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Aug. 19 — The Securities and Exchange Commission threw out short-selling fraud allegations against a respondent who had previously been found liable by an agency in-house judge.
There wasn't enough evidence showing that Marylander Jonathan Feldman committed fraud, the three-member commission held, while still upholding related liability against broker-dealer optionsXpress Inc.
The ruling is a rare instance of the agency overturning an administrative law judge's decision.
Feldman was accused by SEC enforcers of naked short-selling involving millions of dollars of stock, aided by optionsXpress.
In 2013, SEC Chief Administrative Law Judge Brenda P. Murray agreed and ordered Feldman and the broker to pay millions in civil fines and disgorgement (113 SLD, 6/12/13).
On appeal, the commissioners upheld the ALJ's findings against optionsXpress but dismissed the allegations against Feldman. They said the Enforcement Division didn't show that Feldman was obligated to deliver the shares he was trying to sell short or that he didn't intend to deliver them.
The commission also found that Feldman didn't intend to manipulate the market in stocks he traded.
The allegations were brought under Regulation SHO, designed to curb manipulative short-selling practices, and antifraud statutes.
Feldman was represented by Conti Fenn & Lawrence LLC in Baltimore.
To contact the reporter on this story: Rob Tricchinelli in Washington at email@example.com
To contact the editor responsible for this story: Phyllis Diamond at firstname.lastname@example.org
For the opinion, visit https://www.sec.gov/litigation/opinions/2016/33-10125.pdf
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