Barclays Capital Inc. and Credit Suisse Securities (USA) LLC have agreed to pay more than US$150 million in settlements with the U.S. Securities and Exchange Commission (SEC) and the New York attorney general’s office to resolve allegations that the two Wall Street firms violated federal securities laws while operating their dark pools.
In the case of Barclays, the SEC’s order found: the firm didn’t police predatory trading like it promised to clients; it exposed clients to aggressive traders against their wishes; and it sometimes misrepresented the market data feeds that it used to calculate prices in the dark pool.
To settle the charges, Barclays agreed to admit wrongdoing and to pay US$35 million penalties to both the SEC and the state AG’s office. It also ordered the firm to cease and desist; censures Barclays; and, requires Barclays to engage a third-party consultant to review its dark pool marketing, and its regulatory compliance.
In the Credit Suisse case, the SEC reports that the firm also misrepresented certain features of its dark pool; executed millions of illegal sub-penny orders; failed to keep client information confidential; and didn’t fully disclose its routing processes.
Credit Suisse, which settled without admitting or denying the violations, agreed to pay US$30 million penalties to both the SEC and the AG, along with US$24.3 million in disgorgement and prejudgment interest to the SEC for a total of $84.3 million.
“These cases are the most recent in a series of strong SEC enforcement actions involving dark pools and other alternative trading systems,” says SEC Chairwoman Mary Jo White. “The SEC will continue to shed light on dark pools to better protect investors.”
“Dark pools have a significant role in today’s equity marketplace, and the firms that run these venues must ensure that they do not make misstatements to subscribers about their material operations,” adds Andrew Ceresney, director of the SEC’s enforcement division. “These largest-ever penalties imposed in SEC cases involving two of the largest ATSs show that firms pay a steep price when they mislead subscribers.”