UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Securities Act of 1933
Release No. 8533 / February 9, 2005
Securities Exchange Act of 1934
Release No. 51162 / February 9, 2005
Investment Advisers Act of 1940
Release No. 2350 / February 9, 2005
Admin. Proc. File No. 3-11813
SEC INSTITUTES ADMINISTRATIVE PROCEEDINGS AGAINST MARKETXT, INC. AND IRFAN AMANAT
Today, the Commission instituted public administrative proceedings against MarketXT, Inc. (MarketXT), an Electronic Communications Network ("ECN") registered as a broker-dealer, and public administrative and cease-and-desist proceedings against Irfan Amanat (Amanat), MarketXT's de facto Chief Technology Officer. In the Order, the Division of Enforcement alleges that Amanat executed thousands of wash trades and matched orders over a three-day period in March 2002 in order improperly to qualify MarketXT for a tape revenue rebate program offered by the NASDAQ Stock Market, Inc. (Nasdaq). In an effort to compete with other market centers for market-data fees, Nasdaq rebated a portion of the revenue it received for trades that it reported in NYSE- and Amex-listed securities to qualifying NASD members. MarketXT's wash trades and matched orders did not reflect market supply and demand, but were generated solely for the purpose of qualifying for the rebate. As a result of Amanat and MarketXT's fraudulent conduct, MarketXT improperly received approximately $50,000 in rebates from Nasdaq.
In the Order, the Division also alleges that for the year ended December 31, 2001, and quarter ended June 30, 2002, MarketXT was operating without adequate net capital and did not maintain and preserve accurate books and records disclosing its true liabilities.
As a result of executing the fraudulent wash trades and matched orders, the Division alleges that MarketXT willfully violated Sections 10(b) and 15(c)(1)(A) of the Exchange Act, and Rule 10b-5 thereunder. The Division also alleges that Amanat willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and willfully aided and abetted MarketXT's violation of Section 15(c)(1)(A) of the Exchange Act. The Division further alleges that MarketXT willfully violated Sections 15(c)(3) and 17(a)(1) of the Exchange Act, and Rules 15c3-1, 17a-3(a)(2), 17a-3(a)(11), and 17a-5 by failing to maintain adequate net capital and by failing to maintain and preserve adequate books and records.
The Division seeks disgorgement plus prejudgment interest and a civil penalty against MarketXT, and a cease-and-desist order and civil penalty against Amanat, in addition to any remedial sanctions appropriate in the public interest.
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, and to afford MarketXT and Amanat an opportunity to establish defenses to such allegations, and to determine what remedial sanctions, if any, are appropriate in the public interest. The Commission directed that an administrative law judge shall issue an initial decision in this matter within 300 days from the date of service of the Order.
See also the Order in this matter