WASHINGTON (Legal Newsline) —
The Securities and Exchange Commission (SEC) announced Dec. 16 that it settled
cease-and-desist proceedings against the CEO of Wilson-Davis & Co., a
Utah-based broker-dealer for alleged violations of SEC market structure rules.
According to SEC rules, before
a broker-dealer effects a short sale, the broker-dealer must “locate” a source of borrowable
securities that can be delivered on the date a delivery is due. The rule comes
with an exception – short sales executed in connection with bona-fide market
making. Wilson-Davis allegedly violated the rule from at least November 2011 to
May 2013 by relying on the bona-fide market making exception for all short
sales by its proprietary trading group. The SEC claims that was illegal because
much of the company’s proprietary trading was not, in fact, bona-fide market making.
“We allege that Wilson-Davis
violated SEC rules that help ensure fair markets, including the rules for short
sales and for market access,” said Andrew J. Ceresney, Director of the SEC’s
Enforcement Division. “Public confidence in our markets depends on careful
compliance with these market structure rules.”
Anthony Kerrigone, the former
proprietary trader at Wilson-Davis, agreed to disgorge $486,840 plus interest
of $63,160.50, along with a penalty of $50,000.