United Kingdom-based brokerage firm TFS-ICAP LIMITED and its affiliate in the United States TFS-ICAP LLC, have both plead guilty to securities fraud, Attorney General Barbara Underwood said. On Wednesday, the two brokers admitted to posting fake trades in emerging markets forex currency options - a practice that management was aware of and allowed.
In front of the New York City Criminal Court Administrative Judge Kevin McGrath, both companies each plead guilty to one count of securities fraud under New York’s Martin Act. Furthermore, they both made a civil settlement agreement with the Attorney General’s office.
As a result, both brokers will need to implement remedial procedures and policies that make sure each bid, offer, and trade in Forex options shown or announced to the financial markets are transparent and host an independent monitor for two years. Because management was aware of the fraud, two high-level managers from any supervisory role related to the area of fraud must be removed.
TFS-ICAP LIMITED and TFS-ICAP LLC will have to pay $1.15 million in penalties. They will also need to assist and cooperate with the ongoing criminal investigations by the Attorney General into the management team and brokers at both firms.
Attorney General Barbara Underwood
Source: New York State Attorney General
Commenting on the case, Attorney General Underwood said: “My office will pursue financial frauds – no matter how sophisticated – and hold financial institutions accountable for their conduct. Our investigation into fraudulent conduct in the foreign Exchange currency options market continues.”
Details of the Securities Fraud by TFS-ICAP
The announcement on Wednesday follows a three-year investigation from the Attorney General. During this time the office sorted through more than two years worth of instant message and voice communications between brokers from TFS-ICAP and bank traders as well as internal emails. The office also reviewed trade blotters (records of trades) for trades made through TFS-ICAP as well as other sources of information.
From this review, the Attorney General found that the fraudulent behavior was from around January 1, 2007, until December 31, 2015. During this time, brokers at TFS-ICAP announced fake trades in Latin American forex options to New York traders. These were announced via instant message chats and voice transmissions. The main reason for the fraud was to make the market seem more liquid.
Through the investigation, it was discovered that management was aware of the fraud and allowed it to continue. At present, the Attorney General is investigating individual employees of TFS-ICAP, including two high-level managers at the firm.
