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Years in the Making, Brokers Charged for Securities Fraud

The financial meltdown in Wall Street and the subsequent bailout of major financial institutions by the U.S. government has placed undue pressure on white collar defendants, particularly those charged with securities fraud. Such is the case for three New York City brokers under the employ of Linkbrokers Derivatives Corporation, a subsidiary of London-based ICAP PLC — one of the world’s largest providers of electronic broker-dealer services.

According to the charges filed by federal prosecutors in Manhattan, the defendants engaged in a scheme that systematically siphoned pennies from as many as 36,000 transactions that brought their employer almost $19 million in profits. The Securities and Exchange Commission (SEC) filed civil charges against the three brokers in conjunction with the criminal complaint.

Securities fraud is generally defined as any type of deceitful misstatement or omission perpetrated by financial professionals or business entities in the course of dealing with registered securities. In the United States, the SEC is the administrative agency that investigates allegations of securities fraud, but these investigations only lead to civil complaints. Prosecutors must be alerted to an investigation by the SEC in order for criminal charges to be considered.

It is important to note that in this case, the defendants did not pocket any of the pennies they allegedly overcharged as hidden fees. The trades involved institutional investors, and all profits were promptly remitted to the brokerage firm, which at this time has not been named as a defendant in the civil or criminal complaints. According to prosecutors and the SEC, the defendants derived economic benefit in the form of performance bonuses.

The SEC complaint revealed that the defendants did not pocket any of the pennies they allegedly overcharged through the years in tens of thousands of trades. Despite that fact, according to the SEC complaint, they nevertheless netted hundreds of dollars per transaction, which if true, exposes them to criminal liability under the securities law.

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