The Securities and Exchange Commission tagged Scottrade Inc. with a $950,000 fine today for fraudulent information it gave to clients regarding orders for Nasdaq -listed shares.
The SEC charged that St. Louis-based Scottrade made “fraudulent misrepresentations” to customers related “to the firm’s execution of their Nasdaq pre-open orders.”
Those orders are placed after the day’s market close, to be executed at the next market opening.
Scottrade neither denied nor admitted the charges.
According to the SEC, Scottrade didn’t conduct a regular and rigorous review of the execution quality of its orders on the Nasdaq Stock Market Inc. of New York before it opened for trading.
By accepting clients’ orders, a broker-dealer implicitly represents to customers that it will regularly and rigorously review the quality of execution that it receives on its orders, according to the SEC.
From 2001 to 2004, the online discount-brokerage firm misrepresented to its clients that it would give its customers executions of trades in stocks that may be superior to the best bid available.
“The SEC’s order contains no specific findings of losses to any Scottrade customer,” Kelly Doria, a spokeswoman for the firm, wrote in an e-mail. “Since 2004, changes in Nasdaq market structure and new procedures by Scottrade have rectified the issues addressed in the order.”
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