SEC settles charges against Potamus Trading and former CEO
The regulator has found that Potamus filled the vast majority of its clients’ orders by engaging in undisclosed net trading.
The United States Securities and Exchange Commission (SEC) today announces that it settled charges against Potamus Trading LLC, a registered broker-dealer based in Boston, and its former CEO, Eric J. Pritchett, for misrepresenting how Potamus would handle and fill its clients’ orders to trade equity securities.
According to the SEC’s order, from September 2013 through March 2017, Potamus Trading and Pritchett presented Potamus as filling its clients’ orders on a principal basis by trading from its own inventory of securities or risking its capital in the market. In reality, however, Potamus rarely traded from inventory or risked its capital, and instead filled the vast majority of its clients’ orders by engaging in undisclosed net trading.
The SEC’s order finds that when Potamus received client orders, it often did not fill them until it searched for and obtained executions for its own account within, and frequently at the midpoint of, the National Best Bid and Offer. If Potamus succeeded in obtaining an execution for its own account, only then did it fill the client’s order at the National Best Bid or the National Best Offer, as applicable, to profit from this order flow.
Potamus and Pritchett have been found to have violated the antifraud provisions of Sections 17(a)(2) and (3) of the Securities Act of 1933.
Without admitting or denying the findings in the SEC’s order, Potamus agreed to a cease-and-desist order, a censure, and, based on its inability to pay a higher amount, a penalty of $50,000. Pritchett agreed to a cease-and-desist order, a penalty of $50,000, and one-year industry and penny stock bars.
