Monday, August 11, 2014

SEC Charges Former CEO of ConvergEx Subsidiary in Scheme to Deceive Customers About Trading Fees

The former chief executive officer of a broker-dealer subsidiary of ConvergEx Group LLC has been charged with deceiving brokerage customers with hidden fees to buy and sell securities. 
The SEC’s complaint alleges that the former CEO engaged in a scheme that entailed concealing the practice of routing orders to an offshore affiliate in Bermuda to add mark-ups or mark-downs.  The hidden fees known as “trading profits” or “TP” were in addition to and often much higher than the commissions paid by customers to have their orders executed. 
The charges against the former CEO follow those announced in December by the SEC against three ConvergEx subsidiaries that agreed to pay more than $107 million and admit wrongdoing to settle the matter.  Two former employees also settled charges with the SEC. 

According to the SEC’s complaint filed against the former CEO in federal court in Newark, N.J., one university customer paid about $93,000 in disclosed commissions and about $543,000 in undisclosed TP.  In another case, $1.6 million in fees allegedly went undetected.  The SEC alleges that this individual engaged in deceptive practices to conceal the additional fees, and he encouraged traders under his management to do the same.
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