SEC fines TradeZero America for meme stock trading lapse

Rick Steves

The Securities and Exchange Commission has charged broker-dealer TradeZero America Inc., and its co-founder, Daniel Pipitone, with deceiving customers about the meme stock trading halts. According to the agency, they falsely stated that they didn’t restrict the customers’ purchases of meme stocks when in fact they did, back in January 2021. At the apex of […]

The Securities and Exchange Commission has charged broker-dealer TradeZero America Inc., and its co-founder, Daniel Pipitone, with deceiving customers about the meme stock trading halts.

According to the agency, they falsely stated that they didn’t restrict the customers’ purchases of meme stocks when in fact they did, back in January 2021.

At the apex of the meme stock trading frenzy of late January 2021, many brokers restricted investors’ ability to purchase a group of such volatile stocks.

On January 28, 2021, TradeZero was allegedly instructed by its clearing broker not to allow its customers to purchase three meme stocks. The broker complied for about 10 minutes. 

Almost true

After the halt, TradeZero and Pipitone made misleading public statements via interviews, social media, and in a press release in an effort to distinguish their company from brokers that restricted trading during that period, the SEC stated.

The broker’s co-founder Pipitone said in a reddit “AMA”: “That some trading firms are blocking these symbols is disgusting, unprecedented… Our clearing firm tried to make us block you and we refused.”

Melissa Hodgman, Associate Director of the SEC’s Division of Enforcement, said: “This case sends a powerful message that participants in our capital markets cannot exploit market turbulence to deceive customers. The SEC has been committed to ensuring that our capital markets continue to function in times of uncertainty, and today’s action highlights this commitment.”

Without admitting or denying the charges, TradeZero and Pipitone agreed to a cease-and-desist order, retention of an independent compliance consultant to ensure future compliance with the federal securities laws, a $100,000 penalty for TradeZero, and a $25,000 penalty for Pipitone.

TradeZero launches commission-free trading in Canada

Despite the charges, business is going well at TradeZero, which has recently launched its commission-free and subscription-based software for active stock trading in Canada.

The broker’s core offering also includes options trading, real-time streaming on web and desktop platforms, pre-and post-market trade, charting and scrolling news feeds.

TradeZero Securities Canada also allows its ‘active traders’ to select the specific destination where their orders are routed for execution. Those who maintain a minimum account balance of $30,000 can take advantage of these features to increase both the speed and likelihood of order execution, while simultaneously lowering their trading costs by taking advantage of rebates.

TradeZero also said it would offer clients easier access to hard-to-borrow shares though a locate feature built into its platforms. This patent-pending feature enables TradeZero investors to sell their shares to other traders on the platform, which resolves one of the major disadvantages of shorting stocks that appear on a hard-to-borrow list. Most brokers require traders to pay high fees or enroll in special programs to have access to such stocks, given the relatively few borrowable shares coupled with the huge demand from short sellers.

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