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U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES ACT of 1933
Release No. 8060 / January 24, 2002

SECURITIES EXCHANGE ACT of 1934
Release No. 45329 / January 24, 2002

ADMINISTRATIVE PROCEEDING
File No. 3-10689

________________________ :  
In the Matter of
Gregory F. Mazzeo,
Respondent.
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ORDER INSTITUTING PROCEEDINGS, MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND- DESIST ORDER PURSUANT TO SECTION 8A OF THE SECURITIES ACT OF 1933 AND SECTIONS 15(b) AND 21C OF SECURITIES EXCHANGE ACT OF 1934
________________________ :  

I.

The Securities and Exhange Commission ("Commission") deems it appropriate in the public interest and for the protection of investors that public administrative and cease- and-desist proceedings be instituted against Gregory F. Mazzeo ("Mazzeo") pursuant to Section 8A of the Securities Act of 1933 ("Securities Act") and Sections 15(b) and 21C of the Securities Exchange Act of 1934 ("Exchange Act").

II.

In anticipation of the institution of these proceedings, Mazzeo has submitted an Offer of Settlement ("Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the Commission's findings contained herein, except the jurisdiction of the Commission over him and over the subject matter herein, and the Commission's findings set forth in Paragraph III.A., which are admitted, Mazzeo hereby consents to the entry of this Order Instituting Proceedings, Making Findings and Imposing Remedial Sanctions pursuant to Section 8A of the Securities Act of 1933, Sections 15(b) and 21C of the Securities Exchange Act of 1934 ("Order").

Accordingly, IT IS HEREBY ORDERED that proceedings pursuant to Section 8A of the Securities Act and Sections 15(b) and 21C of the Exchange Act be and hereby are instituted.

III.

On the basis of this Order and Mazzeo's Offer, the Commission finds that 1:

A. Gregory F. Mazzeo ("Mazzeo") was, at all relevant times, including from at least April 1997 through at least October 1997, registered as an associated person of W.J. Nolan.

B. During the relevant time period, Mazzeo was the head equities trader at W.J. Nolan ("firm"). As such, Mazzeo was responsible for calculating the prevailing market price from which markups were calculated on principal transactions. Mazzeo was also responsible for monitoring and trading in the Firm's inventory and proprietary accounts, and he set the bid and ask price quotations for the Firm. As compensation Mazzeo received a percentage of the commissions and markups charged on trades he executed. During the relevant time period, the Firm's customers were charged approximately $227,153 in excessive, undisclosed markups on sales of Globalnet Systems Ltd. (Globalnet), a microcap stock.

C. During the time period April 1997 through October 1997 there was no significant actual customer demand for Globalnet outside of the Firm. In fact, during that time period, the Firm and its customers were responsible for almost 75% of the total trade volume in Globalnet. From April through October 1997, the Firm's customers accounted for approximately 94% of all retail customer purchases of Globalnet during that period. Further, between August and October 1997, the Firm held the inside bid for Globalnet approximately 98% of the time. Also, the Firm only made one sale to another market maker during that period. Therefore, there was no active, competitive market for Globalnet from April through October 1997, but instead, the Firm dominated and controlled the market for Globalnet during that period.

D. During this period, Mazzeo calculated the prevailing market price from which markups were calculated using the price at which the Firm offered Globalnet to other market makers as the prevailing market price. However, because there was no active, competitive market for Globalnet, and the Firm dominated and controlled the market for Globalnet, Mazzeo should have used the Firm's contemporaneous cost as the prevailing market price when calculating markups. Mazzeo executed about 163 retail sales of Globalnet between April and October 1997 at various markups. Calculating markups using the Firm's contemporaneous cost as the prevailing market price, approximately 85% of the trades were executed at markups greater than 10%, and about 41% were executed at markups over 25%. Markups greater than 10% are fraudulent per se. Accordingly, Mazzeo charged excessive markups and did not disclose these excessive markups to the Firm's customers.

E. As a result of the excessive markups charged to customers Mazzeo received approximately $13,479.

Violations

F. As a result of the conduct described above, Mazzeo willfully violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.

IV.

In light of the foregoing, it is in the public interest to impose the sanctions specified in the Offer submitted by Mazzeo.

Accordingly, IT IS HEREBY ORDERED that:

A. Mazzeo, pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, cease and desist from committing or causing any violation and any future violation of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder.

B. Mazzeo be suspended from association with any broker or dealer for a period of twelve months, effective on the second Monday following entry of this Order; and

C. Mazzeo shall upon entry of the Order, pay a civil money penalty in the amount of $5,000 to the United States Treasury. Such payment shall be (a) made by United States postal money order, certified check, bank cashier's check or bank money order; (b) made payable to the Securities and Exchange Commission, Operations Center, 6432 General Green Way, Alexandria, Virginia, 22312-0003; and (c) submitted under the cover letter that identifies Mazzeo as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Mary Keefe, Midwest Regional Office, Securities and Exchange Commission, 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661.

D. Mazzeo shall within one hundred and twenty (120) days of the entry of the Order, pay disgorgement, prejudgment interest and post-judgment interest in the amount of $5,616.10 to the United States Treasury. Such payment shall be (a) made by United States postal money order, certified check, bank cashier's check or bank money order; (b) made payable to the Securities and Exchange Commission, Operations Center, 6432 General Green Way, Alexandria, Virginia, 22312-0003; and (c) submitted under the cover letter that identifies Mazzeo as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Mary Keefe, Midwest Regional Office, Securities and Exchange Commission, 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661.

E. Mazzeo shall within two hundred and forty (240) days of the entry of the Order, pay disgorgement, prejudgment interest and post-judgment interest in the amount of $5,573.96 to the United States Treasury. Such payment shall be (a) made by United States postal money order, certified check, bank cashier's check or bank money order; (b) made payable to the Securities and Exchange Commission, Operations Center, 6432 General Green Way, Alexandria, Virginia, 22312-0003; and (c) submitted under the cover letter that identifies Mazzeo as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Mary Keefe, Midwest Regional Office, Securities and Exchange Commission, 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661.

F. Mazzeo shall within three hundred and sixty (360) days of the entry of the Order, pay disgorgement, prejudgment interest and post judgment interest in the amount of $5,532.14 to the United States Treasury. Such payment shall be (a) made by United States postal money order, certified check, bank cashier's check or bank money order; (b) made payable to the Securities and Exchange Commission, Operations Center, 6432 General Green Way, Alexandria, Virginia, 22312-0003; and (c) submitted under the cover letter that identifies Mazzeo as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Mary Keefe, Midwest Regional Office, Securities and Exchange Commission, 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661.

By the Commission.

  Jonathan G. Katz

Secretary


1 The findings herein are made pursuant to Respondent Mazzeo's Offer and are not binding on any other person or entity in this or any other proceeding.

 

http://www.sec.gov/litigation/admin/33-8060.htm


Modified: 01/25/2002