SEC fines and ban Ex-ConvergEx CEO for fraudulent practices

convergEx,SEC,craig lax
Craig Lax, an ex CEO of G-trade services, a broker-dealer fully owned by ConvergEx has admitted to fraudulent dealing, hit with a fine of $783,000 and a five year ban from the industry by the Securities and Exchange Commission (SEC) as a result of his involvement in a scheme which involved employees under his control deliberately misleading customers as they employed deceptive means to profit illegally from client trades.

Based on information from the SEC’s filling against Mr. Lax, it was discovered that he headed ConvergEx subsidiaries during a period of a scheme where client commissions where substantially increased more than the disclosed amounts for trading financial securities. It was discovered that he authorized the use of proprietary trading algorithms to conceal these charges from clients as the scheme involved “concealing the practice of routing trading orders to an offshore affiliate in order to take hidden mark-ups and mark-downs commonly referred to as “trading profits” or “TP.”

The SEC fines and ban Ex-ConvergEx CEO is one of many penalties that have already gone down in this case. ConvergEx group subsidiaries have already been fined $107 million by the SEC, along with two former employees who were deemed to be directly involved in executing the deceptive tactic, and have all admitted wrong doing. There is also a pending federal court case filed against another ex CEO of a Convergence subsidiary.

Stephen L. Cohen, an Associate Director in the SEC’s Division of Enforcement commented thus;

“Senior executives cannot permit deceptive practices by their subordinates,” said.  “Lax not only condoned such conduct, but he specifically authorized practices that kept customers in the dark.”

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All in all, Craig Lag has admitted to wrongdoing, and has bagged a 5-year ban from the industry in addition to the $783,000 penalty levied upon him and has agreed to fully cooperate with the regulators in the ongoing investigation, with additional fines against Lax still possible.

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