The Securities and Exchange Commission (SEC) has charged iCapital Markets, formerly Datek Securities Corp., with securities fraud and widespread violations of the Commission's broker-dealer books and records and reporting provisions.
SEC has censured the firm and ordered iCapital to pay a $6.3 million penalty. iCapital has consented to the issuance of the order without admitting or denying the findings contained in it, and to the relief imposed.
SEC allages that from at least 1993 through March 1998, when it sold its day-trading business, Datek Securities engaged in a widespread fraudulent scheme by illegally executing proprietary trades through the Nasdaq Stock Market's Small Order Execution System (Soes). The Soes system was designed as an automatic execution service for small public customers, and until last year, a broker-dealer was prohibited from using the Soes system to trade for its own account.
An investigation by the industry watchdog alleged Datek Securities "fraudulently used the Soes system to execute millions of proprietary trades, resulting in tens of millions of dollars in trading profits". This was accomplished through the use of sophisticated software, dozens of nominee accounts, concealment and misrepresentations to regulators, fictitious books and records, and false reports filed with the SEC, says the Commission.
William Baker, associate director of the division of enforcement at the SEC, says: "Today's tough action by the Commission underscores the obligations of a broker-dealer to speak truthfully to the securities market and to regulators."