Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Thursday, April 29, 2010

FINRA Bans Former Compliance Officer for Cheating Customers

FINRA announced today that it has permanently barred Tod Bretton, former Chief Compliance Officer and Head Trader for Prestige Financial, Inc., of New York, for engaging in a fraudulent trading scheme that generated approximately $1.3 million in profits for him and his firm at the expense of customers by subjecting their orders to improper and undisclosed additional charges. To conceal the scheme, Bretton falsified order tickets and created inaccurate trade confirmations. Bretton also failed to cooperate with FINRA's investigation.

FINRA found that, from at least September 2006 through June 2009, Bretton, working from the firm's New York office, engaged in a fraudulent trading scheme in which he took advantage of customers placing large orders (generally 1,000 shares or more) to buy or sell stocks. Rather than effecting the trades in the customers' accounts, FINRA found, Bretton first placed the orders in a firm proprietary account. He would then increase the price per share for securities purchased by approximately $.02 to $.05 above the market price before allocating the shares to the customers' accounts. Similarly, he would decrease the price per share for securities sold by approximately $.02 to $.05 below the market price before allocating the proceeds to the customers' accounts. This improper price change was not disclosed to or authorized by the customers.  Bretton's trading scheme generated approximately $1.3 million in profits for the proprietary accounts, in which he had a 33 percent interest. Bretton personally earned approximately $429,000 from this scheme. 

In settling this matter, Bretton neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

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