E-Trading Platform Neovest Agrees to Pay $2.75M for Unregistered Broker-Dealer Violation

According to a press release and order issued on Tuesday, the Securities and Exchange Commission (SEC) agreed to accept a settlement offer put forward by Neovest Inc., a subsidiary of JPMorgan Chase & Co, in an administrative proceeding against the Orem, Utah-based company. 

The SEC alleged that by operating as an unregistered broker-dealer, Neovest failed to provide investors with important protections like submission to regulatory oversight and adherence to policy and procedure requirements relating to customer information and identity theft safeguards.

According to the SEC’s order, Neovest is a company which offers an order and execution management system (OEMS) for electronic trading and real-time market data to primarily institutional investors and asset managers. From 1996 to 2006 Neovest was registered as a broker-dealer with the SEC and the Financial Industry Regulatory Authority (FINRA), the order said. JPMorgan Chase reportedly acquired Neovest in September 2005, and deregistered the broker-neutral electronic trading system in December 2006.

However, the SEC alleged, Neovest continued to act as a broker-dealer “by engaging in the business of effecting securities transactions for others through the receipt of transaction-based compensation for its OEMS services and its solicitation of customers for those services,” for more than a decade in willful violation of Section 15(a) of the Securities and Exchange Act. This week’s order stateed that Neovest has consented to SEC censure without admitting or denying fault.

Consequently, the trading service promised not to commit further violations and to pay a $2.75 million civil penalty. According to the press release, this is the first time the SEC has charged an OEMS provider for operating as an unregistered broker-dealer.