Tuesday, February 24, 2009
Former Employees at Leumi and Oppenheimer Settle Order Flow Allegations
The SEC settled charges alleging that two former registered representatives, Victor P. Machado, a former fixed income trader at two related entities, Leumi Investment Services Inc. ("LISI"), a registered broker-dealer, and Bank Leumi USA ("BLUSA") (collectively "Leumi"), and Frank Lu, a former salesperson at Oppenheimer & Co. Inc. ("OPCO"), a registered broker-dealer and investment adviser, engaged in a fraudulent trading scheme. As alleged in the Complaint, from May 2003 through mid-August 2004, Machado and Lu engaged in a scheme to direct Leumi's securities order flow to OPCO in exchange for secret gratuities and entertainment that Lu provided to Machado. The Complaint also alleges that Machado routinely directed a substantial flow of orders to OPCO for execution at prices that were favorable to OPCO and detrimental to Leumi's own customers. The Complaint further alleges that as a result of Machado's and Lu's conduct, Leumi and its customers were harmed by approximately $1.1 million.
Machado has consented to the entry of a final judgment that (i) permanently enjoins him from committing, or aiding and abetting, future securities law violations, and (ii) based on Machado's financial condition, waives the payment of disgorgement and prejudgment interest and does not impose a civil penalty. As part of his settlement, Machado has also agreed to the issuance of an administrative order that bars him from association with any broker or dealer.
Lu has consented to the entry of a final judgment that (i) permanently enjoins him from committing future violations of the antifraud provisions of the federal securities laws, and (ii) based on Lu's financial condition, orders him to pay partial disgorgement of $100,000, and does not impose a civil penalty. As part of his settlement, Lu has also agreed to the issuance of an administrative order that bars him from association with any broker, dealer, or investment adviser.