Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, March 9, 2010

SEC Charges Former Stock Loan Trader in Cash Kickback Scheme

The SEC filed charges 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 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.

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.

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