e registered as a General Secu rities Represen tative (Series 7) in 1999, as an Equity TraderRepresen tative (Series 55) in 1999, as a General Securities Principal (Series 24) in 1999, as aMunicipal Securities Principal (Series 53) in 2001, as a Financial and Operations Principal(Series 27) in 2002 and as a Com pliance Registered Options Principal (Series 4) in 2004.Rumyantsev also serves as NevWest's Chief Executive Officer and Head Trader.

Santos has been associated with NevW est since April 30, 1999. Santos becameregistered as a General Securities Representative (Series 7) and as a G eneral Securities Principal


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(Series 24) in July 1999 . Santos also serves as the firm's Executive Vice President, ChiefCom pliance Officer, and on occasion, as the firm's General Counsel.

FINDINGS AND CONCLUSIONSIt has been determined that the Offer be accepted and that findings be made as follows:

First Cause of Action (Inadequate Anti-M oney Lau ndering Program -Violation of NAS DConduct Rules 3011 and 2110 by NevW est, Santos and Rumyantsev and Violation ofMSRB Rule G41 by NevWest)Between January 1 ,2 00 3 and May 3 1,2 00 5, NevW est, acting through Rumyantsev and

Santos, failed to adequately implemen t and enforce anti-money laundering (AML) procedures inaccordance with NA SD Conduct Rules 301 1 and 21 10, and NevW est violated M unicipalSecurities Rulemaking Board (MSR B) Rule G -41. For example, NevWest failed to adequatelyperform d ue diligence, file Suspicious Activity Reports (SAR) or cease trading in multipleaccounts owned and controlled by JE , NevW est's customer, regarding over 500 transactions,involving mo re than 25 0 billion shares of sub-penny stock issued by C MKM Diamonds, Inc.(CMK M) totaling over $ 53.0 million. As a result o f these sales, NevW est earned commissionrevenue totaling $2.5 million, which accounted for approximately 36% of the firm's total revenueduring the relevant period.

Moreover, between January 2003 and D ecember 2004, NevW est failed to adequatelyperform d ue diligence, file SARs, or cease effecting wire transfers involving $43 million through139 separate wires from at least 28 of the accounts JE had opened at NevW est to various bankaccounts.

NASD Conduct Rule 301 1, adopted on April 24,2002 and amended on October 22,2002, requires all mem ber firms to "develop and implement a written anti-money laundering


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program reasona bly designed to achieve and monitor the firm's comp liance with therequirements of the Bank Secrecy Act (31 U.S.C. 5 53 11, et seq.), and the implementingregulations promulgated thereunder by the D epartment of the T reasury."

NASD Conduct Rule 301 1(a) requires NASD members to establish and implementpolicies and procedures "that can be reasonably expected to detect and cause the reporting of 'suspicious activity and transactions.

The United S tates Departm ent of the Treasury issued the implementing regulation,31 CFR 9 103.19(a)(l), on July 2,2 00 2, for suspicious transaction reporting for broker-dealers.It provided that, with respect to any transaction after Decem ber 30 ,20 02 , "[elvery broker ordealer in securities within the U nited States . . . shall file with FinCE N . . . a report of anysuspicious transaction relevant to a possible violation of law o r regulation." Section (a)(2) of thatregulation provides:

A transaction requires reporting . . . if it is conduc ted or attempted by, at, orthrough a broker-de aler, it involves or aggregates funds or other assets of at least$5,000, and the broker-dealer knows, suspects, or has reason to suspect that thetransaction (or a pattern of transactions of which the transaction is a part):(i) Involves funds derived from illegal activity or is intended orconduc ted in order to hide or d isguise funds or assets derived fromillegal activity (including, without limitation, the ow nership,nature, source, location, or control of such funds or assets) as partof a plan to violate or evade any federal law or regulation or toavoid any transaction reporting requirement und er federal law orregulation;

(ii) Is designed, whether through structuring or other mean s, to evadeany requirements of this part or any other regulations promulgatedunder the B ank Secrecy Act, . . .;(iii) Has no business o r apparent lawful purpose or is not the sort inwhich the particular customer would norm ally be expected toengage, and the broker-dealer know s of no reasonab le explanation


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for the transaction after examining the available facts, including thebackground and possible purpose of the transaction; or(iv) Involves use of the broker-dealer to facilitate criminal activity.

In August 2002, NASD issued Notice to Members (NTM) 02-47, which set forth theprovisions of the final AML rule for suspicious transaction reporting promulgated by the UnitedStates Department of the Treasury for the securities industry. This NTM further advised broker-dealers of their duty to file a SAR for certain suspicious transactions occurring after December30,2002. NTM 02-47 discusses Treasury's release adopting the final suspicious activityreporting rule for broker-dealers. Treasury's release states that brokerldealers should determinewhether activities surrounding certain transactions raise suspicions of no business or apparentlawful purpose by looking for "red flags" such as those enumerated in NASD NTM 02-NTM 02-21, which was adopted in April 2002, advised broker-dealer firms of the requirementsof their AML procedures, including that AML procedures apply to:

a. account opening and maintenance, including verification of the identity of thecustomer;

b. monitoring of account activities, including but not limited to, trading and theflow of money into and out of the account, the types, amount, and frequency ofdifferent financial instruments deposited into and withdrawn from the account,and the origin of such deposits and the destination of withdrawals; and

c. monitoring for, detecting, and responding to "red flags."NTM 02-21 emphasized each firm's duty to detect red flags and, if it detects any,

"perform additional due diligence before proceeding with the transaction." NTM 02-21 also setforth examples of "red flags," including but not limited to:


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a. Upon request, the customer refuses to identify or fails to indicate any legitimatesource for his or her funds or other assets;

b. The customer maintains multiple accounts, or maintains accoun ts in the names offamily members or corporate entities, for no apparen t business purpose or otherpurpose;

c. For no apparent reason, the customer has multiple accounts under a single nameor multiple name s, with a large number o f inter-account or third-party transfers;and

d. The customer exhibits a lack of concern regarding risks, comm issions, or othertransaction costs.

The S AR form indicates 20 "Type[s] o f suspicious activity" that m ust be reported,including "Market manipu lation," "Money laundering/Structuring," "Prearranged or other non-competitive trading," "Securities fraud," "Significant w ire or o ther transactions withouteconom ic purpose," "Suspicious docum ents or ID presented," "W ash or other fictitious trading,""Wire fraud," and "Other."

MSRB Rule G-41, which the SEC approved on July 11,20 03 , requires every NASDmem ber broker, dealer and municipal securities dealer to establish and imp lement an AMLcompliance program designed to achieve and monitor ongoing com pliance with the requiremen tsof NASD C onduct Rule 301 1. On July 1 6,2 00 3, the MSRB issued Notice 2003-28 announcingthat Rule G-41 had been approved.

Customer JE's Activities at NevWestIn or about Sep tember 2002, JE began op ening accounts with a registered representative

at NevWest. From 2002 through December 2004, JE opened and controlled 32 accounts for


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various trusts and co rporate entities, including on e personal retirement accou nt (collectively JE 'saccounts). JE opened : five accounts in 2002; 19 accounts in 2003; and eight accounts in 2004.

In or about January 2003 and continuing through at least January 2005, JE com pleted newaccount documents for some of the accounts opened with NevWest. For example, JE completednew account docum ents to reflect changes mad e to the various trusts and corpo rate entities.Additionally, JE completed new account documents for several of his accounts when N evWestswitched clearing firms.

According to the new account documents, JE acted as Trustee on behalf of each of the 26trust accounts he opened at NevWest. The Declaration of Trust documents JE subm itted inconnection with the trust ac counts do not identify any beneficiary, but instead state that JE, astrustee, may sell units o f beneficial interest in the trusts to purch asers.

JE also served as the sole officer and d irector for each of the five corporate accounts heopened at NevWest.

The customer address in 30 of JE 's 32 accounts was 7500 West Lake Meade Boulevard,Suite 9627, Las Vegas, Nevada 8912 8. JE also used his personal social security number as thetax identification number in 29 o f JE's 32 accounts.

Shortly after JE began opening acc ounts at NevW est, he developed a trading pattern ofphysically carrying into the firm, certificates of low -priced securities. In February 2003, JEbegan to deposit shares of CMKM into the various accounts he opened at NevWest. JEinstructed NevW est, through his registered representative, to expeditiously liquidate thecertificates, and to imm ediately wire all sales proceeds to various bank accoun ts. The bankaccount owner of record rarely matched the name of the N evWest account holders.


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Until trading in CM KM shares was permanently halted by court order dated October 28,2005, CM KM shares traded in the Pink Sheets, first under the symbol "CMKM," and later underthe symbol "CMKX," through matched trades o f unsolicited orders.

During the relevant period, JE sold approximately 259 billion shares of CM KM throughNevW est, at an average price of $0.00021 per share. NevW est executed trades for JE's accountsin agency transactions. During the relevant period the price of CMK M shares generally rangedfrom a high of $0.00057 per share in June 2004 to a low o f $0.00005 price per share in May2005.

Transactions in 2003The numb er of transactions and the am ounts of C MKM certificates JE sold through

NevW est increased over time. During 2003, JE sold a total of 4.3 billion shares of CM KM , in 66transactions, which resulted in sales proceeds to JE totaling over $401,000 as follows:

During 2003, JE wired a total of over $1.4 million &om accounts with NevW est in 49separate transactions, which included proceeds from the sale of CMKM stock.


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Transactions in 2004In 2004, JE began to aggressively implement his trading strategy in C MKM shares. In

many instances, JE carried into NevWest billions o f CM KM shares at a time. Through NevWest,he liquidated billions of shares per month. For exam ple, in February 2004, JE executed 35transactions and sold over 11 billion shares, which resulted in sales proceeds totaling alm ost$592,000.

Moreover, between June 2004 and November 2004, JE sold, through NevWest,approximately 1 50 billion shares of CMK M in 257 transactions that generated proceeds totalingabout $44.4 million. During this same period, JE wired fiom his accounts at NevW est to variousbank accounts under his control, a total of $38 million in 57 separate wire transactions.

During 2004 , JE sold approxima tely 207 billion shares of CMK M in 368 transactions thatresulted in sales proceeds to JE totaling over $ 49 million as follows:


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In early 2004, RD, the firm's designated AML Compliance Officer, recomm ended toSantos that NevWest file a SAR regarding JE's transactions in CMK M. Despite RD'srecommendations, Santos and Rum yantsev chose not to file a SAR. M oreover, in connectionwith JE, his accounts and sales of CMK M, Santos and Rumyantsev did not include RD in anyAM L-related discussion, analysis or decision.

In 2004, JE wired funds totaling over $41.5 million from his accounts at NevW est tovarious bank accounts under his control.

Transactions in 2005From January 1 ,20 05 through May 2005, JE sold over 48 billion shares of CM KM in 133

transactions that resulted in sales proceeds totaling $3.7million as follows:

Red FlagsNevW est's AM L procedures stated that:

[wlhen a member o f the firm detects any red flag he or she will investigate furtherunder the direction of the AML Com pliance Officer. This may include gatheringadditional information internally or fiom third party sou rces, contacting thegovernm ent, freezing the account, and filing a S AR.


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With respect to JE's CM KM transactions and wire transfer activity referenced in theComp laint, NevW est failed to implement and enforce adequate AM L procedures in violation ofNASD Conduct Rule 301 1 and, as a result, failed to "observe htgh standa rds of comme rcialhonor and just and equitable principles of trade" as required by NASD Conduct Rule 21 10.AML rules and NevW est's own procedures required NevWest, under the direction of its AMLCom pliance Officer, to collect further information, perform additional due diligence, file a SARand/or freeze JE's accounts with respect to JE's CM KM transactions, but NevW est failed to doso. NevW est, acting through Santos and Rumyantsev, was aware or should reasonably have beenaware of "red flags," which should have individually or collectively triggered NevW est's AMLobligations. These "red flags" included, but were not limited to, the following:

a. JE suspiciously refused to reasonably explain how he acquired the CMK Mshares. In October 2004, Santos and Ru rnyantsev asked JE whether he couldidentify the individuals fiom whom he acquired his CM KM shares. InNovem ber 2004, JE provided NevW est with a letter from his personal attorneythat stated the attorney had "reviewed the trading practices of [JE] and suchpractices appear to be in com plete compliance w ith federal and Nevada law."At no relevant time, did Santos or Rum yantsev ask JE to specifically identify theindividuals and the details surrounding each transaction in which JE acquiredthe shares.

b. JE suspiciously opened and maintained 32 accounts at the firm for no businessor apparent lawful purpose.

c. Over the relevant period, before liquidating his CMK M shares throughNevW est, JE personally hand-delivered the CM KM certificates to the firm. The


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CM KM certificates JE deposited for sale were not always registered in the n ameof a specific account holder with NevW est. Instead, beginning in or aboutAugust 2004 and continuing into 2005, JE began depositing certificatesregistered in the name of NevW est's clearing firm.

d. JE's wire transfers from his NevWe st accounts were suspicious in that the wireactivity involved: large dollar amo unts; frequent activity; and repetitive wiretransfer patterns. In addition, JE generally instructed the firm to wire funds "asthey became available" from the various NevW est accounts he established to,most often, only two Nevada bank accounts held by business entities whichneither sold the CM KM certificates, nor maintained accounts at NevW est. Thesuspicious wire transfers included, without limitation, the following : of the 139separate wire transactions from JE's accounts, 11 6 were for amoun ts greaterthan $5,000, of which 57 were for amounts between $5,000 and $100,000; 30were for amounts between $100,000 and $500,000; 17 were for amountsbetween $500,000 and $1 million; nine were for amounts between $1 m illionand $2 million; two wires exceeded $2 million; and one exceed ed $4 million.

e. JE suspiciously exhibited a lack of concern regarding the comm issions and othertransaction costs relating to the liquidation of CMK M shares. NevW estuncharacteristically charged JE 5% for each transaction. The 5% commissionwas well-above NevWest's customary rate of 3-4% it normally charged itscustomers for penny stock transactions.

f. The substantial number of CMK M shares NevW est received and was asked tosell for JE's accounts, and the significant amoun t of sales proceeds resulting


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therefrom, should have promp ted NevW est to conduct a searching inquiry toensure that CMK M w as complying with relevant laws and regulations. Forexam ple, Nev We st failed to condu ct a reasonable inqu iry to obtain informationregarding the num ber o f CMECM sh ares issued to JE, a nd specific detailsconcerning how and when JE acquired his CMK M shares, in order to complywith minimum standards imposed o n broker-dealers to prevent and detectviolations of the federal securities laws and to en sure that the firm met itscontinuing responsibility to know both its custom er and the securities beingsold.

During the relevant period, NevWest, acting through Santos and Rumyantsev, was aw areor shou ld reasonably have been aware of pub lic information including, without limitation, thefollowing:

a. CM KM 's 10-QSB filing with the Securities and Exchange Comm ission, datedNovember 18 ,20 02 , showed the address of the principal executive office as7500 West M eade Boulevard, Suite 9627, LasVegas, Nevada 891 28; andtelephone number (702) 683-3722. JE used this address and phone number onmany of the new account documents at NevW est. This address is a UPS postalbox located within about six miles of Nev Wes t's offices.

b. CM KM 's 10-QSB filing with the SEC, dated Novem ber 18 ,20 02 , was signedby lM.lM appears on several of JE's trust documents provided to NevWest aspart of the new account docum entation. During relevant times to the complaint,IM was the former President, director and shareholder of CM KM , and IM alsoacted as the Registered Agent on behalf of CM KM .


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c. CMKM's last 10-QSB filing with the SEC, dated November 18,2002, showedthat for the quarter ending September 2002, CMKM reported total assets of$344.00, all in cash, and total liabilities of $1,672.00.

d. CMKM did not file any annual reports on Form 10-KSB with the SEC for itsfiscal years ending December 3 1,2002,2003, and 2004.

e. CMKM did not file any quarterly reports on Form 10-QSB since November 18,2002, and therefore, did not file quarterly reports for the periods ended: March31, June 30, and September 30,2003; March 31, June 30, and September 30,2004; and March 3 1,2005.

f. CMKM did not make any SEC filings during the period of July 22,2003 toFebruary 17,2005. Consequently, investors did not have any financialinformation regarding CMKM during the period that NevWest sold over 235billion shares on behalf of JE's accounts.

g. By September 2004, NevWest should have been aware that it had sold for JEmore than 10% of the outstanding shares of CMKM. Specifically, betweenMarch 2003 and May 2005, NevWest sold for JE's accounts, in the aggregate,as many as 36.7% of CMKM's total outstanding shares.

h. CMKM engaged in a promotional campaign, in, amongst other places, Nevada,designed to raise interest in its stock. CMKM sponsored a NHRA funny car.The car is called the CMKXTREME vehicle. Promotional items such as T-shirts and hats with "Got CMKX?" written on the front were handed out at raceevents. All of thls activity was used to encourage investors to purchase sharesof CMKM through trading activity on the pink sheets.


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i. The Securities and Exchan ge Com mission temporarily suspend ed over-the-counter trading of CM KM securities for the period of March 3 ,20 05 throughMarch 1 6,200 5. Further, on May 10,20 05, the SEC commenced anadministrative hearing against CM KM pursuant to S ection 12 0) of theSecurities Exchange Act of 1934 to revoke the registration o f each class ofsecurities of CM KM . Despite the aforementioned events, NevW est, fiomMarch 17 ,20 05 through May 11 ,20 05 continued to sell at least 22.5 billionshares of CMK M for JE's accounts in approximately 77 transactions. On orabout July 1 2,2 00 5, an Administrative Law Judge issued an adm inistrativedecision in the SE C's action revoking the registration of each class of securitiesof CMK M. This decision became final on or about October 28 ,20 05 .

j. Prior to selling JE's CM KM shares, NevW est, acting through S antos andRumyantsev, knew or should have know n that JE had liquidated throughNevW est a substantial amount o f shares in other low-priced and penny stockcertificates in at least two entities, Pinnacle Business M anagem ent, Inc. whichlater becam e Serac Holdings Inc. (Pinnacle), and Barrington Foods (Ba rrington),which later became U.S. C anadian Minerals, Inc. (UCAD ). Between February20 ,20 03 and February 19 ,20 04 , JE deposited almost 6 billion shares ofPinnacle stock with NevW est. In May 2002, the SEC temporarily suspendedtrading in Pinnacle's securities and filed fraud charges against the com pany. Onor about July 6,2 00 4, the SE C revoked Pinnacle's securities registration.Between February 2003 and December 2004, J E deposited 6.2 m illion shares of


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securities issued by Barrington Foods at NevWest. In October 2004, the SECtemporarily suspended trading in this security.

Based on the foregoing, NevW est, Santos and Rumyantsev violated NASD ConductRules 301 1 and 21 10, and NevWest v iolated M SRB Rule G-41.

Second Cause of Action (Improp er Release of Funds from Escrow B ank Account -Violation of Section 15(c)(2) of the Securities Exchange Act of 1934, and SEC R ule 15c2-4thereunder, and NA SD C onduct Rule 2110 by NevW est and Santos)Ascendant Select Fund I, LLC Offering

Between February 1 5,2 00 4 and July 2004, NevWest, acting through Santos, participatedin a distribution of secu rities for the sale of 5 million units in Ascendant Se lect Fund I, LLC(ASF). The ASF private placement memorandum (ASF Memorandum ) represented that theoffering was contingent on raising a m inimum o f $500,000 and a maximum of $50 million on abest efforts "part o r none" basis.

ASF w as a Nevada limited liability comp any with Ascendant Partners MM, Inc. (APM )acting as the managing member of ASF. APM 's officers and directors included Santos,VH andDR. The ASF M emorandum identified various affiliates of the APM that included: OneCap;NevWest doing business as O neCap Securities; and OneCap R eal Estate Fund I. The ASFMem orandum also listed the officers and directors of OneCap as follows: VH was the president,chief executive officer, and director; and Santos was a director.

The ASF Mem orandum represented that the offering was contingent on raising aminimum of $500,000 from non-affiliates on or before February 15,20 05. The ASFMemorandum fk th er represented that: a) all funds received would be held in an escrow account;and b) if the minimum of $500,000 was not raised from sales of securities to non-affiliates byFebruary 15 ,20 05 , all funds would be refunded to investors together with interest.


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From April 12 ,20 04 , to May 12 ,20 04 , NevW est, acting through Santos, sold units inASF to two investors totaling $500,000 as follows: $250,000 was raised from one member ofthe public; and $250,000 was raised from OneC ap, an investor that was affiliated with both APMand NevWest. NevW est, pursuant to an escrow agreement, deposited all investors' funds into asegregated bank acco unt in AS F's name. The escrow agreement did not accurately reflect thatthe minimum contingency amount o f $500,000 was to be raised from sales of securities to non-affiliates.

Despite not having met the minim um con tingency amount through sales of securities inbona fide transactions to non-affiliated investors, on May 17 ,20 04 , Santos released contingencyproceeds totaling $500,000 from the ASF escrow bank account as follows: $495,000 wasdisbursed to ASF and $ 5,000 was disbursed to NevWest. NevW est raised additional fundstotaling $250,000 from two non-affiliated investors by July 21 ,20 04 . Therefore, NevW est,acting through S antos, failed to properly escrow purchasers' funds in a segregated account fromMay 17 ,20 04 until the minimum contingency amount was satisfied on July 2 1,2 00 4.

Based on the foregoing, NevW est violated Section 15(c)(2) of the Securities ExchangeAct of 1934, and SEC Rule 1 5 ~ 2 -4hereunder, and NASD Conduct Rule 2110, and Santosviolated NASD Conduct Rule 21 10.Third C ause of Action (Failure to C omply with C ontingency offer in^ Terms - Violation ofSection 10(b) of the Securities Ex ch a n ~ e ct of 1934, and SEC Ru le lob-9 thereunder, andNASD Conduct Rule 21 10 by N evWest)

Ascendant Select Fund I, LLC OfferingAs more fully described in Second Cause of Action above, NevWest caused the release of

investors' funds to the control of ASF and NevWe st before satisfaction of the contingenc y to sell


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the minimum amount of securities through bona fide transactions, to non -affiliated investors,thereby rendering the representations in the ASF Mem orandum false and m isleading.

Based on the foregoing, NevW est violated Section 10(b) of the Securities Exchange Actof 1934, and SEC R ule lob -9 thereunder, and NASD Conduct Rule 2 110 .

Fourth Cause of Action (Improper Release of Funds From Escrow Bank Account -Violation Section 15(c)(2) of the Securities Exchange Act of 1934, and SEC Rule 15~2-4thereunder, and NASD Conduct Rule 2110 bv NevWest and Santos)PracticeXpert, Inc. Offering

Between October 8, 20 03 and January 26 ,20 04 , NevW est, acting through Santos,participated in a distribution of securities for the sale of 6 million shares of comm on stock ofPracticeXpert, Inc. (PXPT ) at a price of $0 .50 per share. The PXPT p rivate placementmemorandum (PXPT M emorandum) represented that the offering was contingent on raising aminimum o f $50,000 and a maxim um of $3 million on a "best efforts basis."

The PXP T Mem orandum further represented that: a) all subscription funds receivedwould be held in an escrow account in compliance with SEC Rule 15c2-4; and b) no fundswould be released to PXPT until the offering raised a minimum o f $50,000. The PXPTMem orandum further provided that if the minimum offering amount had not been raised within90 days of October 8,2 00 3, all subscription funds would be returned to investors without interestor deduction of fees. Under the terms of the PXPT Memorandum , PXPT had the option toextend the contingency offering period from 90 to 180 days.

The PXPT Memorandum represented that "[nlo person associated with the Company[PXPT ] intends to participate in the distribution of the Offering." Further, the PXPTMem orandum failed to disclose that PXPT's officers and directors would be purchasing shares of


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the offering, including the maximum amou nts of such investments, and that the proceeds of theirparticipation would be counted towards fulfilling the minimum contingency amount.

From November 1 8,2 00 3 through December 23,2 00 3, NevWest and PXPT collectivelyraised $5 1,000 from five investors as follows: $36,000 was raised from two public custom ers;and $15 ,000 was raised from three investors that were each o fficers and directors of PXPT .Pursuant to an escrow agreement signed by Santos on behalf o f NevWest, investors' funds weredeposited into a segregated bank account in PXPT's name on January 22 and January 23 ,20 04 .

Despite not having satisfied the minimum contingency amoun t through sales of units inbona fide transactions, on January 26 ,20 04 , NevW est caused the release o f $5 1,000 from theescrow bank account as follows: $47,430 was disbursed to PXPT ; and $3,570 was disbursed toNevW est as comm issions due for acting as the placemen t agent for the offering. Consequently,NevW est failed to properly escrow purchasers' funds in a segregated account until the minimumcontingency am ount was satisfied through the sale of bona fide transactions from investors thatwere not affiliated with PXPT. After the release of purchasers' fimds from escrow on January26 ,20 04 , NevW est neither acted as the placement agent nor participated in the PXPT offering toraise any additional funds.

Based o n the foregoing, NevW est violated Section 15(c)(2) of the Securities ExchangeAct of 1934, and SE C Rule 15c2-4 thereunder, and NASD Conduct Rule 2 110, and S antosviolated NASD Conduct Rule 2 110 .


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Fifth Cause of Action (Failure to Comply with Contingency Offering Terms -Violation ofSection 10(b) of the Securities Exchange Act of 1934, and SEC Rule lob-9 thereunder, andNASD Conduct Rule 2110 by NevWest)PracticeXpert, Inc. Offering

As m ore fully described in the Fourth Cause of A ction above, NevW est caused therelease of investors' funds to the control of PXPT a nd NevW est before satisfaction of thecontingency to sell the minimum amou nt of securities through bona fide transactions, therebyrendering representations in the P XPT Mem orandum false and m isleading.

Based on the foregoing, NevW est violated Section 10(b) of the Securities Exchange Actof 1934, and SEC Ru le lob -9 thereunder, and NASD Conduct Rule 2 110.

Sixth Cause of Action (Failure to Timely Comply with Reporting Requirements-Violation of NASD Conduct Rules 3070 and 2110 by NevWest and Santos)From February 28 ,20 03 to August 27 ,20 04 , NevWest, acting through Santos, failed to

timely report six w ritten customer complaints to NA SD as statistical and summ ary informationby the 1 5 ' ~ ay of the month following the calendar quarter in which the customer complaintswere received by the firm, in violation of NASD Conduct Rule 3070(c). NevW est reported thecustomer complaints to NASD approximately 134 to 500 days late.

From July 26 ,20 04 to September 7,2 00 4, NevWest, acting through Santos, failed totimely report the existence of two co nditions that required disclosure within ten business d aysafter the firm knew o r should have known of the existence of the conditions, in violation ofNASD Conduct Rule 3070(b). NevW est was required to report that the following conditionsoccurred under C onduct Rule 3070(a): 1)the S tate of New Hamp shire denied a registeredrepresentative's registration; and 2) the SE C named a registered representative as a defendant in a


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civil action. NevW est reported the existence of the conditions to NA SD approximately 13 to 18days late.

Based on the foregoing, NevWest and Santos violated NASD Conduct Rules 3070 and21 10.

Seventh Cause of Action (Supervision -Violatio n of NASD C onduct Rules 3010 and 2110bv NevWest and Santos)NASD Rule 3010(a) requires that each firm establish and maintain a system to supervise

the activities of each registered representative, registered principal, and associated person that isreasonably designed to achieve com pliance with app licable securities laws and regulations, andwith the Rules of NASD.

NASD Rule 3010(b) requires that the firm establish, maintain, and enforce writtenprocedures to supervise the types of business in wh ich it engages and to supervise the activitiesof each registered representative, registered principal, and associated person in a m anner that isreasonably designed to achieve com pliance with ap plicable securities laws and regulations, andwith the Rules of NASD.

At all times relevant to the complaint, Santos, as the firm's Chief Compliance Officer,was responsible for ensuring that NevW est establish and maintain an effective supervisorysystem, including adequate written supe rvisory procedures, that was reasonably designed toachieve compliance with the federal securities laws and rules, and Rules of NA SD. Moreover,at all relevant times herein, NevWest's procedures required that Santos supervise the finn'sactivities relating to con tingency offerings.


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Superv ision Relating to Contingency OfferingsBetween October 2003 and July 2004, NevW est, acting through Santos, engaged in the

business of raising mon ey in connection with two con tingency offerings sold through privateplacement memoranda. As more fully described in the Secon d, Third, Fourth and Fifth Causesof Action above, NevWest released purchasers' funds from escrow bank accounts to the controlof the issuers before the contingencies were s atisfied through sales of securities in bona fidetransactions, thereby rendering representations in the respective private placement m emo randafalse and misleading.

NevW est's supervisory system and written supervisory procedures relating to contingencyofferings did not: i) require the firm to monitor and verify that the minimu m contingen cy amounthas been satisfied through sales of securities in bona fide transactions, prior to releasing thepurchasers' funds from the escrow bank accoun t and to the control of the issuer; ii) address whatsteps the firm w ould take if NevW est determined that issuers were not com plying with SECRules 15c2-4 and lob -9 ; iii) specify the process and procedu res the firm sh ould follow to notifythe escrow agent whe n the contingen cy offering terms ha ve been satisfied; and iv) designate aspecific principal at the firm to determine whether or not th e contingencies have been sa tisfiedand to provide notification to the escrow agent to release the purchasers' funds from the escrowbank account to the control of the issuer.

Superv ision Relating to Reporting Requiremen tsBetween February 2003 and September 2004, NevWest w as required to file certain

reports relating to custom er complaints and disclosure events with NASD pursuant to NA SDConduct Rule 3070. As more fully described in the Sixth Cause of A ction above, NevWest


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failed to timely file quarterly reports of statistical and summary information and reports regardingthe existence of disclosure events.

NevWest failed to establish an effective supervisory system and adequate writtensupervisory procedures reasonably designed to achieve compliance with NASD Conduct Rule3070, in that they did not designate a specific person with the responsibility to: i) reviewcustomer complaints and disclosure information on a monthly and a quarterly basis, and ii)timely file the reports with NASD as required by NASD Conduct Rule 3070.

Based on the foregoing, NevWest and Santos violated NASD Conduct Rules 3010 and2110.

Based on these considerations, the sanctions hereby imposed by the acceptance of theOffer are in the public interest, are sufficiently remedial to deter Respondents fiom any futuremisconduct, and represent a proper discharge by NASD, of its regulatory responsibility under theSecurities Exchange Act of 1934.

SANCTIONSIt is ordered that the sanctions against Respondents be imposed as follows:

As to NevWest:

1. A censure.2 . A fine in the amount of $100,000, for which the firm shall be jointly and

severally liable with Santos and Rumyantsev (the latter to the extent of$75,000).

3. An undertaking to retain, within thirty (30) days of the effective date of theOrder, an Independent Consultant, who is not unacceptable to the


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Department of Enforcement, to conduct a com prehensive review of thefirm's policies, controls, systems and procedures (w ritten and otherwise),and training relating to the firm's ability to co mply with (i) the BankSecrecy Act (BS A), NAS D Conduct Rule 3011, and other anti-moneylaundering statutes and regulations (AML); and (ii) all rules andregulations relating to its participation in private offerings (collectively,Areas of Concern). In connection with the AML assessm ent, the reviewshould include, without limitation, whether Nev We st's policies, proceduresand controls are adequ ate to (a) add ress its receipt and handling ofcustom er securities and (b) identify circum stances when filing of a SARmay be inadequate to addres s suspicious activity, and instead, justifyalternate action, including the cessation of trading fo r a stock and /orcustome r. The review of the firm's p ractices for participating in privateofferings should include, without limitation, whe ther NevWe st's policies,procedures and con trols are adequate to ensu re compliance with (a)Section 15(c)(2) of the Securities and Exchange Act of 1934, and SECR ule 1 5 ~2 - 4hereunder; and (b) Section 10(b) of the Securities andExchange Act of 1934 and SE C Rule lo b-9 thereunder.

In connection therewith:a. NevW est shall bear all costs, including com pensation and expenses,

associated with the retention of the Independent Consu ltant.


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b. NevW est shall cooperate with the Independent Consu ltant in allrespects, including by providing staff support. NevW est shall notplace any restrictions on the Independent Consu ltant'scomm unications with the NASD staff and, upon request, shall makeavailable to NASD staff any and all com munications between theIndependent Consultant and the firm and docum ents reviewed by theIndependent Consultant in connection with his or her engagement.Once the Independent Contractor is retained, NevW est shall notterminate the relationship with the Independent Consultant withoutthe NASD staff s written approval. NevWest shall not be in and shallnot have an attorney-client relationsh p with the IndependentConsultant and shall not seek to invoke the a ttorney client privilegeor other doctrine or privilege to prevent the Independen t Consultantfrom transmitting any information, reports or docum ents to theNASD.

c. At the conclusion of the initial review, which shall be no more thanninety (90) days after the effective date of the Order, NevW est shallrequire the Independent Consultant to submit to the firm and NASDstaff an Initial Written Report. The report shall address, at aminimum, (i) the adequacy of the firm's policies, controls, systemsand procedures (w ritten or otherwise), and training relating to theAreas of Concern; (ii) a description of the review performed and theconclusions reached by the Independent Consultant; and (iii) the


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Independent Consultant's recomm endations for modifications andadditions to the firm 's policies, controls, systems and procedures, andtraining.

d. Within thirty (30) days following the delivery of the Initial Report,NevW est shall adopt and implement the recomm endations of theIndependent Consultant or, if it determines that a recomm endation isunduly burdensome or impractical, propose an alternate procedure tothe Independ ent Consultant designed to achieve the sam e objective.The firm shall submit such proposed alternatives in writingsimultaneously to the Independ ent Consultant and the NAS D staff.Within thirty days of receipt of any proposed alternate procedure, theIndependent Consu ltant shall: (i) evaluate each alternate procedureand determ ine whether it will achieve the same objective as theIndependent Consultant's original recomm endation; and (ii) providethe firm with a w ritten decision reflecting his or her determination.The firm will abide by the Independen t Consultant's ultimatedetermination with respect to any proposed alternate procedure andmust adopt and implement all recommendations deemed appropriateby the Independent Consultant.

e. Within sixty (60) days after the issuance of the later of theIndependent Consultant's Initial Written Report or writtendetermination regarding alternate procedures (if any), NevWest shall


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provide the NASD staff with a written implemen tation report,certified by an officer of NevW est, attesting to, containingdocum entation of, and setting forth the details of the firm'simplementation of the Independent Consultant's recommendations.For a period o f not less than one and half (1-112) years followingNevWest's submission of its affidavit described in paragraph 3.e.,immediately above, NevW est shall require the IndependentConsu ltant to perform five follow-up quarterly reviews (QuarterlyReview ) of the firm's AML and private offering programs todetermine whether NevWest has adopted and implemented theIndependent Consultant's recomm endations relating to such area ofconcern. Further, the Independent Consultant shall evaluate whetherthe firm's policies, controls, systems and procedures, and practices inthe respective Areas o f Concern are adequate and whether furtherrecommendations are w arranted.

g. NevW est shall require that, within thirty (30) days following theconclusion of each Quarterly Review , the Independent Consultantconcurrently submit to NevWest and NASD a written reportaddressing, at a minimum, (i) the adequ acy of the firm's conduct inthe Areas of Concern, as well as its efforts to implem ent theIndependent Consultant's recomm endations made to date, (ii) thefirm's policies, controls, systems and procedures, and training


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relating to the Areas of Concern; (iii) a description of the reviewperformed and the conclusions reached by the IndependentConsu ltant, and (iv) any additional recomm endations formod ifications and additions to the firm 's conduct, policies, controls,systems and procedures, and training concerning the Areas o fConcern.

h. Within ten (10) business days following receipt of each quarterlyreport, NevWest shall respond in writing to the IndependentConsultant's comm ents by, am ong other things, addressing theIndependent Consultant's concerns and recommendations, if any, anddescribing how and when it intends to implemen t any furtherrecommendations made by the Independent Consultant.

i. NevW est shall further require the Independent Consultant to conducta final review and subm it a written Final Report to the firm an d toNAS D staff no later than two years from the effective date of theOrder. In the Final Report, the Independent Consultant shall addressthe firm's efforts to implem ent the Independen t Consultant'srecomm endations concerning the firm's policies, controls, systemsand procedures, training, and conduct relating to the Areas o fConcern, and make any further recommendation he or she deemsappropriate. Withn thlrty (30) days of receipt of the Indepe ndentConsu ltant's Final Report, NevWest shall adopt and implement all


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recommendations deemed appropriate by the IndependentConsu ltant, and NevW est shall provide the NA SD staff with awritten implem entation report, certified by an officer of NevWest,attesting to, containing docum entation of, and setting forth thedetails of the firm's implem entation of the Independen t Consultant'srecommendations.

4. NevW est may not participate in any private offering for thirty (30) daysfollowing the effective date of the Order.

5. NevW est shall not accept or hold custome r securities until, consistent withParagraph 3 .e., it certifies to NA SD that it has adopted and imp lementedthe recommendations made by the Independent Consultant in his or herInitial Written Report.

6. Upon w ritten request by NevWest, and a showing of good cause, NASDstaff may extend any of the procedural dates set forth above.

As toRumyantsev:1. A censure.2. A fine in the amo unt of $75,000, for which he shall be jointly an d

severally liable with NevW est and S antos.3. A three mon th suspension in all principal capacities.4. A requirement that he com plete 16hours of AM L training, by a provider

not unacceptable to NA SD, eac h year for a two year period (total of 32


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hours). Rumy antsev must complete at least 16 hours of AML trainingwithin 6 mon ths after the effective date of the settlemen t. Within thirty(30) days following completion of each training session Rumyantsevattends, he m ust provide NASD with written proof of his completion ofsuch session.

As to Santos:

1. A censure.2. A fine in the am ount of $1 00,000, for which he shall be jointly and

severally liable with NevW est and Rumyantsev (the latter to the extent of$75,000).

3. A three month suspension in all principal capacities.'4. A requirement that he complete 16 hours of A ML training, by a provider

not unacce ptable to NAS D, each year for a two-year period (total of 32hours). Santos must complete at least 16 hours of AM L training within 6mon ths after the effective date of the settlement. Within thirty (30) daysfollowing completion of each training session Sa ntos attends, he mustprovide NASD with written proof o f his completion of such session.

1 Santos' and Rumyantsev's suspensions in all principal capacities shall run consecutively, com mencingwith thethree month suspension imposed on Santos. Rumyantsev's suspension shall commence two business days followingthe conclusion of Santos' susp ension period.


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The sanctions imposed herein shall be effective on a date set by NASD staff. Pursuantto IM-83 10-2(Q, a bar or expulsion shall become effective upon approval or acceptance of thisOrder by the NAC.SO ORDERED.

NASDSigned on behalf of theDirector of ODA, by delegated authority

Regional CounselNASD Department of Enforcement300 S. Grand Avenue, Suite1600Los Angeles, CA 90071(213) 613-2659; Fax: (213) 617-1570


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NASDOFFICE OF HEARING OFFICERS

Department of Enforcement,Complainant,

v.NEVWEST SECURITIES CORPORATION,(CRD No. 46464),SERGEY RUMYANTSEV,(CRD No. 4009791),an dANTONY M. SANTOS,(CRD No. 3239243),

Respondent.

Disciplinary ProceedingNO. E0220040 112-01Hearing Officer - APCERTIFICATE OF SERVICEDate: March 2 1,2 00 7

I hereby certify that on this 21st day of M arch 2007, I caused a copy o f the foregoing Notice o fAcceptance of Offer of S ettlement and Order Accepting Offer of Settlement to be sent as

follows:Via C ertified and First Class Mail Via C ertified and First Class MailNevW est Securities Corporation Sergey RumyantsevAttn: Sergey Rumyantsev 19 51 North Jones Blvd, Apt. G 202President and Chief Executive Officer Las Vegas, NV 891085440 West Sahara # 202Las Vegas, NV 89146Via C ertified and First Class Mail Via Facsimile No. (202) 756-8087Antony M. Santos and First Class Mail301 3 Marsh Court Eugene Goldman, Esq.Las Vegas, NV 89128 McD ermott Will & Emery LLP600 Thirteenth Street, NWWashington, DC 20005

Gloria E. Galvan, Senior Paralegal

Nasd Nevwest

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