SEC accuses JPMorgan Neovest unit of operating as unregistered broker

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The Securities and Exchange Commission said it has indicted Neovest Inc., a unit of JPMorgan Chase & Co. that provides an electronic trading platform, for operating as an unregistered broker.

The commission said on Tuesday that this was the first such charge against a supplier of an order and fulfillment management system. He said Neovest agreed to pay a $ 2.75 million in fines, although the company has not admitted or denied the SEC’s findings.

The SEC said that Neovest had agreed to cease and desist from committing violations under a section of the Securities Exchange Act of 1934. “Neovest has taken a number of steps to improve its security measures in recent times. years and remains a neutral electronic trading platform for brokers. There is no evidence that client data has been compromised in any way, “said a spokesperson for JPMorgan Chase.

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Neovest’s platform allows clients to route stock and option orders to more than 360 brokers, the SEC said. He said that Neovest was operating as a registered broker before JPMorgan Chase acquired the company in 2005, but then continued to operate the order and fulfillment management system even after Neovest withdrew its broker registration after acquisition.

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Neovest, during the time it did not register as a broker, replicated a database containing client authentication information, including usernames and passwords, to one of its most active customers and did not oversee the customer’s use of the database, according to the SEC. The commission said that by not registering as a broker, Neovest was not providing clients with protections such as inspections and reviews by the SEC and the obligation to establish policies and procedures to protect customer information.

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As an unregistered broker, Neovest has been involved in taking and routing orders, and engaging clients and destination brokers through its website and outreach at conferences and trade shows, SEC said . The company received transaction-based compensation by redirecting payments from destination brokers to registered broker JP Morgan Securities LLC, which transferred the proceeds to Neovest, the commission added.

“Neovest has bypassed the regulatory regime which grants brokers the privilege to operate in our markets,” said Joseph Sansone, head of the market abuse unit of the SEC Enforcement division.


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