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U.S. Securities and Exchange Commission

SEC Charges Floor Clerk at NYSE With Alerting Trader to Large Orders in Return for Cash Payments


Washington, D.C., March 9, 2005 — The Securities and Exchange Commission today charged Frank J. Furino, a former clerk for a New York Stock Exchange floor broker, for his role in a fraudulent “trading ahead” scheme. Furino is charged with disclosing large, pending block orders from institutional customers to a day trader in return for cash payments between August 2000 and December 2001. The Commission alleges that the day trader traded ahead of the customer orders and profited on short-term price movements when the block order was filled.

Stephen M. Cutler, Director of the Commission’s Division of Enforcement, stated, “Customers expect that when they entrust their buy and sell orders to a floor broker, the floor broker - and its employees - will be acting as their agent. Furino breached that trust when, in exchange for cash payments, he provided information about pending customer orders to a day trader.”

Mark K. Schonfeld, Director of the Commission’s Northeast Regional Office, stated, “In lining his own pocket, Furino completely disregarded his duty - both to his employer and its customers - to handle his customers’ orders in the best interests of those customers. Such conduct threatens investors’ ability to have orders executed on the best available terms and cannot be tolerated.”

Furino, age 48, is a resident of Port Washington, N.Y. Until his recent termination, he was employed on the floor of the New York Stock Exchange as a clerk for a floor broker, Jefferies Execution Services, Inc. and its predecessor, Lawrence Helfant LLC.

The Commission alleges that between August 2000 and December 2001, Furino frequently alerted the day trader when institutional customers placed large orders with Helfant. Large orders can affect the market price of a stock by affecting the supply or demand for the stock. The day trader then “traded ahead” of the customer order – that is, bought or sold short the same security before Helfant executed the customer order. The day trader then closed his position as Helfant filled the customer’s order, realizing a profit from the movement in the stock price caused by the large order.

By means of this scheme, the day trader made over $300,000 in trading profits on at least 58 trades. Helfant’s customers suffered losses because the scheme allowed the day trader to trade at more favorable prices than the customers were able to receive. Furino solicited and received from the day trader payments ranging from $2,500 to $10,000 per month over the course of the scheme.

Furino’s conduct breached duties of confidentiality and trust that he owed to his employer and to his employer’s customers. Furino also violated his firm’s written policies requiring confidential treatment of customer information, forbidding the use of confidential client information for personal benefit or for the benefit of another client, and forbidding acceptance of undisclosed compensation from clients.

The Commission’s complaint, which was filed in the United States District Court for the Eastern District of New York in Brooklyn, charges Furino with securities fraud and seeks disgorgement of illegal profits, penalties, and an injunction against future violations.

The Commission acknowledges the assistance of the United States Attorney’s Office for the Eastern District of New York and the United States Postal Inspection Service. The New York Stock Exchange, Inc. is also filing today a separate action against Furino charging him with securities fraud and violation of NYSE rules.


Mark K. Schonfeld
Regional Director
Northeast Regional Office

Helene Glotzer
Associate Regional Director
Northeast Regional Office

Kay L. Lackey
Assistant Regional Director
Northeast Regional Office

  Additional materials: Litigation Release 19126



Modified: 03/09/2005