The (SEC) has reached a settlement with GFI Securities LLC, which will see the firm pay a civil money penalty of $4.3 million, for material misstatements regarding customer anonymity.
According to a filing by the United States regulator published last Friday, GFI Securities LLC made material misstatements to its customers, regarding how the firm’s registered representatives handled customer identities in brokering securities transactions.
GFI Securities is part of . Based in New York, the company is registered with the SEC as a broker-dealer. Publicly, the firm stated that it generally maintained the anonymity and confidentiality of customer identities.
As highlighted by the SEC, this could be seen in a document entitled “Understanding GFI Brokering Services”. The broker-dealer published this file on its website and made available to customers starting in January 2016. The company had similar publicly available materials making similar statements.
However: “from at least January 2014 to June 2016 (the “Relevant Period”), at least three registered representatives on GFI’s equity derivatives desk regularly disclosed customer identities to potential counterparties and others did so occasionally,” the SEC states in the filing.
SEC found GFI Securities internal policies lacking
Overall, the SEC found that the company’s internal policies regarding this issue were lacking and that it didn’t take the appropriate steps to inform its registered representatives on its equity derivatives desk and their supervisors of the company’s confidentiality and anonymity policy.
“The GFI registered representatives’ actions were inconsistent with GFI’s public statements concerning customer anonymity. Most GFI customers believed that GFI’s equity derivatives desk generally kept their identities anonymous,” the US regulator said in the document.
“Anonymity was important to many customers of GFI’s equity derivatives desk because they were concerned that the disclosure of their identities could unfairly advantage other market participants. For example, some customers were concerned about the possibility that other market participants could use this information to front-run their trades.”
Therefore, in addition to the civil money penalty, the US regulator has also ordered that GFI “cease and desist” from committing or causing any violations of Section 17(a)(2) of the Securities Act.
GFI Securities has been undertaking remedial efforts to improve training and enforcement of its anonymity policy. In particular, the broker-dealer now distributes its anonymity policy to its registered representatives on an annual basis, among other measures.
Finance Magnates reached out to GFI Securities LLC, however, the company was not willing to comment on the order.