SECURITIES AND EXCHANGE COMMISSION Washington, D.C. SECURITIES EXCHANGE ACT OF 1934 Rel. No. 40297 / August 3, 1998 Admin. Proc. File No. 3-9308 ----------------------------------------------------------------- : In the Matter of the Application of : : SIDNEY C. ENG : 362 Mariposa Way : San Anselmo, CA 94960 : : For Review of Action Taken by : : NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. : OPINION OF THE COMMISSION REGISTERED SECURITIES ASSOCIATION -- REVIEW OF DISCIPLINARY PROCEEDINGS Violation of Rules of Fair Practice Insider Trading General securities representative associated with member firm of registered securities association purchased securities while in possession of material, non-public information. Held, association's findings of violation and the sanctions it imposed are sustained. APPEARANCES: Sidney C. Eng, pro se. Alden S. Adkins and Carla J. Carloni, for NASD Regulation, Inc. Appeal filed:May 8, 1997 Last brief filed: August 14, 1997 I. Sidney C. Eng, formerly a registered general securities representative at PaineWebber, Inc. ("PaineWebber"), a member of the National Association of Securities Dealers, Inc. ("NASD"), appeals from NASD disciplinary action. The NASD found that Eng violated Article III, Sections 1 and 18 of the NASD's Rules of Fair Practice ("NASD Rules") [/] by purchasing the stock of Pioneer Fed BanCorp, Inc. ("Pioneer") based on material, non- public information provided by his father-in-law, Kenneth M. Wong, a Pioneer director. [/] The NASD censured Eng, fined him $75,000, barred him from associating with any NASD member in any capacity, and assessed hearing costs of $8,480 and appeal costs of $750. We base our findings on an independent review of the record. II. At issue in this matter is whether Eng, before his late 1992 purchases of Pioneer stock, was provided material, non-public information by Pioneer director Wong regarding a proposed merger between Pioneer and First Hawaiian, Inc. ("First Hawaiian"). Also at issue, with respect to the NASD's finding under Section 18, is whether Eng acted with scienter. The following facts are relevant to resolution of those issues. As of December 1992, Wong had served as a Pioneer director for eleven years. Wong served as vice chairman of the board and as a member of its pricing, audit, and retirement committees. Wong's office was located across the street from Pioneer headquarters, and he and Pioneer's president, Lily K. Yao, had been close friends for some years before Wong's board service. During the latter part of 1992, restrictions on interstate banking were being eased and banking institutions like Pioneer were prime acquisition targets. Merger negotiations between Pioneer and First Hawaiian -- a Hawaiian bank that Pioneer's management and Board members, according to a June 8, 1993 proxy statement, viewed as representing the "best potential opportunity for effecting a business combination" -- began in early December 1992. At that time, Yao arranged for representatives of Merrill Lynch, Pierce, Fenner & Smith, Inc. ("Merrill Lynch"), Pioneer's investment bank, to approach First Hawaiian to determine whether First Hawaiian would be interested in acquiring Pioneer. On December 3, 1992, executives of Pioneer and First Hawaiian met at First Hawaiian's headquarters in Honolulu to discuss a possible merger. Extraordinary security precautions were taken in connection with this meeting because Pioneer and First Hawaiian executives were greatly concerned that any leak of information concerning the meeting would affect the price of Pioneer stock. During the meeting, Yao told First Hawaiian executives that she believed that another, perhaps incompatible, financial institution would attempt a takeover of Pioneer. First Hawaiian's president then expressed First Hawaiian's interest in acquiring Pioneer and discussion of a range of substantive topics followed. During a lunch meeting on December 11, 1992, Yao told Wong that merger negotiations with First Hawaiian had begun. Prior to the meeting of Pioneer's Board of Directors on December 17, 1992, Yao also informed all of the other board members of the merger negotiations. On December 17 and 18, 1992, Merrill Lynch presented to Pioneer's Board of Directors, including Wong, a report detailing Pioneer's strategic alternatives and recommended that Pioneer pursue a merger due to the "strong thrift merger and acquisition market and the already high level of interest indicated by some potential acquirors." At this meeting the possibility of a Pioneer-First Hawaiian merger proposal was specifically discussed as well as First Hawaiian's request to negotiate with Pioneer on an exclusive basis. In connection with this meeting, Board members were reminded of Pioneer's policy on insider trading and Pioneer's counsel advised the Board members, including Wong, "not to discuss the Board's decision to pursue a sales strategy with anyone and to avoid transactions in stock of the Company or of the potential acquiror." This advice came only a few months after Wong's execution, in October 1992, of a statement acknowledging his understanding of Pioneer's confidentiality policy, which prohibited any communication of material, non-public, and confidential information by directors. On December 22, 1992, a second meeting of Pioneer and First Hawaiian executives was held during which specific issues relating to the proposed merger were discussed, including employment agreements, stock options, accounting and due diligence issues, and post-merger management. This meeting, like the December 3rd meeting, also was conducted in secret. Wong did not attend this meeting and the record does not establish when Wong was informed about it. Negotiations between the two entities continued through early 1993 and culminated in mid- February 1993 in First Hawaiian's public announcement that it would acquire Pioneer. The record establishes that sometime between December 11 and December 14, Wong told Eng about the negotiations between Pioneer and First Hawaiian. At the opening of trading on December 14, the first business day after Yao's December 11 meeting with Wong, Eng purchased Pioneer stock. Eng subsequently made additional Pioneer stock purchases on December 16 and 22, 1992. The record also establishes that strong professional and personal bonds existed between Wong and Eng, and that Wong had ample opportunity to and did in fact "tip" Eng about the proposed merger. Eng and Wong met in the early 1970s when they worked together at a broker-dealer in San Francisco. In 1972, Eng married Wong's daughter. Subsequently, the Wongs moved to Hawaii. For many years, including during December 1992, Eng and Wong spoke daily by telephone. During these telephone calls Eng would convey certain interest rate information to Wong that Wong would use in his roles as a member of the Pioneer board and of that board's pricing committee, and as an associated person of Shearson Asset Management. Eng also served as registered representative for several individual retirement accounts held jointly by Wong and Wong's spouse and for other investment accounts, including an account for an investment club of which Wong was a member. Wong gave Eng and Eng's spouse (Wong's daughter) approximately $2,500 per month to help with living expenses during 1991 and part of 1992. This assistance ended in the Fall of 1992 when Eng accepted a position with PaineWebber and received a $107,000 loan from PaineWebber which was forgivable if Eng remained employed by PaineWebber for four years. During October and November of 1992, Eng used approximately $55,000 of the $107,000 to pay off unpaid credit card balances and to refinance his home mortgage loan. In addition, during November and December of 1992 Eng used some of the proceeds to trade in the commodity futures market. Over a two-week period in December 1992, Eng used most of the remaining balance of the loan to purchase 2,000 shares of Pioneer stock, using margin to the maximum amount permissible. Prior to Eng's purchases of Pioneer stock in December 1992 he had never purchased any Pioneer stock, and Eng's December stock purchases were by far his largest equity purchases in many years. Specifically, Eng purchased 1,000 shares of Pioneer stock at $19.50 per share on December 14, 1992. He also purchased 500 shares at $19.75 per share on December 16, 1992, and 500 shares at $20 per share on December 22, 1992. Each of these purchases was preceded by a series of telephone calls between Wong and Eng. In addition, Pioneer stock purchases by Wong's close friends and relatives -- Eng, a long-time friend of Wong's and that friend's two sons, and a Wong neighbor -- accounted for 90% of the volume of Pioneer stock traded on December 14, 1992 (the date of Eng's first Pioneer stock purchase) and for all of the volume on December 22, 1992 (the date of the second meeting between Pioneer and First Hawaiian executives and the date of another Eng 500 share purchase). In May 1993 Eng sold the 2,000 shares of Pioneer he had purchased in December 1992 and realized a profit on the sale of approximately $25,000. III. Eng's appeal to us is premised on his claims that no direct evidence of insider trading was adduced and that the record evidence supporting key elements of this charge of insider trading "[does] not rise to the level of probative circumstantial evidence," as Eng assertedly has presented "the probabilities of viable alternative explanations" for that evidence. Eng's claims are unpersuasive. In this case, as in many insider trading cases, the evidence that supports a finding of insider trading is circumstantial, as those charged with insider trading rarely acknowledge their misconduct. Circumstantial evidence may be the sole basis for a finding of insider trading, [/] and, as the Supreme Court has recognized, "[c]ircumstantial evidence is not only sufficient, but may also be more certain, satisfying, and persuasive than direct evidence." [/] The evidence marshalled here is probative and compelling. As we explain below, we conclude that the evidence establishes, as the NASD found, that Eng, acting with scienter, purchased Pioneer stock based on material, non-public information relating to the merger of Pioneer and First Hawaiian, and thus violated both Sections 1 and 18. As we also explain below, we reject Eng's "alternative explanations" for his Pioneer trading. A. As an initial matter, Yao told Wong about the merger discussions on December 11, 1992. Yao stated to the NASD in deposition testimony that before the meeting of Pioneer's Board of Directors on December 17 and 18, 1992, Yao informed each of Pioneer's directors of the possibility of a merger of Pioneer and First Hawaiian. Yao further testified that she recalled briefing Wong about the merger discussions over lunch. Yao explained that she discerned from an entry on her calendar that the lunch took place on December 11, 1992. Eng urges us to disregard Yao's testimony about this lunch meeting with Wong on the grounds that the testimony is unreliable. Eng asserts that Yao had no independent recollection of meeting with Wong on December 11, Yao did not produce any documentation such as a credit card receipt to substantiate that the lunch meeting in fact took place, and Yao's testimony was not subject to oath under penalty of perjury. We decline to disregard Yao's testimony, having assessed, as did the NASD, its reliability and probative value in light of the possible bias of the declarant, her availability to testify, the existence of any contradictory testimony, and any corroborative evidence. [/] The record contains nothing to suggest that Yao was biased against either Eng or Wong. In fact, record evidence shows that Yao and Wong are long-time friends who remained so throughout this proceeding. With respect to Yao's availability, Yao refused to appear before the Market Regulation Committee in response to the NASD's request, and the NASD did not have jurisdiction over Yao and could not compel her testimony. While the record includes Wong's contradictory deposition testimony that he did not attend a lunch meeting with Yao on December 11, we consider that testimony unreliable because Wong claims to be unable to recall anything about December 11 other than that he returned from Guam that morning and did not meet Yao for lunch. Moreover, while Yao had no incentive to lie, Wong, as an associated person with an NASD member firm, had reason to fear NASD action. Additionally, Yao's testimony regarding her meeting with Wong is corroborated by a Pioneer letter sent to the NASD on July 12, 1993 in response to an NASD request for information. That letter states that "Wong was orally informed by . . . Yao . . . on December 11, 1992 . . . regarding her informal discussion with [First Hawaiian's CEO] who had expressed interest in acquiring [Pioneer]." The Pioneer letter further states that Wong, along with all of the Pioneer directors, was informed before the December 17 and 18 board meetings about the merger discussions. Notably, Wong, who reviewed Pioneer's July 12th letter around the time it was written, did not advise Yao or anyone else at Pioneer that the letter -- which indicates that Wong knew about the proposed merger before Eng's first Pioneer purchase -- was incorrect. Moreover, when Yao, in connection with her attempt to respond to an NASD information request, telephoned Wong sometime prior to July 12th and told Wong that she could not recall independently the specific date that she informed Wong about the merger negotiations, Wong did not advise her that the date was December 18th, the date Wong now claims to have learned of the proposed merger. B. We also conclude that Wong "tipped" Eng about the proposed merger prior to December 14, 1992, and that Eng's purchases of Pioneer stock were based on this information. As an initial matter, the record evidence shows a longstanding pattern of reciprocal professional assistance between Wong and Eng, and of financial assistance given to Eng by Wong. Additionally, the record reflects a startling pattern of trading in Pioneer stock by Wong's friends and family while merger negotiations were underway, from which we, like the NASD, infer that Wong was "tipping" his friends and family members, including Eng, during this period. [/] In drawing this inference, we reject Eng's assertion that the evidence that transactions by persons with long-standing relationships with Wong accounted for most of the volume of Pioneer stock traded on December 14 and December 22 cannot be relied upon, as it is possible that one of the other Pioneer directors could have tipped Wong's friends and neighbors prior to their purchases. Circumstantial evidence may be probative and reliable even when it does not negate all other explanations for an inference; here, we conclude that this circumstantial evidence is "certain, satisfying, and persuasive," [/] and that it is more probable than not that Wong was "tipping" his circle of family and friends about the merger. Further, Eng had never bought Pioneer stock before December 14, 1992, nor had he purchased an equity interest in any company in many years before his Pioneer stock purchases. Eng's first purchase of Pioneer stock occurred at the market opening on the first business day after Wong learned from Yao that a Pioneer- First Hawaiian merger was under discussion. This is compelling circumstantial evidence that Eng's purchases of Pioneer stock were made based on a "tip" from Wong. In addition, Eng used most of the balance of the loan received from PaineWebber to purchase Pioneer stock on margin to the maximum extent possible. This indicates Eng's confidence in the profitability of this investment. Wong had many opportunities to communicate information about the merger discussions to Eng since the two spoke daily by telephone. However, because of the family relationship between the two men, and the facts that the two spoke daily and a number of the telephone calls were between the Wong and Eng residences (suggesting that family members other than Wong and Eng may have been parties to the calls made to or from the two residences), we agree with the National Business Conduct Committee ("NBCC") that the telephone records in this case are "not as compelling as they are in other cases." Nonetheless the record establishes that Wong spoke directly with Eng in advance of each of Eng's purchases of Pioneer stock. We conclude that it is more probable than not, given Wong's and Eng's pattern of professional and personal assistance, as well as all of the other evidence appearing on this record, that Wong "tipped" Eng before Eng's purchases of Pioneer stock. Eng nonetheless contends, in the face of this compelling evidence, that he had followed Pioneer stock for over a year, that he had recommended its purchase to his retail customers some time before his own purchases, and that his purchases of Pioneer stock were based on his independent assessment that the stock was "moving up a little bit . . . [and] looked like it was challenging the previous highs." Eng, in other words, would explain as purely coincidental the fact that he made his first purchase on December 14. He claims that the date of the purchase was dictated solely by the fact that he "had money, . . . wanted to diversify from commodities, . . . [and] the one stock [he] knew best was Pioneer." This contention is undermined by the timing of Eng's purchases -- while Eng had the loan proceeds in hand for several months before his initial Pioneer purchase and had resumed trading in the commodity futures market in November 1992, Eng's investment in Pioneer followed immediately upon Wong learning about merger negotiations between Pioneer and First Hawaiian. C. The record further demonstrates that the information Wong provided to Eng concerning the Pioneer-First Hawaiian merger negotiations in December 1992 was non-public and material. Eng has not disputed at any point in these proceedings the non-public nature of the merger negotiations prior to First Hawaiian's public announcement on February 18, 1993, of its acquisition of Pioneer. Information which has not been made generally available to investors is deemed to be "non-public." [/] The effort to keep the merger negotiations from becoming public knowledge is illustrated by the extraordinary security measures that were taken in connection with the December 1992 meetings between Pioneer and First Hawaiian executives. Eng, however, has disputed strenuously the materiality of the information. In Basic v. Levinson, [/] the Supreme Court stated that when considering the materiality of a fact, "there must be substantial likelihood that disclosure of the . . . fact would have been viewed by the reasonable investor as having significantly altered the 'total mix' of information . . . available." [/] In Basic, which dealt specifically with the materiality of merger negotiations, the Supreme Court established a two-prong materiality test that considers both the indicated probability that an event will occur and the anticipated magnitude of the event in the light of the totality of the company's activity. [/] Here, by the date of Eng's first Pioneer purchase, information about the proposed merger of Pioneer and First Hawaiian was material. First, the merger was probable, as the highest ranking executives of the two companies had met directly to discuss amicably the substance of the merger and members of Pioneer's board were being briefed on the discussions. Second, a merger of the two companies was an event of substantial magnitude to Pioneer. As the Supreme Court has stated, the merger of a corporation is the most important event that can occur in the life of the corporation; it follows that inside information relating to a merger is material at an earlier stage than would be the case with respect to information relating to lesser corporate events. [/] Additionally, we agree with the NASD that the context in which the merger discussions occurred -- an extremely active bank merger market -- heightened the materiality of the discussions between Pioneer and First Hawaiian such that information about those discussions constituted information that a reasonable investor would deem important in determining whether to buy, sell, or hold Pioneer stock. D. Lastly, the record establishes that Eng's conduct violated the NASD's rule requiring the observance of high standards of commercial honor and just and equitable principles of trade. It further establishes that Eng acted with the required scienter for an Article III, Section 18 finding. Eng admitted that he knew at the time he purchased Pioneer stock that Wong was a director of Pioneer. Eng, as a securities industry professional with over twenty-five years of experience, at a minimum was reckless if he did not know that, by buying the stock without disclosing the inside information about the company that Wong had furnished him, Eng was participating in insider Wong's breach of fiduciary duty to Pioneer's shareholders. [/] In sum, we conclude that a preponderance of the record evidence establishes that, as found by the NASD, Eng bought Pioneer stock on the basis of material, non-public information and that Eng's conduct violated Article III, Sections 1 and 18 of the NASD Rules. The NASD did not separately analyze Eng's conduct under the "possession" test of insider trading liability. Under that test, just as a corporate insider who trades in his company's stock while in possession of inside information without disclosing that information commits fraud whether or not he "uses" the information, [/] an insider's "tippee" commits fraud if the "tip" constitutes a breach of the insider's fiduciary duty and the tippee -- with notice of this breach of duty -- trades while in possession of the tipped information, without disclosing that information. In these circumstances, the tippee has acquired the insider's fiduciary duty to disclose or abstain from trad- ing. [/] Because the NASD did not so analyze Eng's conduct, we do not ground our findings against Eng on this alternative theory of liability. IV. A. Eng filed with his brief a document titled "Declaration of Kenneth M. Wong" dated June 21, 1997. Rule 452 of this Commission's Rules of Practice governs the acceptance of evidence not adduced previously. Rule 452 states that any motion for leave to adduce additional evidence must "show with particularity that such additional evidence is material and that there were reasonable grounds for failure to adduce such evidence previously." The NASD opposes our consideration of this document. We have determined not to accept it. The Wong declaration is duplicative of other evidence in this record; each of Wong's assertions is repeated elsewhere, including in a Wells-like submission Wong made to the NASD that has been made a part of this record. Therefore, although the document contains information important to Eng's defense, this information is cumulative. [/] In addition, Eng has not made a showing of reasonable grounds for failure to adduce his father-in-law's affidavit previously. Eng contends that the fault lies with the law firm that represented him before the NASD. Eng, however, chose the law firm that represented him. "Public policy considerations favor the expeditious disposition of litigation, and a respondent cannot be permitted to gamble on one course of action and, upon an unfavorable decision, to try another course of action." [/] B. Eng asserts to us, without further explanation, that the NASD erred "by the inclusion, on the National Business Conduct Committee panel hearing this matter, of persons who had conflicts or the appearance of conflicts of interest with respect to their participation." Our review of the record reveals that Eng timely but unsuccessfully moved to disqualify from the hearing panel two persons who, at the time of their panel service, were, like Wong, associated with Shearson-affiliated entities. The record also reflects that Eng sought disqualification of one of these two NBCC panelists on the separate basis that, on two occasions, Eng assertedly had discussed employment opportunities with him and had declined employment offers from him. Eng claimed that disqualification was necessary because this asserted involvement might affect the panelist's ability to focus solely on the record in this case. Assuming that Eng's claim of error relates to the NASD's determination to deny Eng's motion, we find no basis for unfairness. Under NASD rules in effect during the NBCC review period, an NBCC member was precluded from participation in "the determination of any matter substantially affecting his interest or the interest of any person in whom he is . . . interested." [/] The NASD concluded that neither the two panelists nor their firms had a substantial interest in the matters at issue in this proceeding, given, among other reasons, that Shearson-affiliated entities were not involved in the transactions that formed the basis for the NASD complaint and that Wong learned of the proposed merger through his service as a Pioneer director, not as a result of his association with a Shearson affiliate. The NASD also probed Eng's claim that he had discussed employment opportunities with one of the panelists and, based on the panelist's response that he did not remember even meeting Eng and his assurance that his focus would be solely on the record in this matter, the NASD concluded that the panelist should not be disqualified. Under these circumstances, we find no error in the inclusion of these persons on the NBCC hearing panel. V. Eng asserts that the sanctions here are excessive, oppressive, and unnecessarily harsh. We disagree. The bar from associating with any NASD member in any capacity and other sanctions imposed on Eng are a serious response to serious misconduct. Insider trading constitutes clear defiance and betrayal of basic responsibilities of honesty and fairness to the investing public. A bar will serve to protect the public from Eng, and will preserve the integrity of the securities markets. [/] Additionally, the bar and $75,000 fine -- approximately three times Eng's personal trading profits of $25,375 -- are appropriate as a deterrent. We have stated previously that "for self-regulatory exchanges to maintain their credibility as effective participants in the regulatory process . . . [they] must also impose sanctions severe enough to deter others from engaging in similar misconduct." [/] While Eng suggests that he may be unable to pay the fine, he has not introduced any evidence to support that claim. In any event, Eng may be permitted to pay this fine under an NASD installment plan made available to respondents; this will reduce any financial hardship. Lastly, the aggravating factors apparent in this record also justify the sanctions imposed. These factors include -- as the NBCC specified in its decision -- the reckless nature of Eng's misconduct and his lack of candor in testifying before the NASD. In sum, given the serious nature of Eng's misconduct, we do not conclude that the sanctions imposed are either excessive or oppressive. An appropriate order will issue. [/] By the Commission (Chairman LEVITT and Commissioners JOHNSON and HUNT); Commissioners CAREY and UNGER not participating. Jonathan G. Katz Secretary **FOOTNOTES** [/]:/Article III, Section 1 of the NASD Rules requires that members "observe high standards of commercial honor and just and equitable principles of trade." Article III, Section 18 requires that "[n]o member shall effect any transaction in, or induce the purchase or sale of, any security by means of any manipulative, deceptive or other fraudulent device or contrivance." Article III, Sections 1 and 18 have been renumbered, respectively, as Conduct Rules 2110 and 2120. [/]:/Wong, then an associated person of Shearson Asset Management, an NASD member firm, also was named in the NASD's complaint because of his alleged role as a "tipper." Wong settled this matter prior to hearing and was censured, fined $45,000, and suspended from associating with any NASD member for 22 months. [/]:/See SEC v. Singer, 786 F. Supp. 1158 (S.D.N.Y. 1992); SEC v. Bluestone, [1990-1991 Transfer Binder] Fed. Sec. L. Rep. (CCH) 95,880, at 99,343 (E.D. Mich. Jan. 24, 1991); SEC v. Musella, 748 F. Supp. 1028, 1038- 40 (S.D.N.Y. 1989), aff'd, 898 F.2d 138 (2d Cir. 1990), cert. denied sub nom. DeAngelis v. SEC, 498 U.S. 816 (1990). [/]:/Michalic v. Cleveland Tankers, Inc., 364 U.S. 325, 330 (1960); see also SEC v. Moran, 922 F. Supp. 867 (S.D.N.Y. 1996)(proof of insider trading can be made through an inference from circumstantial evidence). [/]:/Kirk A. Knapp, 51 S.E.C. 115, 117 (1992). [/]:/See, e.g., SEC v. Heider, [1990-1991 Transfer Binder] Fed. Sec. L. Rep. (CCH) 95,651, at 98,037 (S.D.N.Y. Dec. 3, 1990) (evidence that defendants' trading accounted for a large percentage of total trading activity provided circumstantial evidence of scienter to commit fraud of insider trading.) [/]:/Michalic, supra, 364 U.S. at 330. [/]:/See, e.g., Investors Management Co., Inc., 44 S.E.C. 633, 643 (1971). [/]:/485 U.S. 224 (1988). [/]:/Id. at 231-232 (quoting TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 (1976)). [/]:/Id. at 238-239. [/]:/Id. at 238. [/]:/See Dirks v. SEC, 463 U.S. 646, 660 (1983) (establishing a framework for tippee liability under Section 10(b) of and Rule 10b-5 under the Securities Exchange Act of 1934 ("Exchange Act")). Compare SEC v. Musella, 748 F. Supp. at 1038 n.4 ("tippee who knows or is reckless in not knowing that he was trading on misappropriated non-public information violates Rule 10b-5"); Carter v. SEC, 726 F.2d 472 (9th Cir. 1983) (registered employees of NASD member firms assumed as a matter of law to have read and have knowledge of NASD rules and requirements). [/]:/The insider, by failing to disclose material non-public information in his possession, violates his fiduciary duty to shareholders requiring him not to disadvantage them when trading. [/]:/See Dirks, 463 U.S. at 661-64 (1983). Compare SEC v. Adler, No. 96- 6094 (11th Cir. 1998) (discussing "use versus possession" issue in context of insider trading claims brought under Section 10(b) of and Rule 10b-5 under the Exchange Act). [/]:/See Vanasco v. SEC, 395 F.2d 349 (2d Cir. 1968)(additional evidence not considered where it is cumulative and would add little to existing record). [/]:/David T. Fleischman, 43 S.E.C. 518 (1967). [/]:/Article X, Section 1 of the NASD Code of Procedure (NASD Manual (CCH) 3141 (1995)). See also Article XVI, Section 4 of the NASD By-Laws (NASD Manual (CCH) 1294 (1995)). [/]:/See U.S. v. O'Hagan, 117 S. Ct. 2199, 2200 (1997)(the purpose of Securities Exchange Act of 1934 prohibitions on insider trading is "to ensure honest markets, thereby promoting investor confidence"). [/]:/Daniel Joseph Alderman, Securities Exchange Act Rel. No. 35997 (July 20, 1995), 59 SEC Docket 2528 (quoting Kenneth Sonken, 48 S.E.C. 832, 836 (1987)). [/]:/All of the arguments advanced by the parties have been considered. They are rejected or sustained to the extent that they are inconsistent or in accord with the views expressed herein. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. SECURITIES EXCHANGE ACT OF 1934 Rel. No. Admin. Proc. File No. 3-9308 ----------------------------------------------------------------- : In the Matter of the Application of : : SIDNEY C. ENG : 362 Mariposa Way : San Anselmo, CA 94960 : : For Review of Action Taken by the : : NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. : : ORDER SUSTAINING DISCIPLINARY ACTION TAKEN BY REGISTERED SECURITIES ASSOCIATION On the basis of the Commission's opinion issued this day, it is ORDERED that the disciplinary action taken by the National Association of Securities Dealers, Inc. against Sidney C. Eng and the Association's assessment of costs, be, and they hereby are, sustained. By the Commission. Jonathan G. Katz Secretary