U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19862 / October 11, 2006
SEC v. Steven B. Markovitz, Civil Action No. 06 CV 8291 (S.D.N.Y.)
SEC Files Settled Action Against Former Late Trader For Violations Of A Bar Against Association With An Investment Adviser
On October 11, 2006, the Securities and Exchange Commission ("Commission") filed a settled civil action in the United States District Court for the Southern District of New York against Steven B. Markovitz, a former trader at Millennium Partners, L.P. ("Millennium"), a New York-based hedge fund. In October 2003, the Commission instituted partially settled administrative and cease-and-desist proceedings against Markovitz based on his late trading of mutual funds at Millennium. At that time, the Commission issued an order, with Markovitz's consent, barring him from associating with an investment adviser.
The Commission's complaint alleges that Markovitz violated the Commission's bar order. From November 2004 to May 2006, Markovitz, with two unnamed individuals, formed an offshore investment adviser, and proceeded to conduct the business of the investment adviser, including communicating and meeting with investors and prospective investors and placing buy and sell orders, from New York City, in violation of the Commission's investment adviser bar. Through this conduct, Markovitz willfully and intentionally violated (i) the order barring him from association with an investment adviser and (ii) Section 203(f) of the Investment Advisers Act of 1940, which prohibits persons subject to investment adviser bars from violating those bars.
Without admitting or denying the Commission's allegations, Markovitz has consented to the entry of a final judgment permanently enjoining him from violating certain orders issued in the Commission's administrative proceeding and Section 203(f) of the Investment Advisers Act and ordering him to disgorge $50,000 and pay a civil penalty of $120,000.
Today, the Commission also issued an order, on consent, in its administrative proceeding against Markovitz that requires him to disgorge $1 and pay a $400,000 civil penalty for his late trading conduct. From 1999 to 2003, while employed as a hedge fund trader at Millennium, Markovitz engaged in late trading on behalf of Millennium. Late trading violates the federal securities laws related to the price at which mutual fund shares must be bought or sold and defrauds innocent investors in those mutual funds by giving to the late trader an advantage not available to other investors. Markovitz consented to the issuance of the administrative order without admitting or denying the findings therein.