BNY To Pay $23M Over Hedge Fund-Favoring Trade Scheme

Feb 13 2013 | 11:04am ET

BNY Mellon has agreed to pay $23 million to institutional clients harmed by trade manipulations made to favor hedge funds.

The Securities and Exchange Commission's staff has submitted a plan to distribute the $19.3 million in disgorgement and $3.7 million in prejudgment interest. The SEC filed an administrative complaint against BNY two years ago over the former Mellon Securities, alleging that institutional order desk manager Mark Shaw dummied the timing of cross trades "to advantage a handful of accounts held by individuals and hedge funds at the expense of accounts belonging to various employee stock purchase plans, employee stock option plans, direct purchase and sale plans, and similar plans."

The SEC stumbled upon Shaw's scheme, which allegedly ran from 1999 through 2008, when it filed an unrelated charge against one of the hedge funds. That led to an internal BNY investigation. The bank sold Mellon Securities in 2009.

Shaw himself was ordered to pay more than $350,000 in disgorgement and fines.


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Chicago-based independent futures brokerage and clearing firm R.J. O’Brien & Associates (RJO) has hired industry veteran Daniel Staniford as Executive Director, responsible for the firm’s institutional business development in New York and London.

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