A broker-dealer firm and its CEO settled SEC charges (see here and here) for enabling Ukraine-based customers to conduct a manipulative trading scheme over a three-year period.
According to the SEC, the broker-dealer's customer illegally profited from (i) placing and canceling orders to manipulate the buying and selling of stocks at artificial prices (a.k.a. "layering") and (ii) buying and selling stocks to artificially affect options prices (a.k.a. "cross-market manipulation").
The SEC claimed that the broker-dealer firm participated and substantially assisted in its customer's trading scheme. The broker-dealer firm allegedly aided its customer by (i) providing access to U.S. markets, (ii) lessening its layering controls, and (iii) improving the firm's technology in a way that supported its customer's manipulative trading activity.
To settle the charges, the broker-dealer firm agreed to the final judgment entered by the court, which included (i) a three-year injunction during which time the firm must terminate any business with foreign customers that might be engaging in market manipulation or manipulative trading, (ii) a requirement that the firm use an independent compliance monitor for a three-year period, (iii) a permanent injunction against further violating certain SEC rules and statutes, and (iv) a penalty of $1 million, in addition to $525,892 in disgorgement and prejudgment interest. The firm also agreed to a censure.
To settle the charges, the CEO agreed to the final judgment entered by the court, which included (i) a permanent injunction from further violating certain SEC rules and statutes, (ii) a civil penalty of $420,000, and (iii) a ten-year associational and penny stock bar, after which time he may reapply.
In settling the charges, the firm and the CEO admitted that the customer's trading activity constituted violations of the federal securities laws. The SEC's litigation against the customer and associated individuals is ongoing.
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