Brokerage Firm Paying Penalty for Compliance and Trading Surveillance Failures
The Securities and Exchange Commission today announced that a New York-based brokerage firm has agreed to pay a $100,000 penalty to settle charges of compliance and trading surveillance failures.
Federal securities laws require firms to enforce policies and procedures to prevent the misuse of material, nonpublic information to which their employees routinely have access. The SEC’s order finds that Sidoti & Company LLC had no written policies or procedures in place from November 2014 to July 2015 as it pertained to those making investment decisions for an affiliated hedge fund that invested in issuers covered by Sidoti’s research department and some other issuers for which Sidoti provided investment banking services. For example, Sidoti maintained a “daily restricted list” of securities restricting personal trading because Sidoti was involved in investment banking or marketing activities or the firm was publishing research on the security. There were 126 instances from Nov. 3, 2014 to May 5, 2015 when the hedge fund traded in a stock that appeared on the daily restricted list.
“Sidoti did not devote sufficient resources to set up the requisite trade surveillance and compliance systems and failed to meet its obligation to prevent the misuse of material nonpublic information,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.
Without admitting or denying the findings, Sidoti consented to the SEC’s order finding that the firm violated Section 15(g) of the Securities Exchange Act of 1934.
The SEC’s investigation was conducted in the New York office by Pamela Sawhney, Jason W. Sunshine, and Sandeep Satwalekar, and the case was supervised by Sanjay Wadhwa. The SEC examination that led to the investigation was conducted by Jennifer Grumbrecht, Lourdes Caballes, Evett Evelyn, and Sabrina Rubin.