SEC Charges Broker-Dealer for Failing to Protect Customers' Trading Information

Before the United States District Court for the Southern District of New York, the SEC charged a broker-dealer for failing to protect its customers' trading information.

In the Complaint, the SEC alleged that a broker-dealer communicated to customers and to the public a false claim that it implemented "information barriers" and "systemic separation between business groups" to protect customers' information. The SEC contended that nearly all of the broker-dealers' employees, including its proprietary traders as well as affiliated broker-dealers, had access to customer "material non-public information" ("MNPI") that included customer names and transaction details. Among other allegations, the SEC argued that the information could have been used by the broker-dealer's employees to front run the trades of the broker-dealer's customers.

In the Complaint, the SEC charged that the broker-dealer violated Securities Act Section 17 ("Fraudulent Interstate Transactions") and Exchange Act Section 15(g) ("Registration and regulation of brokers and dealers").

For relief, the SEC is seeking from the broker-dealer (i) permanent enjoinment of future violations, (ii) disgorgement of ill-gotten gains plus prejudgment interest and (iii) civil penalties.

Premium Content

Available only to Premium subscribers.