The money will be distributed to 4 Direct Customers and 78 Indirect Customers of a number of subsidiaries of trading services provider Convergex.
The United States Securities and Exchange Commission (SEC) is about to make the fourth disbursement of funds to customers of three subsidiaries of brokerage firm Convergex. The disbursement is in line with a plan approved by the Commission in July 2015.
The fourth distribution will amount to $8,954,411.01, according to a SEC announcement issued on Monday, with distribution payments to be made to 4 Direct Customers and 78 Indirect Customers.
In November 2016, the Commission disbursed $63.5 million for a first tranche distribution. In February 2017, the Commission disbursed $5.62 million for a second tranche distribution. And in March 2017, the Commission disbursed $1,925,301.67 for a third tranche distribution.
In December 2013, G-Trade Services LLC, ConvergEx Global Markets Limited, and ConvergEx Execution Solutions LLC – subsidiaries of Convergex Group, agreed to pay more than $107 million to settle fraud charges. The three brokerage subsidiaries and two former employees of Convergex were accused of having caused many institutional clients to pay substantially higher amounts than disclosed for the execution of trading orders.
The ConvergEx brokerage firms represented to customers that they charge explicit commissions to execute equity trading orders. However, they routinely routed orders, including orders for US equities, to an offshore affiliate in Bermuda that executed them on a riskless basis and boosted their profits by adding a mark-up or mark-down on the price of a security. The offshore affiliate often consulted with the client-facing brokers to assess the risk of customer detection before taking the extra money on top of the disclosed commissions. The mark-ups and mark-downs led to many customers unknowingly paying more than double what they understood they were paying to have their orders executed.
In a parallel action, the Department of Justice announced criminal charges against ConvergEx Group, a brokerage subsidiary, and the two former employees. To settle those charges, ConvergEx Group has agreed to pay $43.8 million in criminal penalties and restitution.