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Lessons Learned
Payment for Order Flow Gets Another Broker into Hot Water for Undisclosed Conflicts. The SEC found Lightspeed Trading, LLC (“Lightspeed”), formerly a registered broker-dealer, guilty of securities fraud for lying to customers and profiting from lower “market center fees” charged by its affiliate for executing trades. In 2012, Lightspeed started offering customers access to an equity trading platform that allowed them to select the exchange or trading venue for executing their orders. Unfortunately, that freedom of choice was an illusion. Lightspeed actually sent many trades to its affiliated Routing Broker, which charged Lightspeed less for the trades than the venues the customers had selected. Lightspeed charged the fees those venues advertised and kept the difference, to the tune of $300,000 over a period of seven months. The SEC required Lightspeed to repay its clients, but the firm pleaded poverty and got $100,000 of its penalty waived.
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Further to the Securities and Exchange Commission (“SEC” or the “Commission”)’s ongoing review of investment advisers offering wrap fee programs, on December 23, 2020, the Commission announced a settlement with Pruco Securities, LLC (“Pruco”) related to alleged breaches of fiduciary duty in connection with its wrap fee programs. Pruco agreed to pay disgorgement, interest, and civil penalties totaling over $18.2 million to compensate for its alleged breaches of its fiduciary duties to its advisory clients that participated in its wrap fee programs.[1] In short, the SEC alleged that Pruco breached its fiduciary duties and violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 (the “Advisors Act”), and Rule 206(4)-7 thereunder, by failing to disclose certain fees, savings, and revenue sharing payments it received in connection with its wrap fee programs, and the associated conflicts o
Wednesday, January 20, 2021
Further to the Securities and Exchange Commission (“SEC” or the “Commission”)’s ongoing review of investment advisers offering wrap fee programs, on December 23, 2020, the Commission announced a settlement with Pruco Securities, LLC (“Pruco”) related to alleged breaches of fiduciary duty in connection with its wrap fee programs. Pruco agreed to pay disgorgement, interest, and civil penalties totaling over $18.2 million to compensate for its alleged breaches of its fiduciary duties to its advisory clients that participated in its wrap fee programs.[1] In short, the SEC alleged that Pruco breached its fiduciary duties and violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 (the “Advisors Act”), and Rule 206(4)-7 thereunder, by failing to disclose certain fees, savings, and revenue sharing payments it received in connection with its wrap fee programs, and the associated conflicts of interest related ther
Pruco Securities Settles With SEC Over Wrap Fee Violations The Prudential subsidiary has agreed to pay $18 million in disgorgement, interest and penalties, to settle SEC charges.
Pruco Securities, the broker/dealer and corporate RIA arm of Prudential, has settled with the Securities and Exchange Commission over alleged violations in the firm’s wrap fee programs. The firm agreed to pay $18 million in disgorgement, interest and penalties, as well as a censure and cease-and-desist.
In an administrative order, the SEC claimed Pruco failed to perform ongoing monitoring to determine whether the “wrap fee” program (in which clients paid a singular asset-based fee for investment advice, brokerage services and trade execution) was still suitable for clients.