U.S. Securities and Exchange Commission
Litigation Release No. 21442 / March 9, 2010
SEC v. Salvatore Zangari, Civil Action No. 10-1058 (EDNY)
SEC Charges Former Stock Loan Trader In Cash Kickback Scheme
On March 9, 2010, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court for the Eastern District of New York against a former securities lending, or "stock loan," trader for participating in a long-running cash kickback scheme involving stock loan transactions at several major Wall Street brokerage firms. The Commission's complaint alleges that from March 2004 through December 2005, Salvatore Zangari ("Zangari"), a former stock loan trader at Morgan Stanley & Co., Inc. ("Morgan Stanley") and Banc of America Securities, LLC ("Banc of America"), received well-over $100,000 in cash kickbacks from a Brooklyn, New York stock loan finder in exchange for sending stock loan orders to brokerage firms that paid the finder for purportedly locating the stocks.
The defendant named in the Commission's complaint is:
Zangari, age 33, of New York, New York. For eleven years, from 1998 to 2009, he was employed as a stock loan trader at several major Wall Street brokerage firms where he was responsible for negotiating, arranging and entering into stock loan transactions on behalf of the firms. Most recently, from October 2006 to July 2009, Zangari worked as a stock loan trader at UBS Securities, LLC. Prior to UBS, he worked at Banc of America from May 2005 to October 2006, and before that, at Morgan Stanley from August 1998 to May 2005. During the course of his employment in the securities industry, Zangari held Series 7 and 63 professional licenses.
The Commission's complaint specifically alleges as follows:
For nearly two years, from March 2004 through December 2005, Zangari participated in a cash kickback scheme while arranging daily stock loan transactions for Morgan Stanley and Banc of America. Zangari received well over $100,000 in cash from a stock loan finder located in Brooklyn, New York in exchange for sending Morgan Stanley and Banc of America stock loan orders to other brokerage firms that paid the finder a fee for purportedly locating the securities being borrowed and loaned. The finder shared part of the fees he received on the transactions with Zangari by paying him thousands of dollars in cash each month. Zangari used a portion of the kickback money as a down-payment to purchase an apartment in New York City. Zangari's misconduct defrauded and otherwise harmed Morgan Stanley and Banc of America because he purposely arranged stock loan transactions on their behalf at borrowing and lending rates that were designed to generate finder fee payments rather than to maximize the firms' profits.
Zangari is charged with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and, in the alternative, with aiding and abetting others' violations of certain of these provisions. The Commission's complaint seeks permanent injunctive relief, disgorgement with prejudgment interest, and civil penalties against Zangari. The Commission's investigation is ongoing.
For additional information see: Litigation Release No. 20291 (September 20, 2007)
See Also: SEC Complaint