According to Reuters, the COO of the securities firm, Dennis Donnelly, failed to properly supervise the activities of certain former employees in its Philadelphia and New York offices.
The charges and subsequent settlement relate to two employees in its New York office, Thomas Gerbasio and Raymond Braun, who, from the summer of 2002 to the fall of 2003 carried out illegal trades for two hedge fund clients, regulators said.
The settlement also relates to a vice president of the firm’s Philadelphia office, Charles Addeo, who engaged in late trading and market timing in his personal trading accounts between December 2000 and October 2002, according to Reuters. Addeo had also never been licensed to sell securities.
The SEC had filed a civil complaint against Gerbasio and Braun in a federal court in Philadelphia and had brought administrative proceedings against Fiserv Securities, Donnelly and Addeo.
All but Gerbasio have settled without admitting or denying guilt.
The settlement includes censure for Fiserv, as well as $5 million in disgorgement and $10 million in civil penalties. The firm must also take certain remedial actions, according to Reuters, including the implementation of new supervisory and operational procedures to protect against such practices in the future.
Donnelly, who agreed to pay a $50,000 penalty, was also suspended as part of the settlement from being a supervisor with any broker for nine months, while Addeo must pay a $30,000 civil penalty and be banned from associating with any broker for 12 months.
The Fiserv settlement is just one in a long line, with some companies, such as Putnam Investments, paying up to $110 million in fines and restitution for impropoer late trading and market timing in mutual funds (See Putnam Trustees Approve Outside Study Putting Market Timing Damages at $108.5M ).
Fiserv Securities, a unit of securities clearing operation firm BHC Investments Inc., was a unit of Fiserv Inc. until BHC was sold to the National Financial unit of Fidelity Investments in March.