UNITED STATES OF AMERICA before the SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Admin. Proc. File No. 3-9671
ORDER DENYING MOTION FOR RECONSIDERATION
On September 7, 2000, we issued an opinion sustaining disciplinary action taken by the National Association of Securities Dealers, Inc. ("NASD") against Michael J. Markowski, who was chairman, chief executive officer, and majority shareholder of Global America, Inc., a former NASD member firm, and Joseph F. Riccio, who was Global's trader.1 Markowski and Riccio now request reconsideration of our decision.
We found that Markowski and Riccio violated antifraud provisions of the Securities Exchange Act of 1934 and NASD Conduct Rules by manipulating the market for securities of Mountaintop Corporation, and that they also violated those rules by publishing non-bona fide bid quotations for the securities. We further determined that Markowski committed additional rule violations by failing to comply with a restriction agreement between Global and the NASD, and by refusing to submit timely to an investigative interview requested by the NASD's staff. We accordingly sustained the sanctions assessed by the NASD: censures, bars of Markowski and Riccio from association with any NASD member, and the imposition of a $300,000 fine on Markowski and a $250,000 fine on Riccio.
Global was underwriter of an initial public offering ("IPO") of Mountaintop securities, and was the primary market maker in theaftermarket. Applicants argue that our decision would require underwriters of successful IPO's to abandon the marketplace following the offerings. They also argue that our finding that they acted with scienter in manipulating the market for Mountaintop securities and entering improper bids was based on nothing more than the retrospective conclusion that the marketplace had overvalued those securities. These contentions are wholly lacking in substance. Our decision was neither meant to discourage appropriate market making activity nor based on the analysis that Applicants suggest. On the contrary, we concluded that Applicants had deliberately maintained unwarranted price levels for Mountaintop by entering high bids that did not reflect genuine demand and by absorbing all unwanted Mountaintop securities into inventory.
Contrary to Applicants' further assertions, the record fully supports the conclusion that they were reluctant to sell Mountaintop securities to other broker-dealers. In addition, we fully considered Applicants' objections to the NASD's Chronological Transaction Analysis, and determined not to credit numerical data in that Analysis that conflicted with data in Global's records. Moreover, our conclusions with respect to Applicants' manipulation were to a large extent based on the testimony of Global officials and Applicants' own admissions.
Markowski argues that an admission we ascribed to him was actually a statement by another witness.2 We cannot accept this contention. The pertinent transcript of testimony before the NASD's Market Surveillance Committee attributes the statement in question to Markowski, and it does not appear that he ever made any effort to correct that transcript. Moreover, there is other testimony in the record to the same effect.
Markowski further contends that he had no "evil intent" to violate the restriction agreement, and he claims that the NASD agreed to extend the time for his investigative testimony. No proof of scienter was required to establish Markowski's violation of the restriction agreement, 3 and, despite receiving anextension of time, Markowski refused to testify in the NASD's investigation on the rescheduled date.
We have considered the additional arguments raised by Applicants, and find them equally lacking in merit. Accordingly, IT IS ORDERED that the motion for reconsideration filed by Michael J. Markowski and Joseph F. Riccio be, and it hereby is, denied.By the Commission.
Jonathan G. Katz
1 Michael J. Markowski, Securities Exchange Act Release No. 43259, __ SEC Docket ____.
2 Markowski has filed an affidavit in support of this claim. However, no showing has been made, as required by Rule 452 of our Rules of Practice, that there were reasonable grounds for failing to adduce this evidence previously. Accordingly, we decline to consider the affidavit, and it is excluded from the evidentiary record.
3 NASD Conduct Rule 2110 merely requires the observance of high standards of commercial honor and just and equitable principles of trade.