Wednesday, August 20, 2014

SEC Charges N.Y.-Based Brokerage Firm With Overcharging Customers in $18 Million Scheme

The SEC is charging New York-based brokerage firm Linkbrokers Derivatives LLC with unlawfully taking secret profits of more than $18 million from customers by adding hidden markups and markdowns to their trades.
According to the SEC’s order instituting administrative proceedings, certain representatives on Linkbrokers’ cash equity desk defrauded customers by purporting to charge them very low commission fees, but in reality extracting fees that in some cases were more than 1,000 percent greater than represented.  These brokers hid the true size of the fees they were collecting by misrepresenting the price at which they had bought or sold securities on behalf of their customers.  The scheme was difficult for customers to detect because the brokers charged the markups and markdowns during times of market volatility in order to conceal the false prices they were reporting to customers.

Linkbrokers has agreed to pay $14 million to settle the SEC’s charges. The SEC previously charged four former brokers on the cash equities desk at Linkbrokers, and three of them later agreed to settle those charges by consenting to judgments ordering more than $4 million in disgorgement plus interest.
Read more here.
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