Heartland, Brokers to Pay $70 Mln to Settle Charges (Update1)
By Neil Roland
Washington, Jan. 14 (Bloomberg) -- Heartland Securities Corp., a day trading firm, and six brokers with its predecessor firm, Datek Securities Corp., agreed to pay $70.2 million to settle securities fraud charges filed by regulators.
The Securities and Exchange Commission alleged that Sheldon Maschler, Erik Maschler, Jeffrey Citron, and Michael McCarty executed millions of illegal proprietary trades on the Nasdaq Stock Market's Small Order Execution System. The defendants hid their fraud from 1993 to 2001 by creating fictitious books and filing false regulatory reports, the SEC said.
The charges stem from day traders' exploitation of an automated Nasdaq system designed in the 1980s to give small traders an opportunity to trade on a level playing field with large brokerages. Nasdaq changed the SOES system following abuses by day traders, many of whom were professional traders who exploited moment-to-moment stock movements during the market boom of the late 1990s.
``Today's action and hard-hitting penalties reinforce the high degree of integrity required of broker-dealers and persons associated with them,'' said associate SEC enforcement director Antonia Chion.
A year ago, Datek Online Holdings Corp., formerly Datek Securities, agreed to pay a $6.3 million fine on similar charges.
Sheldon Maschler agreed to pay $29.2 million in penalties and Citron $22.5 million, among the largest regulatory penalties ever assessed against individuals, the SEC said. They, as well as Erik Maschler and McCarty, orchestrated the scheme, according to the SEC.
Other brokers who agreed today to pay fines were Aaron Elbogen, formerly Datek Securities' chief executive officer, and Moishe Zelcer, formerly Datek's chief compliance officer, the SEC said.
Heartland bought Datek Securities' day-trading business in 1998. |
