The former CEO of a ConvergEx subsidiary has been charged with securities fraud by the US Securities and Exchange Commission (SEC) and Department of Justice.
Anthony Blumberg led ConvergEx Global Markets—an offshore broker-dealer unit—from 2006 through 2011. As CEO, he allegedly “directed, encouraged, and authorized” repeated deceptive actions to charge clients hidden fees on securities trades.
These actions included falsifying trading data, misleading inquisitive customers, and manipulating trade execution to illicitly skim extra fees, according to the SEC.
In some cases, clients allegedly paid several multiples of their agreed-upon fees thanks to these additional charges. One university spent $636,000 on $93,000 worth of trading services, the regulator’s complaint said. Blumberg’s unit allegedly charged another client—a charity—$33,000 in disclosed commissions and $283,000 in fraudulent fees.
“During his tenure, Blumberg directed a culture of deception and greed that systematically harmed investors,” said Stephen Cohen, an associate director in the SEC’s division of enforcement. “He had the power to put an end to this fraud, but instead used his power to encourage and perpetuate it.”
In February 2012, CIO reported that through a complicated structure that seemingly fractured its business units into different legal entities, ConvergEx as a whole was charging both a commission and a spread on transitions, among other transactions, when dealing with pension plans.
ConvergEx admitted wrongdoing when charged for the scheme by the SEC last year. It settled the regulatory and criminal fraud cases brought against the firm for $151 million.
When contacted about Blumberg’s charges, a ConvergEx spokesperson noted that his employment ended several years ago, and directed CIO to the firm’s statement following its own settlements.
“The employees who engaged in this misconduct are no longer at the company, the Bermuda trading desk of ConvergEx Global Markets was shut down by ConvergEx, and the activity associated with these investigations was discontinued two years ago,” the company said at the time.
“ConvergEx has also significantly enhanced its policies, procedures and controls in order to prevent anything like this from ever happening again.”
Related Content: ConvergEx Hit with $150M Fine for Overcharging Clients & ConvergEx Shutting Down Non-US Transition Management Business