SEC Charges Roosevelt & Cross and Two of Its Salespeople for Retail Order Period Misconduct in Municipal Offerings
Sept. 14, 2020
File Nos. 3-19996, 3-19997, 3-19998
September 14, 2020 - The Securities and Exchange Commission today instituted settled enforcement actions against Roosevelt & Cross, Inc. and two of its registered representatives, Thomas Vigorito and William W. Welsh, for circumventing the priority given to retail and institutional investors in certain municipal bond offerings.
According to the SEC's order, Roosevelt improperly allocated new issue municipal bonds intended for retail customers to parties known in the industry as "flippers," who then resold or "flipped" the bonds to other broker-dealers. The order finds that Roosevelt's registered representatives knew or should have known that the flippers were not eligible for retail priority. In addition, the order finds that Roosevelt registered representatives used the flippers as proxies to place customer orders - as opposed to dealer orders - for new issue municipal bonds on Roosevelt's behalf. This allowed Roosevelt to obtain bonds for its own inventory, thereby circumventing the priority of orders and improperly obtaining a higher priority in the bond allocation process.
In related actions, the SEC instituted settled proceedings today against Roosevelt registered representatives Thomas Vigorito and William W. Welsh. The SEC's orders find that Vigorito and Welsh negligently submitted retail orders for new issue municipal bonds on behalf of their flipper customers and helped Roosevelt obtain bonds for Roosevelt's inventory through their flipper customers. In addition, the SEC order finds that Vigorito engaged in illegal "parking" of municipal bonds with one flipper.
The SEC's order against Roosevelt found that it willfully violated the antifraud provisions of Section 17(a)(3) of the Securities Act of 1933, Section 15B(c)(1) of the Securities Exchange Act of 1934, which prohibits the purchase and sale of any municipal security in contravention of any Municipal Securities Rulemaking Board rule, and the disclosure, fair dealing and supervisory provisions of MSRB Rules G-11(k), G-17, and G-27, caused the flippers' unregistered broker violations of Section 15(a)(1) of the Exchange Act, and also failed reasonably to supervise within the meaning of Section 15(b)(4)(E) of the Exchange Act. Without admitting or denying the SEC's findings, Roosevelt consented to a cease-and desist order imposing a censure and requiring it to pay $681,037 in disgorgement, plus $135,978 in prejudgment interest, and a $200,000 civil penalty,
Without admitting or denying the SEC's findings, Vigorito consented to a cease-and-desist order finding he violated the antifraud provisions of Sections 17(a)(1) and 17(a)(3) of the Securities Act, the disclosure and fair dealing provisions of MSRB Rules G-11(b), G-11(k), and G-17, and caused the flippers' unregistered broker violations of Section 15(a)(1) of the Exchange Act and Roosevelt's violations of Section 15B(c)(1) of the Exchange Act. The order also censures him, requires him to pay a civil penalty of $40,000, and imposes a 12-month industry suspension. Without admitting or denying the SEC's findings, Welsh consented to a cease-and-desist order finding he violated Section 17(a)(3) of the Securities Act, MSRB Rules G-11(k) and G-17, and caused violations of Sections 15(a)(1) and 15B(c)(1) of the Exchange Act. The order also censures him, requires him to pay a civil penalty of $25,000, and imposes a 6-month industry suspension.
The SEC's investigation was conducted by Kevin B. Currid, Sue Curtin, and Heidi M. Mitza of the Public Finance Abuse Unit and Kathleen B. Shields of the SEC's Boston Regional Office. A related SEC examination of Roosevelt was conducted by the SEC's New York Regional Office.