NASD Charges Swift Trade Securities with Fraudulent and Non-bona Fide "Wash" Transactions in QQQ
Washington, D.C. — NASD today announced it has filed a complaint against Swift Trade Securities USA, Inc. and its President, Peter Beck, for engaging in a fraudulent trading scheme involving fictitious "wash" transactions in the Nasdaq-100 Index Tracking Stock (QQQ) to obtain market data revenue generated from such transactions.
From April 2002 through May 2002, Swift USA, an NASD-registered brokerage firm based in Toronto, Canada, under the direction of Beck, operated a computer software program to route simultaneously offsetting limit orders for QQQ to The Island ECN solely for the account of its Canadian-registered counterpart, Swift Trade Securities, Inc. its only customer. Because these orders were executed at the same price and quantity on both sides of the market for Swift Canada's proprietary account, they were not intended and did not result in any change of Swift Canada's ownership of QQQ shares. These fictitious and non-bona fide transactions that do not result in a change of ownership are illegal.
The complaint alleges that Swift USA, through Beck, violated NASD rules by executing these "wash" transactions through Island to profit from the market data revenue sharing provided by Island to its subscribers, while not subjecting Swift Canada to the risk of profit or loss from the underlying trading. During the course of one month, Swift USA received over $19,000 in ill-gotten market data revenue.
The complaint also charges that Swift USA and its Vice President and Compliance Officer, Joseph Ianni, inadequately supervised the trading in Swift USA's proprietary account.
Under NASD rules, the individuals and the firms named in the complaint can file a response and request a hearing before an NASD disciplinary panel. Possible sanctions include a fine, censure, suspension, bar, or expulsion from the NASD, in addition to the request made by NASD in the complaint that the respondents give up any illegal profits and pay restitution.
Investors can obtain more information about NASD as well as the disciplinary record of any NASD-registered broker or brokerage firm by calling (800) 289-9999, or by sending an e-mail through the NASD Web site, www.nasd.com.
NASD is the leading private-sector provider of financial regulatory services, dedicated to bringing integrity to the markets and confidence to investors through effective and efficient regulation and complementary compliance and technology-based services. NASD touches virtually every aspect of the securities business -- from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and member firms. For more information, please visit our Web site at www.nasd.com.