NEW YORK (Reuters) - U.S. securities regulators on Friday charged two former Cantor Fitzgerald & Co brokers with sharing commissions on customer transactions off the books, and announced the firm had agreed to pay $1.25 million to resolve the related claims.
In a civil complaint filed in Manhattan federal court, the U.S. Securities and Exchange Commission said the brokers, Adam Mattessich and Joseph Ludovico, led to “widespread” violations of a federal securities law that requires brokerages to keep accurate records of transactions and compensation.
Lawyers for Mattessich, 47, and Ludovico, 41, did not immediately respond to requests for comment.
Karen Laureano-Rikardsen, a spokeswoman for Cantor, declined to comment. The company agreed to the $1.25 million settlement without admitting or denying the allegations, the SEC said.
According to the complaint, Mattessich in 2002 asked that Cantor pay him commissions on transactions on customer accounts he serviced, but his supervisor refused and ordered him to transfer the accounts to more junior traders.
Mattessich then approached two junior traders, Ludovico and another person not named in the complaint, about an agreement to circumvent his supervisor’s decision, according to the SEC. Mattessich transferred accounts to Ludovico and the other trader, who were eligible to receive commissions, and had them pay him a share by personal check, the SEC said.
Ludovico also benefited financially by receiving additional customer accounts from Mattessich, the SEC said.
In 2004, Mattessich was promoted to supervise Ludovico and the other junior trader directly, the SEC said. His new role created a conflict of interest that, by “risking compromising Mattessichs’ supervision, posed a risk of harm to Cantor’s customers and counterparties,” the complaint said.
In 2011, Mattessich arranged for another subordinate, who was not named, to begin receiving off-the-books commissions from Ludovico and the other junior sales trader, according to the complaint.
Ludovico in 2013 paid Mattessich at least $58,200 in off-the-books commissions, which Mattessich hid from both Cantor and tax authorities, the SEC said.
After legal and compliance personnel at Cantor were alerted about the arrangement, the firm’s chief compliance officer sent an email to employees in January 2014 reminding them that off-the-books commission splitting was prohibited, the SEC said. Mattessich and Ludovico were allowed to resign voluntarily in February 2018, the complaint said.
Reporting by Brendan Pierson in New York; Editing by Paul Simao