JANNEY SETTLES SEC CHARGES FOR $850,000

by Christopher J. Gray on August 4, 2011

in Arbitration,SEC,Securities Fraud

Janney Montgomery Scott, a broker-dealer from Philadelphia, and his firm, Janney Montgomery Scott LLC, will pay $850,000 in his settlement with the Securities and Exchange Commission for not taking proper precautions to prevent insider trading. According to securities regulators, Janney didn’t establish proper policies and, in some cases, didn’t enforce what policies were in place, to prevent potential insider trading.

Janney Settles SEC Charges for $850,000

The firm’s lax policies and lack of adherence to them continued for more than four years, from January 2005 until July 2009. The policies in question affected the firm’s Equity Capital Markets division. This division included trading, equity sales and research departments. Problems with policies included a lack of enforcement and failure to follow policies as written. This misconduct made it possible for nonpublic information to be used in insider trading — a clear violation of the law that states a firm should seek to prevent this possible misuse of material.

In addition, Janney did not require pre-clearance for personal trades of its investment bankers or approval for its employees to have brokerage accounts at other firms. The firm also failed to maintain a proper firewall between the email of investment banking staff and research staff. These measures are necessary to properly supervise and maintain accountability that would prevent insider trading. Insider trading creates an unfair advantage in the market and, therefore, unbalances it, perhaps causing major repercussions.

On July 11, both securities arbitration and a court appearance were avoided, as the SEC’s charges against Janney were brought and settled in only one day. According to the SEC, “Janney, without admitting or denying the findings, agreed to be censured and to pay an $850,000 penalty to settle the SEC’s administrative proceeding. It also agreed to cease and desist from committing or causing any violations of Section 15(g) of the Securities Exchange Act of 1934.”

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