SECURITIES EXCHANGE ACT OF 1934
Release No. 43431 / October 11, 2000
Administrative Proceedings
File No. 3-10150
| In the Matter of ALL-TECH DIRECT, INC., f/k/a ALL-TECH INVESTMENT GROUP, INC., HARRY LEFKOWITZ, MARK SHEFTS, LISA ESPOSITO, RALPH ZULFERINO, DAVID WALDMAN, ADAM LEEDS, and BARRY PARISH, Respondents. |
ORDER MAKING FINDINGS, IMPOSING REMEDIAL SANCTIONS AND ISSUING CEASE-AND-DESIST ORDER AGAINST RALPH ZULFERINO |
I.
On February 22, 2000, the Securities and Exchange Commission ("Commission") instituted public administrative and cease-and-desist proceedings pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 ("Exchange Act") against All-Tech Direct, Inc. f/k/a All-Tech Investment Group, Inc. ("All-Tech"), Harry Lefkowitz, Mark Shefts, Lisa Esposito ("Esposito"), Ralph Zulferino ("Zulferino"), David Waldman, Adam Leeds, and Barry Parish.
II.
Zulferino has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceeding brought by or on behalf of the Commission, or in which the Commission is a party, and without admitting or denying the findings contained herein, except for the jurisdiction of the Commission over him and over the subject matter of these proceedings, which are admitted, Zulferino consents to the entry of the findings, a cease-and-desist order, and the imposition of the remedial sanctions set forth herein.
III.
On the basis of this Order and the Offer submitted by Zulferino, the Commission finds that:1
SETTLING RESPONDENT
Zulferino, 40, is an All-Tech registered representative, and the owner and manager of All-Tech's Edison, New Jersey, branch office. He resides in Marlboro, New Jersey.
OTHER RELEVANT RESPONDENTS
1. All-Tech, during the relevant period, has been a broker-dealer registered with the Commission and incorporated under the laws of the State of Delaware. All-Tech offers day-trading services to customers through at least twenty-one franchised branches throughout the United States and through direct line electronic access similar to an internet connection.
2. Esposito, 34, is employed by All-Tech as the head of All-Tech's margin department at the firm's headquarters in Montvale, New Jersey. She resides in Garnerville, New York.
UNLAWFUL EXTENSION OF MARGIN CREDIT
1. Throughout 1998, when the equity in certain customer margin accounts fell below the minimum required by Regulation T ("Regulation T"), promulgated by the Board of Governors of the Federal Reserve ("Federal Reserve"), 12 C.F.R. §§ 220.1 - 220.12, All-Tech, directly or indirectly, extended uncollateralized loans from the accounts of associated persons to those customers, who could not otherwise cover the resulting margin calls issued by All-Tech's clearing firm, Southwest Securities, Inc. ("Southwest"). Under Regulation T, All-Tech should not have supplied those customers with additional extensions of credit.
2. Zulferino controlled an account at All-Tech's Edison, New Jersey branch, in the name of Z-Tech Investments, Inc. ("Z-Tech"). Although the Z-Tech account was not in Zulferino's name, the funds in that account came from Zulferino and Zulferino, in fact, controlled the account and had the ability to grant All-Tech and Esposito, head of All-Tech's margin department, unfettered discretion over that account. Zulferino gave the All-Tech margin department discretion and control over most aspects of the margin call loans made out of the Z-Tech account, such as when, to whom and on what terms All-Tech could use the account to fund those margin calls to customers. Zulferino provided All-Tech with a pre-signed blank journal form that was then photocopied by All-Tech without Zulferino's knowledge or authorization and used each time a loan was made out of the Z-Tech account. Zulferino did not individually authorize particular loans, learn the identities of borrowers, approve the creditworthiness of particular borrowers, or pass on the amounts of any particular loans. From August, through December, 1998, while Zulferino was a branch manager of All-Tech, Esposito loaned $1,941,155 from the Z-Tech account to All-Tech customers to satisfy forty-nine margin calls issued under Regulation T. Customers paid a total of $2,535 in fees for this financial assistance provided by All-Tech, Esposito and Zulferino. The fees were transferred directly into the Z-Tech account.
3. These uncollateralized loans from the Z-Tech account violated Regulation T.
4. Zulferino knew that All-Tech's policies, among other things, prohibited the transfer of funds from the accounts of registered employees to the accounts of customers; the effect of the account being kept under the name of Z-Tech was to conceal Zulferino's role in the account and the loans.
5. By reason of the foregoing, All-Tech willfully violated Section 7(c) of the Exchange Act in that it directly or indirectly extended uncollateralized margin call loans to customers in contravention of the rules and regulations that the Federal Reserve has prescribed, namely Regulation T. By reason of the foregoing, Zulferino willfully aided and abetted, and was a cause of, All-Tech's violations of Section 7(c) of the Exchange Act and Regulation T.
IV.
On the basis of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions specified in the Offer submitted by Respondent Zulferino.
ACCORDINGLY, IT IS ORDERED that:
- Zulferino be, and hereby is, censured.
- Zulferino cease and desist, pursuant to Section 21C of the Exchange Act, from causing any violations and any future violations of Sections 7(c) of the Exchange Act and Regulation T promulgated by the Federal Reserve.
- Zulferino shall, within thirty days of the entry of this Order, pay a civil money penalty in the amount of $15,000 to the United States Treasury. Such payment shall be: (A) made by United States postal money order, certified check, bank cashier's check or bank money order; (B) made payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, Virginia 22312; and (D) submitted under cover letter that identifies Zulferino as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Zachary Brez, Northeast Regional Office, Securities and Exchange Commission, 7 World Trade Center, New York, NY 10048.
- Zulferino shall, within thirty days of the entry of this Order, pay disgorgement of fees of $2,535 plus prejudgment interest of $298.29, for a total amount of $2,833.29 to the United States Treasury. Such payment shall be: (A) made by United States postal money order, certified check, bank cashier's check or bank money order; (B) made payable to the Securities and Exchange Commission; (C) hand-delivered or mailed to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, Virginia 22312; and (D) submitted under cover letter that identifies Zulferino as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Zachary Brez, Northeast Regional Office, Securities and Exchange Commission, 7 World Trade Center, New York, NY 10048.
- Zulferino be, and hereby is, suspended from association with any broker or dealer for a period of three months, effective on the second Monday following the entry of the Order.
- Zulferino shall provide to the Commission, within thirty days after the end of the three-month suspension period described in paragraph 5 above, an affidavit that he has complied fully with the sanctions described in Section IV.
Jonathan G. Katz
Secretary
Footnote
1 The findings herein are made pursuant to the Offer submitted by Zulferino and are not binding on any other person or entity in this or any other proceeding.