US regulated broker, Linkbrokers, has been charged by authorities for wrongdoings against its clients by overcharging $18 million. The firm’s cash equity desk misinformed clients of commission charges it had been placing on accounts. It defrauded its customers by claiming to charge them very low commission fees, however, individuals were discreetly overcharging clients, the Securities Exchange Commission’s (SEC) notification states that in some cases the fees were nearly one thousand percent more than they should have been.
The investigators found that the firm had concealed the fraud by charging clients markups and markdowns during times of market volatility, thus making it difficult for clients to detect the scandal.
Details in the Order state: “These brokers hid the true size of the fees they were collecting by misrepresenting the price at which they had bought or sold securities on behalf of their customers.”
Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit, commented in the briefing: “Linkbrokers employees engaged in a devious and abusive trading scheme orchestrated to steal from the firm’s unsuspecting customers.”
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The guilty party, Linkbrokers, agreed to pay settlement charges to the financial watchdog. The firm agreed to pay $14 million in restitution in order to settle the SEC’s charges. The fraud took place between 2005 and 2009 and involved 36,000 transactions.
The US broker-dealer halted its operations as a result of the fraud and withdrew its registration as a regulated entity.
“This settlement strips Linkbrokers of its remaining assets and allows those funds to be returned to harmed customers,” added Mr. Hawke.
In addition, four employees of the firm were found guilty by the regulator and agreed to settle those charges by consenting to judgements ordering more than $4 million in disgorgement plus interest.