In the Matter of BNY Mellon Securities LLC

SEC Release (Enforcement)

The SEC announced settled administrative actions against BNY Mellon and its institutional order desk manager, relating to the firm's failure to meet its duty of best execution to certain customers when it executed orders at "stale or inferior prices" in favor of orders entered by certain hedge fund customers. The release alleges a scheme in which the institutional order manager would use the "validated cross window" at a "Regional Exchange" to execute "not-held" orders of certain customers in a way that deprived them of best execution and benefited the hedge fund customers.

The release further cites the broker-dealer for its failure to supervise its institutional order desk manager. In particular, the SEC notes that the BD (1) failed to have reasonable procedures for following up on red flags raised in best execution exception reports and (2) did not have procedures in place to determine whether desk managers were actually conducting a daily best execution review of transactions on regional exchanges.

The broker-dealer was charged with violating § 17(a) of the Securities Act and § 15(b)(4)(E) of the Exchange Act. The firm's institutional order desk manager was additionally found in violation of § 10(b) of the Exchange Act and Rule 10b-5 thereunder, and was barred from future association with a broker or dealer.

Please contact any of the following Cadwalader attorneys if you have any questions about this item:

Steven Lofchie; [email protected]

Jeffrey Robins; [email protected]

Maurine Bartlett; [email protected]

Glen Barrentine; [email protected]

Document Number

SEC Release 34-63724

Date

January 14, 2011

Cross References (links may require a Cabinet subscription)

SEC Release 33-9174 / 34-63725 (action against order desk manager)

Securities Act § 17(a)

Exchange Act §§ 10(b), 15(b)

Exchange Act Rule 10b-5

Reg. NMS Rule 611