A Securities and Exchange Commission action against Jamie Solow, a former stockbroker who is accused of allegedly taking part in a fraudulent trading scheme involving unsuitable and risky securities, including collateralized mortgage obligations, will not be dismissed, says the U.S. District Court for the Southern District of Florida.
According to the court, the SEC’s antifraud charges satisfied a “level of specificity” for this type of pleading’s particularity requirements. The complaint also gives Solow proper notice of the claims (and their basis) that he aided and abetted Archer Alexander Securities Corp. in their violation of securities laws.
The court has also said that Archer allegedly committed records and books violations and did not comply with FOCUS reporting requirements. The court says that since Solow knew that his conduct was improper, and because he was a registered Archer representative, the firm was obligated to maintain proper records.
The SEC says that in 2003, the defendant took part in fraudulent trading that involved inverse floating rate collateralized mortgage organizations, which are considered risky and volatile and only appropriate for sophisticated investors. Solow was affiliated with Archer Alexander Securities Corp., and the SEC says that he “intentionally disregarded” the firm’s policies on falsified ticket trades and the trading of inverse floaters and made it look like his transactions were in compliance with Archer’s procedures.
Solow is also accused of selling inverse floaters to retail customers who were “risk-averse” and misleading them by saying the risky derivatives were “a suitable investment.” As a result of Solow’s misconduct, Archer ended up running afoul of net capital, books, records, and FOCUS report filing requirements.
Solow had tried to get the charges dismissed in court, saying that the SEC, in its complaint, did not make its allegations adequately nor did it specify how he (Solow) had falsified trade tickets. He also said that Archer and its CEO must have known what he was doing since his transactions made up a huge portion of the firm’s revenue. The court, however, rejoined by saying that Solow’s disputes could help his defense, but that they were not appropriate for this stage of the court proceedings.
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Related Web Resources:
Securities and Exchange Commission v. Jamie L. Solow, Civil Action No. 06-81041-CIV-Middlebrooks/Johnson (S.D. Fla., November 8, 2006, SEC.gov, November 9, 2006
SEC Nabs Mortgaged-Backed Securities Broker for Fraudulent Sales, CCH Wallstreet, November 16, 2006
Read the Complaint (pdf)