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FINRA

For Release:
Contact:

Monday, September 13, 2010
Nancy Condon (202) 728-8379

 

Trillium Brokerage Services, LLC Action (PDF 980 KB)

 

FINRA Sanctions Trillium Brokerage Services, LLC, Director of Trading, Chief Compliance Officer, and Nine Traders $2.26 Million for Illicit Equities Trading Strategy

WASHINGTON — The Financial Industry Regulatory Authority (FINRA) today announced that it has censured and fined New York-based Trillium Brokerage Services, LLC, $1 million for using an illicit high frequency trading strategy and related supervisory failures. Trillium, through nine proprietary traders, entered numerous layered, non-bona fide market moving orders to generate selling or buying interest in specific stocks. By entering the non-bona fide orders, often in substantial size relative to a stock's overall legitimate pending order volume, Trillium traders created a false appearance of buy- or sell-side pressure.

 

This trading strategy induced other market participants to enter orders to execute against limit orders previously entered by the Trillium traders. Once their orders were filled, the Trillium traders would then immediately cancel orders that had only been designed to create the false appearance of market activity. As a result of this improper high frequency trading strategy, Trillium's traders obtained advantageous prices that otherwise would not have been available to them on 46,000 occasions. Other market participants were unaware that they were acting on the layered, illegitimate orders entered by Trillium traders.

 

In addition to the nine traders, FINRA also took action against Trillium's Director of Trading and its Chief Compliance Officer. The 11 individuals were suspended from the securities industry or as principals for periods ranging from six months to two years. FINRA levied a total of $802,500 in fines against the individuals, ranging from $12,500 to $220,000, and required the traders to pay out disgorgements totaling about $292,000.

 

"Trillium's trading conduct was designed to improperly bait unsuspecting market participants into executing trades at illegitimately high or low prices for the advantage of Trillium's traders," said Thomas R. Gira, Executive Vice President, FINRA Market Regulation. "FINRA will continue to aggressively pursue disciplinary action for illegal conduct, including abusive momentum ignition strategies and high frequency trading activity that inappropriately undermines legitimate trading activity, in addition to related supervisory failures."

 

FINRA's investigation found that nine Trillium proprietary traders intentionally created the appearance of substantial selling or buying interest in the NASDAQ Stock Market and NYSE Arca exchange. Trillium's traders bought and sold NASDAQ securities in this manner in over 46,000 instances, resulting in total profits of approximately $575,000, of which the firm retained over $173,000 and subsequently was required to disgorge.

 

The individual sanctions are as follows:

 

  • Trader, John J. Raffaele: $220,000 fine, $78,245 in disgorgement, and a two-year suspension.
  • Director of Trading, Daniel J. Balber: $200,000 fine, and a two-year suspension in a principal capacity.
  • Senior Vice President of Trading, Frank J. Raffaele, Jr.: $80,000 fine, $61,495 in disgorgement, and a two-year suspension, 10 months of which are in all capacities.
  • Trader, Brian M. Gutbrod: $80,000 fine, $51,465 disgorgement, and a 17-month suspension.
  • Vice President of Trading, James P. Hochleutner: $65,000 fine, $27,286 in disgorgement, and a two-year suspension, 10 months of which are in all capacities.
  • Trader, Samuel J. Yoon: $50,000 fine, $33,535 in disgorgement, and a 14-month suspension.
  • Trader, Tal Sharon: $25,000 fine, $20,622 in disgorgement, and an 11-month suspension.
  • Chief Compliance Officer, Rosemarie Johnson: $50,000 fine, and a one-year suspension in a principal capacity.
  • Trader, Bradley L. Jaffe: $20,000 fine, $12,169 in disgorgement, and a nine-month suspension.
  • Trader, Tal B. Plotkin: $12,500 fine, $7,125 in disgorgement, and a six-month suspension.
  • Trader, Michael S. Raffaele: 11-month suspension.

In concluding this settlement, Trillium and the individual respondents neither admitted nor denied the charges, but consented to the entry of FINRA's findings. This conduct was initially referred to FINRA by NASDAQ's MarketWatch Department.

 

Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2009, members of the public used this service to conduct 18.5 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999.

 

FINRA is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business - from registering and educating all industry participants to examining securities firms, writing and enforcing rules and the federal securities laws, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and registered firms. For more information, please visit www.finra.org.