Kang Haggerty News
It seems the U.S. Securities and Exchange Commission is one of the busiest federal agencies lately, as it brought down the hammer once again, this time obtaining a $2.5 million penalty from Scottrade, Inc. by way of settlement……
SEC Alert: Scottrade $2.5MM Settlement
It seems the U.S. Securities and Exchange Commission is one of the busiest federal agencies lately, as it brought down the hammer once again, this time obtaining a $2.5 million penalty from Scottrade, Inc. by way of settlement. From March of 2006 until 2012, an affiliate of Scottrade, Inc. failed to provide the SEC with accurate “blue sheets,” which essentially log the details of all trading activity both within a firm and with its customers. Blue sheet data is necessary for the SEC to identify and analyze trades in the course of investigations and other work, as they contain the details of each equity or options trade that is routed through clearing broker-dealers. (They are called “blue sheets” because the form was blue, but in the ‘80s, the process became electronic. Still, the term “blue sheet” is commonly used.)
Notably, Scottrade Inc. had to admit as part of the settlement that it was guilty, particularly admitting it violated the recordkeeping provisions of the federal securities laws. The chairman of the SEC, Mary Jo White, announced this past June that the SEC will require defendants in such cases to admit wrongdoing, whereas it previously had a policy of “no admit, no deny” in connection with settlements. The Scottrade admission marks the fourth overall, another being in connection with the $6 billion settlement with JPMorgan Chase & Co. The requirement of admitting guilt shows the seriousness of the charges, and that the SEC is more than just a commission seeking to add another “cost of doing business” but instead a fully engaged and equipped policing agency charged with investigating, prosecuting, and hopefully deterring financial crime. And, an admission of guilt impacts the company’s reputation, whereas pure financial penalties often do not.
Scottrade was also required to cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Exchange Act of 1934 and Rules 17a-4(j), 17a-25, and 17a-4(f)(3)(v). Scottrade has also agreed, in addition to paying its hefty penalty, to undertake remedial measures, such as retaining an independent consultant to review its supervisory, compliance, and other policies and procedures designed to detect and prevent securities laws violations related to blue sheet submissions.