Two former stock traders at Cantor Fitzgerald made a secret commission-splitting scheme over the course of more than a decade in order to get around internal controls and line their pockets, according to a lawsuit filed by federal regulators on Friday, The New York Post reports.
The Securities and Exchange Commission accused Adam Mattessich and Joseph Ludovico, as well as an un-named junior trader, of secretly pooling their clients to beef up their commissions from 2003 to 2014, according to The New York Post.
Another SEC action, which was an administrative proceeding, against Cantor was settled. The regulator investigated the firm for failing to keep the proper paperwork on the two traders, The New York Post reports.
The SEC action was settled with Cantor agreeing to pay a $1.25 million fine. Cantor did not admit or deny the claims. A company spokeswoman declined to comment, according to The New York Post.
The scheme started after a supervisor denied a request by Mattessich to change his pay structure so he received a cut of sales commissions, according to the complaint, filed in Manhattan federal court.
To get around the rules, Mattessich gave his account to Ludovico and the other trader, who remains unidentified. This mystery trader and co-conspirator did get commissions on sales, with the promise that the two kick back half of those commissions through off-the-books personal checks, the SEC claims.
Cantor found out about the scheme in 2014, but didn’t relieve them of their duties until earlier this year, the SEC claims.
The alleged deal was lucrative. In 2013 alone, Mattessich made $58,200 in kickbacks from Ludovico, the SEC claims.
Ludovico couldn’t be reached for comment. A lawyer for Mattessich denied the claims to Bloomberg News.
Cantor Fitzgerald is a financial services firm that was founded in 1945. It specializes in institutional equity, fixed income sales and trading, and serving the middle market with investment banking services, prime brokerage, and commercial real estate financing. It is also active in new businesses, including advisory and asset management services, gaming technology, and e-commerce. It has more than 5,000 institutional clients.
Cantor Fitzgerald is one of 22 primary dealers that are authorized to trade US government securities with the Federal Reserve Bank of New York.
Cantor Fitzgerald’s 1,600 employees work in more than 30 locations, including financial centers in the Americas, Europe, Asia-Pacific, and the Middle East. Together with its affiliates, Cantor Fitzgerald operates in more than 60 offices in 20 countries and has more than 8,500 employees.
In 2011, Cantor’s affiliate, BGC Partners, expanded into commercial real estate services by its purchase of Newmark Knight Frank and the assets of Grubb & Ellis, to form Newmark Grubb Knight Frank.
By: Duncan Maxwell