NYSE Disciplines Salomon Smith Barney Regarding Advice in Exercising Worldcom Employee Stock Options and Holding Worldcom Stock

SSB's Atlanta branch handled the accounts of Worldcom employees with respect to their exercise of employee stock options.

The NYSE finds that SSB failed to supervise brokers in that office between 1998-2001. SSB brokers recommended exercise and hold strategies, using margin, which resulted in concentrated, leveraged positions in Worldcom stock. These recommendations were made, the NYSE panel found, without regard to the particular customers' varying risk profiles, investment experience or investment objectives.

Even as Worldcom shares declined, the panel found, SSB continued to recommend holding, without adequately disclosing the risks inherent in holding a "concentrated position of volatile stocks on margin."

In addition to failing to supervise, the panel effectively found that SSB deceived the public. That is, SSB brokers were promoted as being "extensively trained", in handling employee stock options, but in fact the brokers had received no specific training.

Source: www.nyse.com/press/1067342436166.html