SECURITIES AND EXCHANGE COMMISSION
FORMER NYSE FLOOR BROKERS D'ALESSIO, D'ALESSIO SECURITIES, INC., AND MFS SECURITIES CORP. SETTLE SEC CHARGES OF ILLEGAL FLOOR TRADING
Litigation Release No. 16984 \ May 2, 2001
SECURITIES AND EXCHANGE COMMISSION v. THE OAKFORD CORPORATION, EDWARD J. MUEGER, INC., MFS SECURITIES CORP., OAKWOOD SECURITIES CORP., D'ALESSIO SECURITIES, INC., WILLIAM S. KILLEEN, THOMAS W. BOCK, THOMAS J. CAVALLINO, EDWARD J. MUEGER, MARK R. SAVARESE, JOHN J. SAVARESE and JOHN R. D'ALESSIO, United States District Court for the Southern District of New York, 00 Civ. 2426 (S.D.N.Y.)
The Securities and Exchange Commission announced today that the United States District Court for the Southern District of New York has issued Final Judgments By Consent that settle the Commission's civil injunctive action against former New York Stock Exchange, Inc. ("NYSE") floor brokers John R. D'Alessio ("D'Alessio"), D'Alessio Securities, Inc. ("D'Alessio Securities"), and MFS Securities Corp. ("MFS"). In its action, the Commission alleges that D'Alessio, D'Alessio Securities, MFS, and other NYSE floor brokers engaged in illegal proprietary and discretionary trading on the NYSE floor, and defrauded their institutional customers by "frontrunning" and "trading ahead" of customer orders, between 1993 and early 1998.
Without admitting or denying the allegations, D'Alessio, D'Alessio Securities, and MFS have consented to judgments that permanently enjoin: (a) each of them from violating provisions in federal securities laws concerning unlawful proprietary and discretionary trading by members of national securities exchanges, Section 11(a) of the Securities Exchange Act ("Exchange Act") and Rule 11a-1 thereunder; (b) each of them from violating antifraud provisions of the federal securities laws, Section 17(a) Securities Act of 1933, Section 10(b) of the Exchange Act , and Rule 10b-5 thereunder; (c) D'Alessio Securities and MFS from violating recordkeeping and reporting requirements, namely Section 17(a) of the Exchange Act and Rules 17a-3 and 17a-5 thereunder, and D'Alessio from aiding and abetting such violations; and (d) MFS from violating NYSE Rules 90(a), 91 and 92. In addition, D'Alessio has consented to pay $200,000 in disgorgement and prejudgment interest. The Commission's action is pending against the remaining defendants.
D'Alessio was a member of the NYSE from approximately 1982 until February 1998. D'Alessio Inc., a registered broker-dealer since 1983, was the entity through which D'Alessio conducted his floor broker business. On April 5, 2001, the NYSE's Board of Directors upheld the findings of a NYSE Hearing Panel barring D'Alessio and D'Alessio Securities permanently from the NYSE floor and barring them from association with any member firm for seven years. That decision has been appealed to the Commission. MFS, a registered broker-dealer since 1980, was the entity through which defendants Mark and John Savarese (together, the "Savareses") conducted their floor broker business.
The Complaint alleges that: From 1993 through 1998, defendant Oakford Corporation ("Oakford") - a non-NYSE member broker-dealer - entered into illegal oral agreements with certain floor brokers on the NYSE, whereby: (a) Oakford opened an account that was designated as a proprietary account; (b) Oakford provided capital for the account; and (c) the trades in that account were determined by the floor brokers, who received 70-90% of the profits earned on the trades. Each floor broker effectively exercised discretion over the account by determining both the number of shares of a security to purchase or sell and whether to purchase or sell the security. D'Alessio entered into such an illegal agreement in mid-1994 and continued to execute trades for his Oakford account through mid-February 1998. MFS, through the Savareses, engaged in these activities throughout 1997 and up through mid-February 1998. In addition to executing trades for the accounts opened by Oakford, D'Alessio, D'Alessio Securities, and MFS continued to execute trades for institutional customers. On many occasions, D'Alessio intermingled the execution of orders for his Oakford account and orders for institutional customers in a manner that guaranteed an incremental profit on his Oakford trades. The Savareses engaged in similar conduct.
For more information, see Release No. 34-41574, In the Matter of New York Stock Exchange, Inc., AP File No. 3-9925 (June 29, 1999). See also LR-15653, February 25, 1998, LR-15743, May 18, 1998, LR-16497, March 31, 2000.