U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18121 / April 30, 2003
Securities and Exchange Commission v. Ethan H. Weitz and Robert R. Altman, Case No. 03-80348-CIV-MIDDLEBROOKS (S.D. Fla., filed Apr. 30, 2003)
SEC CHARGES TWO NYSE-BARRED BROKERS WITH
Ethan H. Weitz and Robert R. Altman Agree to Pay
On April 30, 2003, the Securities and Exchange Commission (SEC) filed a complaint against two former stockbrokers, Ethan H. Weitz of Manalapan, Florida and Robert R. Altman of New York, New York, for illegal short selling in advance of secondary or repeat stock offerings. Simultaneously with the filing of the SEC's action, Weitz and Altman, without admitting or denying the allegations in the complaint, agreed to settle the charges against them by consenting to the entry of an order that they: 1) pay disgorgement, prejudgment interest and civil penalties totaling more than $1 million; 2) be enjoined from further violations of certain statutes and rules that govern short selling; and 3) be prohibited from participating in any future secondary or repeat stock offering.
The SEC's complaint alleges that starting in August 1999 and continuing until June 2002, Weitz and Altman illegally profited by selling securities short in advance of repeat and secondary stock offerings in violation of the federal securities laws. Their activity began shortly before the New York Stock Exchange barred Weitz and Altman from associating with its members after it found that they had illegally traded ahead of, or along with, orders placed by customers.
The SEC's complaint alleges that Weitz and Altman sold securities short in advance of fifteen repeat and secondary offerings within five days of the pricing of the offered securities, and covered their short sales with securities that they purchased in the offerings. By doing so, Weitz and Altman violated Rule 105 under Regulation M of the Securities Exchange Act of 1934, which is designed to prevent manipulative conduct in advance of stock offerings. The complaint also alleges that on numerous occasions they sold securities short at prices that were below the price at which the last sale in the security had been effected. This practice is prohibited by Section 10(a) of the Exchange Act and Rule 10a-1 thereunder, which are designed to prevent short selling in a declining market. According to the complaint, by trading in violation of these statutes and rules, Weitz and Altman profited by $511,367.39.
The Order to which Weitz and Altman consented permanently enjoins them from future violations of these short selling provisions, and orders them to disgorge, jointly and severally, the $511,367.39 that they profited from their illegal trading, plus prejudgment interest. The judgment also orders them to pay civil money penalties of $255,683.70 each, for a total of $511,367.39. In addition, Weitz and Altman have consented to the entry of a limited trading ban that prohibits them from purchasing securities in any repeat or secondary offering.
The SEC wishes to thank the New York Stock Exchange and its staff for their assistance in investigating this matter.