Securities and Exchange Commission Accepts Offers of Settlement in All-Tech Case
FOR IMMEDIATE RELEASE
Washington, D.C., June 13, 2001 The Securities and Exchange Commission announced today that it has accepted offers of settlement from All-Tech Direct, Inc. (All-Tech), a day trading firm, and certain of its employees to resolve an administrative proceeding alleging violations of the federal securities laws governing margin lending. The settlements include a $225,000 civil penalty against All-Tech and a requirement that the firm retain an independent consultant to examine and recommend improvements to its margin lending practices. The settlements against the individuals include, among other relief, suspensions and civil money penalties.
The administrative proceeding, instituted on February 14, 2000, alleged that All-Tech improperly used funds from accounts of persons associated with the firm to make loans to its customers to enable the customers to meet margin calls, and that a number of All-Tech employees aided and abetted, and caused, All-Tech's improper conduct. In its settlement, All-Tech consented to the entry of an order, without admitting or denying the findings contained in the order, in which the Commission found that All-Tech made approximately 100 improper margin loans totaling approximately $3.6 million over an eight month period in violation of federal margin lending rules. The Commission censured All-Tech and ordered the firm to cease and desist from committing or causing any violations of the federal margin lending rules, to pay a $225,000 civil penalty, and to retain an independent consultant to review and recommend improvements to its margin lending practices.
The administrative order imposed sanctions and made the following findings regarding the individual respondents, which they neither admitted nor denied.
Mark Shefts, All-Tech's President
The Commission found that Shefts failed reasonably to supervise the All-Tech personnel who approved and arranged the loans because he failed to take reasonable measures to detect and prevent the violations, even though he knew about certain of the loans and had reason to know that they were improper. The Commission censured Shefts, ordered him to pay a $25,000 civil penalty, and suspended him from associating with any broker or dealer in a supervisory capacity for three months.
Harry Lefkowitz, All-Tech's Chief Operating Officer
The Commission found that Lefkowitz aided and abetted and caused All-Tech's violations because he approved almost all of the improper margin loans. The Commission censured Lefkowitz, ordered him to cease and desist from further violations of the federal margin lending rules, suspended him from association with a broker or dealer for three months and from associating with a broker or dealer in a supervisory capacity for an additional three months, and ordered him to pay a $20,000 civil penalty.
Lisa Esposito, a supervisor in All-Tech's margin department
The Commission found that Esposito arranged the improper margin loans and, therefore, aided and abetted and caused All-Tech's violations. The Commission censured Esposito, ordered her to cease and desist from further violations of the federal margin lending rules, suspended her from association with a broker or dealer for three months, and ordered her to pay a $10,000 civil penalty.
David Waldman, an associated person at All-Tech
The Commission found that Waldman allowed All-Tech to use his account to make improper margin loans, and therefore aided and abetted, and caused, All-Tech's violations. The Commission censured Waldman, ordered him to cease and desist from further violations of the federal margin lending rules, suspended him from association with a broker or dealer for three months, ordered him to disgorge $1700 of fees he received for making the loans, plus prejudgment interest, and ordered him to pay a $5,000 civil penalty.
Wayne M. Carlin, Regional Director of the Commission's Northeast Regional Office, said, "Today's settlements trumpet a strong message to broker-dealers, including those catering to day traders, that the Commission expects full compliance with the margin lending laws and regulations. These rules are designed to protect investors and broker-dealers from the dangers associated with excessive borrowing to trade securities. We will take appropriate enforcement action when firms employ improper transactions to evade margin lending requirements."
The Commission previously settled with the three other individual respondents, Ralph Zulferino, Barry Parrish and Adam Leeds, and the settlements announced today completely resolve the case.
The Commission acknowledges the assistance of NASD Regulation, Inc. and its staff in this matter.
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