GFI Securities to pay $4.3m over inappropriate handling of customer identities

Maria Nikolova

From January 2014 to June 2016, certain representatives on GFI’s equity derivatives desk regularly disclosed customer identities to potential counterparties.

GFI Securities, a broker-dealer owned by BGC Partners L.P., has agreed to pay $4.3 million as a part of a settlement with the United States Securities and Exchange Commission (SEC). The proceedings concern misstatements that GFI made to its customers concerning how its registered representatives handled customer identities in brokering securities transactions.

General industry practice for interdealer brokers like GFI in the equity derivatives marketplace includes preserving the anonymity of a customer’s identity prior to execution of a trade.

GFI publicly represented that it generally maintained the anonymity and confidentiality of customer identities. Further, GFI had written internal policies that generally required its registered representatives to maintain the confidentiality of customer information, including customer identities, but did not adequately inform and train its employees concerning these policies.

From January 2014 to June 2016, at least three of the registered representatives on GFI’s equity derivatives desk regularly provided customer identities to potential counterparties, and other registered representatives on the desk did so on an occasional basis. The registered representatives who engaged in this practice regularly gave customer identifying information to certain customers who were among their own top revenue-generating customers. One such customer received counterparty identities on a near daily basis.

The SEC says that GFI failed to take reasonable steps to inform the registered representatives on its equity derivatives desk and their supervisors of the company’s confidentiality and anonymity policy. GFI distributed documents detailing its internal policy directly to the representatives on its equity derivatives desk and their supervisors on two occasions – once in a March 2006 memorandum and a second time in an April 2016 memorandum.

While the March 2006 memorandum was available to employees on the firm’s intranet, GFI did not provide adequate substantive training concerning the anonymity policy. Thus, annual compliance training materials that GFI used at meetings in 2012, 2013, and 2014 referenced the existence of a “Client Confidentiality Reminder” without referring to anonymity. GFI’s anonymity policy was not mentioned in training materials that were used in online annual compliance courses in 2015 or 2016.

In addition, GFI failed to alert its employees to the public statements that it had made concerning confidentiality and anonymity.

Moreover, the desk supervisors were not aware of their responsibility to enforce the policies or to monitor registered representatives for compliance with the policies.

In or around May 2016, GFI became aware that one of the registered representatives on GFI’s equity derivatives desk disclosed customer identities on a number of occasions. GFI informed the registered representative to stop disclosing customer names in the future, however, this representative, along with other registered representatives on the desk, continued to disclose customer identities on a number of occasions.

During the Relevant Period (January 2014 – June 2016) GFI received commissions based on the successful brokering of trades for customers who were not aware that the registered representatives on GFI’s equity derivatives desk had disclosed their identities to other customers.

The Commission concludes that GFI violated Section 17(a)(2) of the Securities Act, which makes it unlawful for “any person in the offer or sale of any securities . . . directly or indirectly . . . to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.”

On top of paying a monetary penalty, GFI agrees to cease and desist from committing or causing any violations and any future violations of Section 17(a)(2) of the Securities Act. GFI is also censured.

Read this next

blockdag

Unlocking Investment Potential: Introducing MoonBag Presale, the Cryptocurrency Set to Surpass ApeCoin and Bitbot

Discover MoonBag Presale, the cryptocurrency set to surpass ApeCoin and Bitbot. Unlock your investment potential now!

Fintech

Playtech sees promising growth despite dispute with Caliplay

Gambling technology group Playtech plc (LSE: PTEC) reported solid financial results for the four months to April 30 as B2B growth and Snaitech’s record performance pushed it towards large gains in revenue.

Chainwire

Multipool Launches LBP on Fjord Foundry Raising $200k in 24 Hours

Multipool, a leading innovator in the blockchain and cryptocurrency industry, launched their Fjord Foundry LBP on May 21st, raising $200k in the first 24 hours.

Chainwire

$BEER, a New Solana-Based Memecoin completes Pre-Sale of 30,000 SOL this week

The Liquid Gold, $BEER, has become the most discussed topic on Solana over the past two weeks. $BEER has skyrocketed into Twitter trends across Europe & Asia, captivating beer lovers worldwide.

Digital Assets

Hong Kong regulator orders Worldcoin to cease operations over privacy concerns

Hong Kong’s privacy regulator has ordered Worldcoin Foundation to cease all operations of its cryptocurrency project in the city, citing risks to privacy and personal data.

Inside View

MT4 vs MT5: Which Should You Choose for Crypto Trading?

MetaTrader 4 (MT4) and MetaTrader 5 (MT5) are two sophisticated trading platforms developed by MetaQuotes Software. Although MT4 is the more widely adopted choice, traders must determine which platform is better suited for them and understand the reasons behind this choice. Here’s everything you need to know.

Digital Assets

Intentable.io Launches Intent-Centric Architecture and Marketplace

Discover how Intentable.io, formerly Kiroboflow, is revolutionizing blockchain interactions with its Intent-Centric Architecture and new marketplace for intent-based strategies.

Digital Assets

Crypto ETFs, retail trading spike as Bitcoin nears record highs

BlackRock’s spot bitcoin exchange-traded fund (ETF), which trades under the ticker IBIT on Nasdaq, saw a record amount of cash injection after a quiet few weeks of net outflows. The healthy metrics came as bitcoin briefly traded above the $71,000 level for the first time in a month.

Fundamental Analysis, Market News, Tech and Fundamental

Global FX Market Summary: FOMC Minutes, UK Inflation Data, USD, May 22 ,2024

FOMC minutes reveal Fed’s stance on inflation and rates. Hawkish hints could raise USD as investors seek higher returns. Dovish tones might weaken the dollar.

<