Three brokerage subsidiaries (G-Trade Services LLC, ConvergEx Global Markets Limited, and ConvergEx Execution Solutions LLC) and two former employees of leading trading services provider Convergex were charged with fraud in two parallel cases by the SEC yesterday. The cases involved fraud wherein a number of institutional clients were charged much more than they were supposed to be for the execution of trading orders.
All parties, including former Convergex employees Jonathan Daspin and Thomas Lekargeren, agreed to admit wrongdoing and settle the charges.
Convergex: The settlements
The parties in the first case, including three Convergex subsidiaries and the two above-mentioned former employees, agreed to pay a total of $107 million in penalties and restitution to settle all of the SEC’s charges against them.
In the second case, the ConvergEx Group, a brokerage subsidiary and the two former employees agreed to pay $43.8 million in criminal penalties and restitution.
Daspin paid a total settlement of $1,111,550 in disgorgement and prejudgment interest, while Lekargeren paid total of $117,042 on the same basis. The extensive cooperation of the defendants was considered in determining the terms of settlement.
“Customers have a right to expect honesty from their brokers and accurate information in response to their inquiries,” said Andrew Ceresney, co-director of the SEC’s Division of Enforcement, in a statement. “These ConvergEx brokers misled their customers and failed to provide complete information about the costs they were charging.”
Charges announced in December 2011
The investigation into the fraudulent charges began back in December of 2011 when the misconduct was first discovered in an internal audit. The Bermuda trading desk where the fraud occurred was also shut down at the time. A settlement had been expected for some months.
The SEC is charged with attempting to return any monies collected in these settlements to harmed customers on the basis of a Fair Fund distribution.