U.S. regulators have sanctioned an electronic trading platform for operating without registration.
The U.S. Securities and Exchange Commission (SEC) brought its first-ever case against an order and execution management platform, Neovest Inc., charging the firm for failing to register as a broker-dealer.
The firm agreed to settle the case without admitting or denying the SEC’s findings. It agreed to pay a US$2.75 million penalty and to cease and desist its registration violations.
According to the SEC’s order, Neovest, which is now a subsidiary of JPMorgan Chase & Co., originally provided order routing and execution services to clients through its registered broker, Neovest Trading Inc.
Yet, the SEC alleged that, after being acquired in 2005, the firm withdrew its broker registration but continued to provide its order routing and execution services. The regulator also alleged the firm received compensation from brokers that received its order flow via JP Morgan’s dealer subsidiary.
By not being registered itself, however, the SEC found that Neovest’s clients were deprived of investor protections, including compliance reviews and registration requirements, including obligations to safeguard client information.
“According to the SEC’s order, Neovest circumvented the regulatory regime that grants broker-dealers the privilege of operating in our markets,” said Joseph Sansone, chief of the SEC enforcement division’s market abuse unit, in a release.