Icap pays $25 million SEC penalty to cover fake trading charges
21 December 2009 | 11772 views | 0
Interdealer broker Icap is to pay $25 million in settlement to the US Securities and Exchange Commission over charges that it displayed fake trades on its screens to encourage customer dealing.
The settlement follows a four-year probe by the US watchdog into the activities of dealers operating on its mortgage-backed securities desk.
The SEC found that Icap displayed fictitious flash trades also known as 'bird' trades on its screens in order to lure customers into making actual trades.
Inter-dealer brokers with greater trade activity on their screens can attract customer orders and earn more commissions than those whose screens reflect little or no trading activity.
Alongside the $25 million penalty, the SEC additionally charged five Icap brokers for "aiding and abetting the firm's fraudulent conduct" and two senior executives for supervisory failings. The individuals have each agreed to pay penalties to settle the SEC's charges.
Lorin Reisner, deputy director of the SEC's Division of Enforcement, comments: "Icap engaged in deceptive practices that violated the legal and professional standards required of market participants; our action today demonstrates zero tolerance for such conduct."
In settling the charges, Icap also has agreed to retain an independent consultant to review its controls, trading records and compliance mechanisms across all of its dealings in the US marketplace.