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From Securities Regulation Daily, July 02, 2014

SEC again takes aim at banned short sales

By Mark S. Nelson, J.D.

The SEC said that five persons have agreed to settle charges that their trading activities ran afoul of short selling limits. Today’s settlements end another part of a March administrative proceeding that resulted in the biggest known penalty for a Regulation M violation. The five persons will pay total penalties of nearly $750,000, but without admitting or denying the SEC’s findings. The SEC made the announcement in a late afternoon press release (In Re Brocco; In Re Niemis; In Re Vowell; In Re Lizzio; In Re Bakarich; July 2, 2014).

Andrew M. Calamari, director, SEC New York Regional Office, said the SEC charged the five traders to ensure the integrity of the markets. “These individuals shared in profits generated by transactions that violated important short selling regulations in place to protect the markets from manipulative trading activity.”

All five persons named in today’s settlements traded for Jeffrey W. Lynn, who founded Worldwide Capital, Inc. (Worldwide) in 1993 to facilitate the trading of his own capital. Lynn and Worldwide agreed in March to pay over $7.2 million in penalties for their alleged violations of Regulation M’s Rule 105.

The SEC’s action against Lynn and Worldwide continued the agency’s focus on short-sales violations, which began last September when the SEC announced enforcement actions against 23 companies. The SEC’s Office of Compliance Inspections and Examinations also has issued an alert on Rule 105 compliance. Calamari had cautioned in March that the SEC would continue to pursue illegal short sellers.

Alter egos. Carmela Brocco, Steven J. Niemis, William W. Vowell, Tina M. Lizzio and Derek W. Bakarich allegedly violated Rule 105 of Regulation M by purchasing securities in covered public offerings while also making related short sales during a restricted period. The five traders bought securities either in their own names or via multiple “alter ego” entities through large brokers; they made sales via smaller brokers who cater to professional traders.

Penalties. The SEC hit Brocco with the largest penalty of the five for making banned trades in 12 offerings. Brocco was both an office manager and trader at Worldwide. Brocco must pay disgorgement of $215,233 and a penalty of $129,140. The total penalty is $371,429 with prejudgment interest factored-in.

Niemis, a former computer salesman, traded Lynn’s capital in 17 offerings. Niemis will pay total penalties of $215,240, consisting of $130,842 in disgorgement, more than $5,800 in prejudgment interest, and a $78,505 penalty.

Vowell, Lizzio and Bakarich were cited for illegal trades in 8 to 10 offerings apiece. They each will pay a total of $86,857, $47,731, and $26,727, respectively.

The Releases are No. 34-72518, No. 34-72520, No. 34-72521, No. 34-72519, and No. 34-72517.

Companies: Worldwide Capital, Inc.

MainStory: TopStory BrokerDealers Enforcement ExchangesMarketRegulation FraudManipulation SecuritiesOfferings

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