LI trader among five charged with short-sale violations

Aa Wall Street street sign near the New Aa Wall Street street sign near the New York Stock Exchange, in New York on Aug. 9, 2011. Photo Credit: AP

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The Securities and Exchange Commission has charged five traders, including one from Long Island, with short-sale trading violations.

The five have settled the charges of violating SEC Rule 105, which prohibits the short sale of a stock leading up to its public offering.

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Carmela Brocco, 40, of East Meadow, and the four other traders charged Wednesday worked with Melville-based proprietary trading firm Worldwide Capital Inc. to execute the trades on up to nine public offerings, and reaped profits between $16,000 and $200,000 from the short sales, the SEC said. They would buy offerings of the stock from a secondary source at a discount and then sell for the market price that day, pocketing the difference, according to an SEC news release.

The five traders will give up the returns the SEC says they made from the short sales, including interest, as well as pay a fine of 60 percent of the profits -- a total of up to $750,000. The traders didn't admit to any wrongdoing as part of the settlement.

Brocco said Wednesday night that she didn't want to comment for publication.

In March, Worldwide Capital and its owner Jeffrey Lynn agreed to pay $7.2 million to settle civil charges from the SEC for violating Rule 105.

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