SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17930 / January 14, 2003
SECURITIES AND EXCHANGE COMMISSION V. JOSHUA M. LEVINE, Civil Action No. 03 CV 0265 (S.D.N.Y.)
SEC CHARGES JOSHUA M. LEVINE IN CONNECTION WITH FALSIFICATION OF RECORDS
The SEC today filed a civil action against Joshua M. Levine for his role in developing software programs used by the former Datek Securities Corporation to conceal its improper trading activities on the Nasdaq Stock Market's Small Order Execution System (SOES) from 1994 to 1997. Levine, 34, was the primary software developer for the firm during that period. Levine has agreed to settle the charges by paying a $1 million penalty and consenting to an injunction for aiding and abetting violations of certain broker-dealer books and records provisions of the federal securities laws.
In a complaint filed in U.S. District Court for the Southern District of New York, the Commission alleged that Levine knowingly developed, implemented, and refined software programs that substantially assisted Datek Securities in the falsification and fabrication of its books and records. The complaint alleged that:
At the time, NASD rules prohibited broker-dealers from using the SOES system to trade for their own accounts. Nevertheless, Datek Securities executed millions of proprietary trades using the SOES system.
Initially, the firm concealed its proprietary trading by manually allocating the trades among dozens of nominee accounts at the end of each day. After the trades were allocated, the information was used to generate additional firm books and records that falsely recorded the proprietary trades as those of individual retail customers.
Levine aided and abetted the firm's scheme to falsify its books and records.
In 1994, Levine, with assistance from others, developed a software program known as "Wire" that automated the unlawful trade allocation process. Among other things, Levine programmed Wire to give the firm's books and records the appearance that they complied with federal securities laws and NASD rules.
Levine continually made refinements to Wire. By 1995, Levine had developed "Real Time Wire," which allocated trades among nominee customer accounts as the trades occurred. Thus, Levine created and refined software programs that falsely recorded the proprietary securities transactions as customer transactions.
Levine has agreed to settle this matter, without admitting or denying the allegations in the complaint, by consenting to a final judgment ordering him to pay a $1 million penalty and permanently enjoining him from aiding and abetting violations of the following broker-dealer books and records provisions: Section 17(a)(1) of the Securities Exchange Act of 1934 and Rules 17a-3(a)(1), 17a-3(a)(2), 17a-3(a)(3), and 17a-3(a)(7) promulgated thereunder. The settlement terms are subject to court approval.