SEC Charges Cantor Fitzgerald and Brokers in Commission-Splitting Scheme
Litigation Release No. 24179 / June 29, 2018
Securities and Exchange Commission v. Adam Mattessich and Joseph (a/k/a Jay) Ludovico, No. 18-cv-5884) (S.D.N.Y. filed June 29, 2018)
Washington, D.C., June 29, 2018 - The Securities and Exchange Commission today announced that Cantor Fitzgerald & Co. has agreed to settle charges stemming from an improper commission-splitting scheme in which a former supervisor received off-book payments from traders he managed. The SEC also filed a litigated action against the former supervisor and former senior trader for their roles in the scheme.
According to the SEC's order, for more than 10 years, Joseph "Jay" Ludovico and another Cantor Fitzgerald trader used personal checks to pay a portion of their commissions to Adam Mattessich, the firm's former global co-head of equities, and another trader. The practice violated the firm's policies and procedures and gave rise to conflicts of interest that were hidden from the firm's compliance department, customers, and regulators. As a result of the brokers' alleged commission-splitting scheme, Cantor Fitzgerald's books and records were inaccurate with respect to trader compensation.
Without admitting or denying the SEC's findings, Cantor Fitzgerald consented to the SEC's order finding that the firm violated Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-3(a)(19) thereunder, a cease and desist order, a censure, and a civil penalty of $1.25 million. The SEC's complaint, filed in federal district court in Manhattan, charges Mattessich and Ludovico with aiding and abetting Cantor Fitzgerald's violations and seeks penalties and injunctive relief.
The SEC's investigation was conducted by Philip A. Fortino, Lee A. Greenwood, John O. Enright, Christopher Ferrante, and Sheldon L. Pollock of the New York office. The SEC's litigation against Mattessich and Ludovico will be handled by Messrs. Fortino, Greenwood, and Enright. The case is being supervised by Sanjay Wadhwa.