OptionsXpress accused of skirting naked-short-sale rules

Firm, executives conducted series of sham transactions: SEC

Apr 16, 2012 @ 3:58 pm

The U.S. Securities and Exchange Commission accused an online brokerage firm and four of its executives of engaging in naked short-selling in violation of securities laws.

OptionsXpress Holdings Inc. conducted a series of sham “reset” transactions designed to give the illusion that the firm had purchased securities to comply with obligations associated with short sales, the SEC said in a statement today. The agency also accused an OptionsXpress customer of taking part in the alleged scheme, which it said violated Regulation SHO requirements.

The firm and the customer “used sham reset transactions to avoid, sometimes for months, compliance with Reg. SHO's stock delivery requirements,” SEC Enforcement Director Robert Khuzami said in the agency's statement. “In effect, they ‘kited' shares of stock, thus depriving buyers of the benefit of their bargain -- prompt delivery of their shares.”

According to the SEC, the misconduct occurred from at least October 2008 to March 2010. In September, Chicago-based OptionsXpress became a wholly owned subsidiary of The Charles Schwab Corp.

--Bloomberg News--


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