The U.S. Securities and Exchange Commission (SEC) has barred two brokers at a now-defunct Connecticut brokerage firm. The reasoning behind this was that the brokers were giving customer order information to certain favored customers, helping those customers get better prices while generating extra commissions for their firm. The SEC also ordered the brokers to pay financial penalties.
The SEC’s Enforcement Division alleges that the former co-head of equities trading at Rochdale Securities, Hal Tunick, and his subordinate, Patrick Burke, defrauded customers by using their order information to advise two longtime customers to trade ahead of these orders.
The way this scheme purportedly worked was that once those favored customers purchased or sold short the shares, Tunick and Burke arranged for them to unload their positions to the customers who had placed the original orders. The favored customers profited from these trades while the defrauded customers generally received worse prices than they would have if their orders had been routed directly to the market.
As a result of this scheme, which Tunick and Burke perpetrated from at least 2010 to 2012, Rochdale essentially earned double trading commissions.
To settle the charges, Tunick agreed to pay a civil penalty of $125,000 and to be barred from the securities industry. Burke agreed to pay a civil penalty of $50,000, disgorgement of commissions plus prejudgment interest, and to be barred from the securities industry with a right to reapply after five years. Both Tunick and Burke consented to the SEC’s orders without admitting or denying the findings.
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Joseph G. Sansone, co-chief of the Enforcement Division’s Market Abuse Unit, said:
These brokers repeatedly shirked their obligation to seek best execution for their customers so they could get extra commissions for their firm and better prices for favored customers. They are now paying the price for putting the interests of favored customers and themselves ahead of the interests of their other customers.
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