SECURITIES AND EXCHANGE COMMISSION
Securities Exchange Act of 1934
Release No. 47228 / January 22, 2003
File No. 3-11013
IN THE MATTER OF ANDOVER BROKERAGE, LLC, MICHAEL PICOZZI, III, ELIAS SCHECHTER, AND DAVID DAILY
The Securities and Exchange Commission today issued an Order Instituting Public Administrative and Cease-and-Desist Proceedings ("Order") pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Andover Brokerage, LLC ("Andover"), its president, Michael Picozzi, III ("Picozzi"), and two of its traders, Elias Schechter ("Schechter") and David Daily ("Daily") (collectively, the "Respondents").
In the Order, the Division of Enforcement ("Division") alleges that between May and October 1998, Andover, Schechter and Daily willfully violated Rule 10a-1(a) of the Exchange Act ("Short Sale Rule") when Schechter and Daily executed for Andover's proprietary account 202 short sale transactions in New York Stock Exchange listed securities on minus-ticks. The Short Sale Rule prohibits the short sale of a listed security on a minus-tick. In each of these 202 transactions, Andover, Schechter and Daily did not identify these trades as short sales, but rather incorrectly marked them as "long" sales. The Division also alleges that Picozzi failed reasonably to supervise Schechter and Daily within the meaning of Section 15(b)(4) of the Exchange Act. Picozzi instituted an inadequate supervisory system by, among other things, failing to implement procedures reasonably designed to prevent traders from mismarking sell transactions or executing short sale orders on a minus-tick.
The Division alleges that Andover willfully violated Sections 10(a) and 17(a) of the Exchange Act and Rules 10a-1(a), 10a-1(c), 10a-1(d) and 17a-3(a)(6) thereunder, and that Schechter and Daily willfully violated Section 10(a) and Rule 10a-1(a) thereunder and caused Andover's violations of Sections 10(a) and 17(a) of the Exchange Act and Rules 10a-1(c), 10a-1(d), and 17a-3(a)(6) thereunder. The Division seeks remedial sanctions, cease-and-desist orders, disgorgement plus prejudgment interest thereon, and civil penalties.
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to afford the Respondents an opportunity to dispute these allegations, and to determine what sanctions, if any, are appropriate and in the public interest.