Large BD Will Pay Over $20 Million for Best Execution Violations
A large broker-dealer has agreed to pay over $20 Million in disgorgement and fines for best execution violations. According to the SEC, the Respondent failed to properly supervise its institutional trading desk, which mis-used glitches in a regional stock exchange’s NBBO system to conduct cross trades that benefited certain hedge fund clients and disadvantaged employee stock purchase plan clients. The SEC noted that the firm had best execution WSPs but did not have a mechanism to follow-up on red flags, which included exception reports showing significant “outside the quote” activity. The SEC also claimed that the firm did not ensure that the order desk manager completed his daily best execution review.
OUR TAKE: The SEC does not often bring actions alleging best execution violations because they are difficult to prove. The key factor in this case was that the broker-dealer cross-trades benefited certain firm clients over others.
http://sec.gov/litigation/admin/2011/34-63724.pdf
OUR TAKE: The SEC does not often bring actions alleging best execution violations because they are difficult to prove. The key factor in this case was that the broker-dealer cross-trades benefited certain firm clients over others.
http://sec.gov/litigation/admin/2011/34-63724.pdf
Posted by Todd Cipperman at 1/18/2011 7:06 AM 
Categories: Compliance and Operations
Tags: best execution conflict of interest
Categories: Compliance and Operations
Tags: best execution conflict of interest
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