Legacy chief exec Mark Uselton appeals penalties

Representatives of Legacy Trading Co. LLC could not be reached for comment.

The penalties against Legacy Trading and owner and CEO Mark Uselton were because of "a wide range of misconduct,” a hearing panel found. The panel said Legacy and Uselton made nearly $900,000 in profits from illegal short sales involving thousands of transactions in 2004 and 2005.

The hearing panel’s sanctions have been stayed pending a ruling from the authority’s National Adjudicatory Council, which will hear the appeal by Legacy and Uselton.

The panel found Uselton and his company committed "egregious” violations of short-selling rules.

Legacy and Uselton violated trading regulations by failing to ensure that shares were available to borrow before making trades, the agency said. The panel, which found that Legacy made 2,192 improper short sales, described the violations as "an egregious case involving willful misconduct.”

The hearing panel also found that Legacy and Uselton provided false information to FINRA about several issues, including the source of a $300,000 capital contribution to the firm. In addition, Legacy and Uselton falsely represented that the company did not use e-mail for business purposes and falsely claimed that a bank account in the name of Legacy’s holding company was not related to Legacy’s business, when it was used to pay virtually all of Legacy’s financial obligations, the authority said.

The hearing panel found that Uselton initially refused to provide testimony, and later provided false testimony on his and Legacy’s relationship with a firm that Uselton’s father and cousin owned and operated.

The panel found that Uselton falsely claimed that neither he nor Legacy had any business relationship with that entity.

Uselton’s father and cousin earlier this year agreed to pay nearly $4 million in fines and penalties in connection with a pump-and-dump penny stock scheme.

The men obtained shares of penny stock companies, then orchestrated spam e-mail campaigns touting the stock, according to the U.S. Securities and Exchange Commission. When the stock price rose, the men would dump their shares, the SEC said.

The hearing panel expelled Legacy from the securities industry, permanently barred Uselton from working for a securities firm and issued fines of more than $1 million.

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