The Wall Street Journal-20080214-Trader Is Out For 10 Years- NYSE Rules

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Trader Is Out For 10 Years, NYSE Rules

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The New York Stock Exchange's regulatory arm suspended trader Luis Miguel Cespedes for 10 years for trading malfeasance in the heady days just before the end of the 1990s technology-stock bubble.

According to the ruling, Mr. Cespedes, who worked for A.G. Edwards & Sons Inc., put more than a dozen clients' money into volatile technology securities and then piled on margin debt. When the bubble burst, the clients -- many of them elderly, inexperienced investors -- were "wiped out."

"There's an overall pattern to these accounts," testified the NYSE panel's enforcement expert, Christopher Frank. "So it's highly unlikely that 15 customers came in and said, 'You know what, damn the torpedoes, I want to be in aggressive equity.' That stretches the imagination a bit."

A.G. Edwards asked Mr. Cespedes, who lives in Capistrano Beach, Calif., to resign in October 2001. The firm, now owned by Wachovia Corp., has since settled with 15 of the clients for a total of $1.1 million.

Mr. Cespedes's lawyer Jonathan Schwartz said the investors got in at the wrong time and then had buyer's remorse.

"Luis specialized in dot-com and telecommunications stock when the market was hot," said Mr. Schwartz in a phone interview. "When the market broke, a lot of his customers regretted the risk they had decided to take."

Mr. Cespedes primarily invested the clients in technology-heavy unit investment trusts -- unmanaged funds tied to a set basket of securities. When stocks were on the rise, the strategy produced dramatic results. From 1994 to 2001, while technology stocks were on a bull run, Mr. Cespedes was his branch's top-performing representative, with 400 to 500 clients and more than 1,000 accounts.

But when technology stocks began to collapse, his clients lost money.

On March 22, 2002, the NYSE told Mr. Cespedes he was the target of an investigation. He then allegedly made several attempts to cover up client complaints, including allegedly threatening one elderly woman to get her to change her testimony.