SEC Charges Broker-Dealer With Violating Short Salles In OTC Equity Securities


Last Friday, The Securities and Exchange Commission announced settled cease-and-desist proceedings against the CEO of a Wilson-Davis & Co and two registered persons associated with the firm for causing the firm’s violations of SEC market structure rules, and contested administrative and cease-and-desist proceeding against the firm for the alleged violations.

The proceedings involve a former proprietary trader at Wilson-Davis & Co., a Utah-based broker-dealer, the firm’s vice president/head trader, and the firm’s CEO and chairman. 

From at least November 2011 to May 2013, Wilson-Davis relied on the bona-fide market making exception for all short sales by its proprietary trading group. This reliance was improper for certain Wilson-Davis trades because much of Wilson-Davis’s proprietary trading activity was not, in fact, bona-fide market making.

According to the SEC press release, “While improperly availing itself of the exception, Wilson-Davis engaged in numerous short sales in over-the counter equity securities, which violated Rule 203(b)(1) of Regulation SHO and resulted in improper trading profits.”

In addition, Wilson-Davis’s CEO violated the certification requirement of the Market Access Rule because the certification was inadequate and he signed without being familiar with the rule. This is the first time that the SEC has charged the CEO of a broker-dealer with violating the CEO certification requirement of the Market Access Rule. 

“We allege that Wilson-Davis violated SEC rules that help ensure fair markets, including the rules for short sales and for market access,” said Andrew J. Ceresney, Director of the SEC’s Enforcement Division.  “Public confidence in our markets depends on careful compliance with these market structure rules.”

Read the full press release HERE



Securities and Exchange Commission


OTC Stocks

short selling


microcap broker/dealers


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