A Securities and Exchange Commission judge ruled that a former Maryland banker perpetrated a short-selling fraud aided by one of the biggest stock-options brokers in the U.S., the Wall Street Journal reported today. Jonathan Feldman, who was accused by the SEC of trading billions of dollars of stock and options in ways that misled other investors, was found by the judge to have engaged in a practice regulators say has grown more prevalent in recent years: "naked short selling." The decision makes it more likely the SEC will proceed with other enforcement cases involving similar activity. An SEC administrative law judge—an independent judicial officer who rules on SEC allegations of securities-law violations—late Friday ordered Feldman to disgorge $2.7 million in profits from his alleged trading scheme and to pay a $2 million civil fine. The judge also ordered optionsXpress Inc., a brokerage firm owned by Charles Schwab Corp., to disgorge $1.6 million and to pay a $2 million civil fine for allegedly violating laws prohibiting naked short selling.
