## Facts

- In 1992, the SEC barred Carol C. Martino from associating with any broker or dealer.
- From about 1992–1995, Martino operated through CMA Noel Ltd. (a closely held entity) to place securities with overseas investors in Regulation S transactions for multiple U.S. issuers.
- Martino performed core broker functions: identifying and soliciting investors, providing offering information, acting as an intermediary in negotiations, and encouraging purchases, for transaction-based compensation.
- Neither Martino nor CMA was registered with the SEC as a broker-dealer during the relevant period.
- The court found Martino obtained at least $4.416 million in commissions and fees (cash and stock) from the unregistered brokerage activity.
- In 1993, Martino participated in a scheme to manipulate the market for RMS Titanic, Inc. stock by coordinating sales with other shareholders, assuring a market maker she would locate purchasers, and paying brokers to influence customer demand.
- Martino used proceeds from the violations to purchase a luxury yacht, “Je T’aime,” valued at about $2 million, titled to JTM Limited, an offshore entity wholly owned and controlled by her husband, Gerard Haryman.
- The SEC sued Martino and CMA for securities-law violations and named Haryman and JTM as relief defendants alleged to hold traceable proceeds without a legitimate ownership claim.
- On the SEC’s motion for summary judgment, defendants cross-moved and sought an advisory jury under Rule 39(c).

## Issues

1. Whether Martino willfully violated the SEC bar order by engaging in brokerage activity through CMA.
2. Whether Martino and CMA acted as unregistered brokers in violation of Exchange Act § 15(a).
3. Whether Martino engaged in a manipulative scheme involving RMS Titanic, Inc. stock in violation of federal antifraud provisions.
4. Whether equitable relief, including disgorgement, prejudgment interest, injunctive relief, and turnover of the yacht from relief defendants, was warranted.

## Decision

- The court granted the SEC’s motion for summary judgment and denied defendants’ cross-motion and request for an advisory jury.
- The court found Martino willfully violated the bar order by conducting broker activity through CMA.
- The court held Martino and CMA acted as brokers without registration by effecting securities transactions for others and receiving transaction-based compensation.
- The court found Martino participated in a stock-manipulation scheme for RMS Titanic, Inc. by coordinated trading, market-maker assurances, and paid inducements to other brokers.
- The court ordered disgorgement of $4.416 million plus prejudgment interest of $3,386,842.92, and entered injunctive relief against future violations.
- The court ordered Haryman and JTM to turn over the yacht to a court-appointed receiver as property purchased with traceable proceeds of the violations.

## Legal Principles

- A person is a “broker” under the Exchange Act when engaged in the business of effecting securities transactions for others and receiving transaction-based compensation; solicitation and intermediary functions strongly indicate broker status.
- Operating through a closely held entity does not avoid broker-registration requirements when the entity and individual perform broker functions for commissions.
- Coordinated trading activity designed to control supply or demand, assurances to market intermediaries, and payments to influence purchases can constitute manipulative conduct under federal securities antifraud provisions.
- Disgorgement is an equitable, remedial measure intended to deprive wrongdoers of ill-gotten gains; prejudgment interest may be imposed to prevent benefit from the time value of illicit proceeds.
- Relief defendants may be ordered to surrender property where the SEC shows the asset is traceable to securities-law violations and the holder lacks a legitimate claim to it.

## Conclusion

The court imposed summary-judgment liability for willful violation of an SEC bar order, unregistered broker activity, and stock manipulation, and it granted broad equitable relief—disgorgement with prejudgment interest, injunctive remedies, and turnover of a yacht held by relief defendants as traceable proceeds of the misconduct.


Securities & Exchange Commission v. Martino, 255 F. Supp. 2d 268 (S.D.N.Y. 2003)