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.