Large BD Hit with $10 Million Fine for Favoring Large Clients
The Massachusetts Securities Division fined a large broker-dealer $10 Million for sharing short-term trading ideas with certain higher revenue clients. The MSD charges that the respondent’s analysts and traders engaged in “huddles” and then disseminated unpublished trading ideas to clients based on a tier-ranking of potential revenue. The MSD charges that the conduct violates a Massachusetts statute prohibiting “unethical or dishonest conduct.”
OUR TAKE: While it may seem to make business sense to focus on your best clients, regulators will view it differently when they believe that certain clients are favored over others. This could apply to investment ideas as well as trade execution and allocation.