UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934

Release No. 71128 / December 18, 2013

INVESTMENT ADVISERS ACT OF 1940

Release No. 3744 / December 18, 2013

ADMINISTRATIVE PROCEEDING

File No. 3-15654

In the Matter of

G-Trade Services LLC,

ConvergEx Global Markets Limited, 

and

ConvergEx Execution Solutions LLC,

Respondents.

ORDER INSTITUTING ADMINISTRATIVE 

AND CEASE-AND-DESIST PROCEEDINGS, 

PURSUANT TO SECTIONS 15(b) AND 21C 

OF THE SECURITIES EXCHANGE ACT OF 

1934 AND SECTION 203(e) OF THE 

INVESTMENT ADVISERS ACT OF 1940, 

MAKING FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS AND A CEASEAND-DESIST ORDER 

I.

The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 

public interest that public administrative and cease-and-desist proceedings be, and hereby are, 

instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 (“Exchange 

Act”) and Section 203(e) of the Investment Advisers Act of 1940 (“Advisers Act”) against GTrade Services LLC (“G-Trade”), ConvergEx Global Markets Limited (“CGM”), and ConvergEx 

Execution Solutions LLC (“CES”) (collectively, “Respondents”). 

II.

In anticipation of the institution of these proceedings, Respondents have submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept. Respondents admit 

the facts set forth in Sections III.B. and C. below, acknowledge that their conduct violated the 

federal securities laws, admit the Commission’s jurisdiction over them and the subject matter of 

these proceedings and consent to the entry of this Order Instituting Administrative and Cease-andDesist Proceedings Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 and 

Section 203(e) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial 

Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. 
2

III.

On the basis of this Order and Respondents’ Offers, the Commission finds1 that:

A. Summary

These proceedings arise out of a fraudulent scheme to conceal Respondents’ practice of

unnecessarily routing certain global trading and transition management customer orders to an 

offshore affiliate in order to charge undisclosed mark-ups and mark-downs in addition to disclosed 

commissions on those orders. Respondents held themselves out to the public as a unified conflictfree agency broker that charged explicit commissions for equity order execution. In addition to 

explicit commissions, however, Respondents routinely took undisclosed “trading profits” (“TP”)

from global trading and transition management customers by routing customer orders to an offshore 

affiliate, which executed orders on a riskless basis and opportunistically added a mark-up or markdown to the price of the security. Often the offshore affiliate consulted with the client-facing 

brokers to assess whether and how much TP to take, in order to minimize the risk of detection by 

the customer. TP often greatly exceeded the disclosed commissions, which resulted in many

customers paying more than double the amount that they thought they were paying to execute 

orders. The practice of executing orders through the offshore affiliate and taking TP was not 

adequately disclosed to customers and was inconsistent with Respondents’ purported conflict-free

agency model. In addition, through this practice, Respondents failed to seek to obtain best 

execution.

Respondents believed that they would lose business if customers became aware of this 

practice. As a result, Respondents orchestrated a scheme to intentionally or recklessly conceal TP 

from customers. The foundation of the scheme was Respondents’ multiple-broker corporate 

structure that included the offshore affiliate, which was necessary to add an additional layer of 

execution charges while maintaining the appearance of technical compliance with regulatory 

requirements. Respondents also engaged in specific acts to hide TP from customers, including 

opportunistically taking TP only when they believed that the risk of detection by the customer was 

low, using technological tools to conceal their identity in otherwise transparent markets,

intentionally delaying the implementation of real-time trade reporting and utilizing proprietary 

software applications to quickly fabricate false execution prices. In addition, Respondents made 

false and misleading statements to customers who inquired about Respondents’ overall 

compensation, including providing certain customers with falsified trading data to cover up the fact 

that the offshore affiliate had taken TP on their orders. 

 1 The findings herein are made pursuant to Respondents’ Offers of Settlement and 

are not binding on any other person or entity in this or any other proceeding.
3

Customers with large orders, including those arising out of the global trading and transition 

management services at issue here, typically rely on their brokers to execute orders on their behalf 

at the most favorable terms reasonably available under the circumstances. Monitoring the 

execution of these orders and assessing the quality of a broker’s services can be difficult for even 

the most sophisticated customers – particularly given the complex nature of today’s markets, 

where brokers often need to choose from a variety of order types, routing strategies, and trading 

venues to execute large orders. Customers rely on the honesty and expertise of their brokers and 

are ill-positioned to decipher disclosures that may be technically accurate but are materially

misleading.2

 Often, as in this case, customers ask their brokers for general information on how 

their orders are handled, as well as request specific data to enable more detailed tracking of 

execution quality. In such cases, brokers must provide accurate information, without material 

misstatements or omissions, including by responding to customer inquiries in a transparent and 

complete manner, in order for customers to be able to assess the quality and overall costs of the 

broker’s services. 

By virtue of their conduct, Respondents willfully violated Section 10(b) of the Exchange 

Act and Rule 10b-5 thereunder, and G-Trade and CES willfully violated Section 15(c)(1) of the 

Exchange Act.

After commencement of the Commission’s investigation, Respondents provided substantial

cooperation to the Commission staff and undertook significant remedial measures. For example, 

the Audit and Risk Committee of Respondents’ ultimate parent company retained separate counsel, 

who conducted an internal investigation and, together with company counsel, promptly reported to 

the staff the factual information developed in counsel’s witness interviews and document review. 

Counsel consistently responded to staff requests in a timely fashion and in a useful format, and on 

several occasions identified significant evidence for the staff, which accelerated the progress of the 

investigation. Respondents also closed down the offshore affiliate, discharged a number of 

employees, including employees in management positions, and ceased the routing of U.S. 

securities offshore for order handling. Moreover, in 2012, Respondents augmented disclosures 

related to global trading and transition management, enhanced relevant policies, procedures and 

compliance programs and hired a new general counsel. 

B. Respondents

1. G-Trade Services LLC is a registered broker-dealer and a wholly-owned 

subsidiary of ConvergEx Group, LLC (“ConvergEx”).

3

 G-Trade is headquartered in New York 

 2 See SEC v. Gabelli, 653 F.3d 49, 57 (2d Cir. 2011), rev’d on other grounds, ––– U.S. ––

––, 133 S.Ct. 1216, 185 L.Ed.2d 297 (2013) (“The law is well settled . . . that so-called ‘halftruths’—literally true statements that create a materially misleading impression—will support 

claims for securities fraud”).

3

 ConvergEx, formerly known as BNY ConvergEx Group, LLC, is a global investment 

services and technology firm that was established in October 2006 through the combination of an 
4

and has been registered as a broker-dealer with the Commission since October 2006. ConvergEx 

Global Markets Division (the “CGM Division”) was an unincorporated business division of GTrade and other offshore affiliates of ConvergEx, which offered global trading services from 2006 

until 2011. 

2. ConvergEx Global Markets Limited was a Bermuda broker-dealer and is 

a wholly-owned subsidiary of ConvergEx. CGM is not registered with the Commission in any 

capacity. CGM ceased all trading activities in early 2012 and voluntarily relinquished its 

securities license with the Bermuda Monetary Authority in 2012. The CGM trading model at issue 

in these proceedings predated the formation of ConvergEx in October 2006.

3. ConvergEx Execution Solutions LLC is a registered broker-dealer and a 

wholly-owned subsidiary of ConvergEx. CES is headquartered in New York. CES has been 

registered with the Commission as a broker-dealer since January 1994, and as an investment 

adviser since September 2006. CES has been a member of the New York Stock Exchange since 

January 1994. Global Transition Management (“GTM”) is an unincorporated business division of 

CES and other offshore affiliates of ConvergEx, which offers transition management services. 

C. Facts

Order Routing Practices and Customer Charges

4. From 2006 through 2011, Respondents executed equity orders for 

institutional customers, including funds managed on behalf of charities, religious organizations, 

retirement plans, universities and governments. 

5. The CGM Division offered customers global trading services, and GTM 

provided global transition management services.4 The CGM Division’s global trading services 

involved handling large non-electronic orders for either a single stock or a basket of stocks in 

markets around the world, including the United States. GTM’s global transition management 

services involved handling large orders to buy and sell stocks for customers who were changing 

fund managers or investment strategies. Customers seek out transition management services in 

order to minimize risks to their portfolios and preserve the value of their stocks while in transition.

 

institutional trade execution business and an investment technology company. ConvergEx is 

headquartered in New York and is not registered with the Commission in any capacity.

4

 The conduct that is the subject of this Order involves certain segments of the businesses

operated by CES and G-Trade from 2006 through 2011. These proceedings do not involve the 

following businesses of CES, G-Trade or their affiliates: U.S. Program and Sales Trading, Options 

Services, Prime Services, ATSs, Commission Management and Recapture Services, Clearing, or 

Technology. These proceedings also do not involve orders executed through ConvergEx’s 

electronic Direct Market Access (“DMA”) platform.
5

6. Respondents are not market makers, and they generally do not commit their 

own capital to facilitate customer executions or offer customers guaranteed prices. Thus, 

Respondents assume little, if any, market risk when they execute customer orders. 

7. GTM and the CGM Division of G-Trade acted as agent on behalf of 

customers and charged a disclosed commission. In this capacity, sales traders received customer 

orders and entered them into CGM’s order management system, which allowed them to

automatically route the orders to CGM in Bermuda. With a customer order in hand, CGM acted in 

a riskless principal capacity and bought or sold the security for CGM’s own account through a 

local broker in the relevant market.

5

 If CGM employees believed that they could add a mark-up or 

mark-down without detection by a non-fiduciary customer, they added one to the price received 

from the local broker and kept the difference for Respondents as trading profits or “TP.”6

 CGM 

then delivered the execution back to GTM or the CGM Division of G-Trade, which confirmed the 

trade to the customer at a price that included TP. As a result, when CGM took TP on a customer’s 

trade, the price reported to the customer by GTM or the CGM Division was worse than the price 

that CGM had received from the local broker. 

8. CGM often took TP on orders to buy or sell stocks listed on U.S. 

exchanges. Most of these orders were received in the New York office of GTM or the CGM 

Division, and instead of routing those orders to CES, which was ConvergEx’s U.S. trading arm and 

a member of U.S. exchanges, Respondents unnecessarily routed those orders to CGM in Bermuda 

in order to take TP. CGM traders in Bermuda would then in turn execute the orders with thirdparty U.S. broker-dealers and add TP to the price received before delivering the execution back to 

GTM or the CGM Division of G-Trade.

9. Each customer’s trade confirmation disclosed the commission charged by 

CES or G-Trade, but did not state that CGM also had taken a mark-up or mark-down on the price 

at which the local broker filled the order.

10. The amount of TP taken on trades often was more than the disclosed 

commission. It was not uncommon for the amount of TP to be several times the amount of the 

commission that the customer had paid CES or G-Trade. For example, GTM conducted a

transition for a university, which paid GTM approximately $93,000 in disclosed commissions, but 

also paid approximately $543,000 in TP. Similarly, GTM conducted a transition on behalf of a 

 5

 In general, a “riskless principal” trade occurs when a broker-dealer, after receiving a 

customer order to buy (or sell) a security, buys (or sells) the security for its own account from (or 

to) another person in a contemporaneous offsetting transaction and then allocates the shares to 

the customer order.

6

 Some customers asked Respondents to handle their trades on a fiduciary basis. When 

customers requested fiduciary treatment, Respondents did not take TP on those customers’ trades 

and typically charged those customers higher disclosed commission rates.
6

charitable organization, which paid approximately $33,000 in disclosed commissions, but also paid

approximately $283,000 in TP. In both cases, the transitions involved trades only in securities 

listed on U.S. exchanges, yet GTM unnecessarily routed the customers’ orders offshore to CGM in 

order to take TP.

11. TP was an important revenue source for Respondents, and the profitability

of CGM and GTM in large part depended on it.

Concealing TP from Customers

12. Many employees of Respondents, including certain members of their senior 

management, understood that customers likely were unaware of CGM’s practice of taking TP and 

would fire them if they learned of the practice. As a result, from 2006 through 2011, as described 

herein, Respondents engaged in a fraudulent scheme by taking steps to intentionally or recklessly 

conceal from customers the practice of taking TP.

Marketing Materials and Disclosures

13. From 2006 to 2011, Respondents marketed themselves as a “conflict free” 

agency-only broker offering global execution services. 

14. Some of Respondents’ marketing materials described Respondents’ global 

trading services under the “BNY ConvergEx Group” brand as a “conflict-free” solution with 

access to global markets “all through one organization.” With respect to these services, 

Respondents stated that “[o]ur interests are aligned with yours.” Likewise, Respondents stated, 

“[o]ur primary interest is putting your interests first.”

15. GTM at times marketed its transition management services by stating, “with 

our agency-only platform, our interests are always fully aligned with yours.” GTM also at times 

promoted its transition management services as the customer’s “conflict-free advocate.” GTM at 

times further advertised that it eliminated “unnecessary transactions” and promised “full 

transparency.” For these services, GTM at times represented to customers that the commission 

schedule included “all of our charges.”

16. In light of the practice of taking TP described herein, these statements were 

untrue with respect to Respondents’ order handling practices for non-fiduciary orders.

17. Respondents used several versions of customer disclosures during the 

relevant period, and the relevant disclosures expanded over time. These disclosures generally 

stated, “Client authorizes ConvergEx, in its sole discretion and without notice, to use the services 

of one or more other persons or entities (including its affiliates) in connection with the execution, 

clearance and/or settlement of any Order and/or Transaction, or otherwise to service Client or 

perform its obligations, and that such persons or entities may act as principal and earn a spread[.]” 
7

18. These disclosures did not state the regularity with which GTM and the 

CGM Division of G-Trade routed orders to CGM and took TP. These disclosures also did not state

that GTM and the CGM Division routed orders for securities listed on U.S. exchanges to their 

affiliate in Bermuda, which took a mark-up or mark-down, instead of CES, their “U.S. trading 

arm” and a member of U.S. exchanges. Furthermore, Respondents did not disclose the amount of 

TP that they took on trades or indicate to customers that, in many instances, they were paying 

several times more than the agreed-upon commission amount.

19. Certain members of CGM’s and G-Trade’s senior management were aware 

that these disclosures did not inform customers of their routine practice of taking TP or the 

magnitude of the TP in comparison to the commission.

Multiple-Broker Structure

20. G-Trade and CES unnecessarily used CGM, which was established prior to 

the formation of ConvergEx, to execute certain customer orders. This multiple-broker structure 

was critical to the practice of taking TP. Specifically, GTM and the CGM Division of G-Trade

received orders worldwide through sales traders located in New York and elsewhere, but 

maintained their global traders in a separate broker entity, CGM, which was located in Bermuda. 7

21. CGM in Bermuda and the CGM Division (which included New York-based 

global sales traders registered with G-Trade) were operated as one business. For example, CGM’s 

Bermuda operation was managed jointly with the CGM Division of G-Trade in New York, and TP 

generated in Bermuda was credited or “shadow posted” to CES and G-Trade for various business 

reasons, including for employee compensation determinations. In addition, CGM’s TP and 

commission revenues were regularly discussed with senior management of ConvergEx. 

22. There was no benefit to customers arising from the fact that the services 

were provided in Bermuda by a separate broker. Rather, CGM’s Bermuda operation was used as a 

means to take TP. Particularly with respect to U.S. equities, GTM and the CGM Division routed 

certain orders to CGM in order to take TP, knowing that many trades would be more profitable for 

Respondents at customers’ expense. CGM did not provide additional necessary services in 

handling these orders and routed them back to brokers in the U.S. for execution. Respondents thus 

improperly interpositioned CGM between the customer and the relevant market and failed to seek 

to obtain best execution on customer orders. 

23. In 2007, certain members of senior management approved GTM’s decision

to increase the routing of orders for U.S. equities to CGM in Bermuda. CGM could generate more 

profits by adding TP to the customer’s price than CES could generate by charging commissions 

alone. Significantly, because there were increased settlement costs associated with routing trades 

 7 For orders executed in Asian markets, GTM and the CGM Division routed customer 

orders to an affiliated broker in Hong Kong wholly owned by ConvergEx, which functioned in a 

similar capacity to CGM in Bermuda.
8

to Bermuda, certain members of senior management directed that customer orders not be routed to 

CGM unless there was an opportunity to take TP from customers.

TP Taken Opportunistically 

24. Respondents concealed their practice of charging customers both 

commissions and TP by making decisions regarding TP on an opportunistic basis. In other words, 

Respondents’ decision whether to take TP, and the amount of TP to take, depended largely on 

whether Respondents thought that CGM could take TP without the customer detecting it. On one 

occasion, CGM’s then head trader directed another trader, “You must take TP, take as much as you 

can get away with.”

25. To this end, the CGM Division and GTM generally assessed the 

“sensitivity” of their customers to determine whether a particular customer was paying attention to 

execution quality. The CGM Division of G-Trade and GTM communicated that information to 

CGM in Bermuda, and CGM did not take TP on trades for “sensitive” customers. 

26. Similarly, CGM often took TP when customers were asleep during market

trading hours because of time zone differences. On the other hand, CGM did not take TP from 

customers who actively monitored executions throughout the day through the receipt of real-time 

trade information. 

27. Likewise, CGM, with the knowledge and approval of its senior 

management, did not take TP on trades if customers, prior to trading, requested a “time and sales” 

report that would detail the times of execution and prices received on the individual executions

underlying a customer’s order, and thus expose any TP taken by CGM. 

28. The CGM Division also suspended the practice of taking TP at times when 

it knew customers were scrutinizing their executions, in order to impress those customers and 

secure future business. In at least one instance, CGM suspended the practice of taking TP when a 

customer requested time and sales reports to analyze execution prices and then resumed taking TP 

after they were told that the customer was no longer conducting the analysis.

29. Respondents also determined the amount of TP that they could take from 

customers based on their perception of the likelihood that the customer would detect the charge. 

For example, in certain instances when Respondents perceived the risk of detection to be low, 

CGM took TP in an amount that resulted in customers buying at a price equal to the market high of

the day and selling at a price equal to the market low of the day, where better prices could have 

been provided. Senior management of CGM was aware of these practices, and when consulted,

directed and approved of setting customer prices in this manner.

30. The end result of this practice was that certain customers received worse

execution prices from Respondents than they would have received if they had been more

“sensitive.” Certain members of Respondents’ senior management encouraged employees to 
9

communicate information regarding customers’ perceived “sensitivity” to CGM to maximize the 

amount of TP taken by CGM.

Preventing Customers from Monitoring Their Executions 

31. To conceal TP, Respondents took steps to prevent their customers from 

monitoring their trade executions. For example, certain customers were told that they needed to 

give Respondents prior notice in order to receive time and sales reports. 

32. Likewise, the practice of taking TP became threatened when advances in 

market technology prompted an increased number of customers to request intraday execution price 

information on their trades in “real-time.” Respondents understood that they would not be able to 

take TP if the customers received a live data feed that revealed the prices that CGM itself had 

received in the local markets for the customers’ trades. 

33. As a result, CGM took steps to delay implementing real-time trade reporting

for one highly profitable customer. After the customer requested real-time reporting, the CGM 

Division made misleading statements to the customer indicating that it did not have the capability,

and it delayed implementing the service for approximately a year in order to take TP. To continue 

to take TP even after the customer started receiving real-time data, CGM, working in coordination 

with employees of the CGM Division of G-Trade, disabled the service periodically in order to take 

TP and falsely told the customer that they were experiencing technological difficulties. 

Misrepresentations Regarding Compensation

34. Respondents believed that customers generally did not understand 

Respondents’ business model with respect to TP and would fire them if they learned the truth. As 

a result, Respondents further concealed their practice of taking TP by making misrepresentations 

and misleading statements to customers who inquired about how Respondents were compensated 

for their order execution services. 

Compensation on Transitions

35. In response to one customer’s inquiry into whether GTM could act in a 

principal capacity and take a spread, GTM employees first attempted to avoid answering the 

question, and then provided a misleading response with respect to the circumstances under which 

orders would be executed on a principal basis. GTM employees also stated falsely that it was 

“difficult, if not impossible” to determine the amount of the mark-ups or mark-downs under such 

circumstances.

36. At times, GTM also provided untrue responses to requests for pre-transition

proposals for some customers. For example, one customer’s request for proposal for transition 

management services asked GTM directly: “Describe your revenue source. How transparent is 

your revenue?” A GTM employee responded: “All of our revenue sources are commission based, 
10

and are fully disclosed. Other than explicit commissions, we do not charge any additional fees.” 

While this response was technically accurate from the narrow perspective of GTM, the response 

omitted the fact that the customer would pay TP in addition to the explicit commissions charged by 

GTM, and was thus misleading. 

37. In response to another customer’s inquiry regarding the spread disclosure 

language in the transition management agreement, a GTM employee falsely stated that principal 

trading is “rarely used in our transition business” and “we can assure you that no principal trading 

has been carried out in any transition for [the customer.]” The GTM employee further stated that 

“[s]hould it ever be necessary, prudent or strategically important” to engage in principal trading for 

the customer, GTM “would always discuss and seek your approval.” This statement was approved

expressly by a senior manager of GTM, who knew that the statement was untrue. 

Falsified Time and Sales Reports

38. Certain customers requested time and sales reports for trades on which 

CGM had taken TP. Because CGM had added a mark-up or mark-down to the price received from 

the local broker in order to take TP, the average of the prices reflected on the time and sales reports 

would not match the price previously reported to the customer on the trade confirmation. Due to 

these discrepancies and the risk of the inquiring customers finding out about TP, certain employees 

of CGM and G-Trade’s CGM Division lied to customers rather than acknowledge the undisclosed 

mark-ups and mark-downs.

39. In some instances, customers were falsely told that the time and sales 

reports no longer existed. On at least six occasions involving at least four different customers, 

CGM employees altered the time and sales data reflecting CGM’s actual execution prices, so that 

the prices given to the customers would average to the price, inclusive of TP, previously reported 

on the customers’ confirmations. Once these reports were prepared, CGM or CGM Division

employees transmitted the data to customers in a format that made it difficult for the customer to 

analyze. Senior management of CGM was aware that these false reports were provided to 

customers who asked for prints for their trades.

Technological Tools

40. Respondents employed technological tools to conceal their practice of 

taking TP from their customers. 

41. On at least one occasion, when the now former head trader for CGM 

believed that there might be market transparency on trades that were part of a transition, with the 

approval of certain members of senior management, he used algorithmic tools and anonymous 

broker codes to hide CGM’s identity in the market so that the customer could not identify with 

whom CGM traded or the prices it received. Although this algorithmic tool could be used for 

legitimate purposes, such as promoting market anonymity in order to minimize market impact of

trades, the former CGM head trader used this anonymity on this occasion to add a mark-up or 
11

mark-down on the prices that CGM had received on the customer’s trades in order to take TP 

without the customer knowing it. 

42. In addition, Respondents developed and implemented software known as 

“AutoTP” that allowed traders to quickly compare actual execution prices to market highs, lows 

and various benchmarks. This tool helped traders to maximize TP and arrive at a customer price 

that minimized the likelihood of detection by the customers. 

Inadequacy of Procedures

43. Throughout the relevant period, Respondents lacked adequate policies and 

procedures related to monitoring execution quality for orders routed to CGM. Indeed, until 

November 2008, Respondents had no formal policies and procedures in place to evaluate CGM’s 

execution quality. Even after Respondents adopted such policies, Respondents failed to effectively 

implement and review compliance with those policies. Respondents also ignored a number of red 

flags related to the concealment of TP.

Advice of Counsel

44. On certain occasions, ConvergEx and a predecessor entity retained outside 

law firms in the United States and elsewhere to advise on the adequacy of certain disclosures in 

light of CGM’s taking of TP on trades in global securities. Many of Respondents’ employees were 

generally aware of these reviews. None of these employees, however, was told that outside 

counsel had approved concealing the practice from clients. Indeed, these law firms were not 

advised that Respondents sometimes routed trades consisting solely of U.S. securities to Bermuda, 

nor were they told that CGM and GTM deliberately concealed TP from customers, that CGM 

routinely took TP in an opportunistic manner, or that CGM and GTM employees made false 

statements to customers in order to conceal their practice of taking TP.

D. Violations

45. As a result of the conduct described above, Respondents willfully violated 

Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, which prohibit fraudulent conduct 

in connection with the purchase or sale of securities.

46. As a result of the conduct described above, Respondents G-Trade and CES 

willfully violated Section 15(c)(1) of the Exchange Act, which prohibits fraudulent conduct by a 

broker-dealer in effecting, inducing or attempting to induce any securities transaction.

E. Respondents’ Remedial Efforts and Cooperation

47. In determining to accept the Offer, the Commission considered remedial 

acts promptly undertaken by Respondents and cooperation afforded the Commission staff. 
12

F. Undertakings

G-Trade and CES undertake to:

48. Retain, at the expense of G-Trade and CES and within thirty (30) days of 

the issuance of this Order, a qualified independent ethics and compliance consultant (the 

“Consultant”) with extensive experience in developing, implementing and overseeing 

organizational compliance and ethics programs, not unacceptable to the staff, to conduct an ethics 

and compliance program assessment. G-Trade and CES shall cause the Consultant to analyze 

whether the components of G-Trade’s and CES’s ethics and compliance program set forth below 

are having the desired effects, determine whether the culture is supportive of ethical and compliant 

conduct and provide advice and recommendations to strengthen the program and enhance the 

culture of compliance. G-Trade and CES shall cause the Consultant to:

a. review the creation, administration and implementation of the 

compliance and ethics program, including but not limited to reviewing key documents (e.g., 

business principles, Code of Conduct, policies and procedures, risk assessments, performance 

evaluation forms, relevant internal training materials and internal communications), conducting

an assessment survey and interviewing relevant personnel; 

b. review and evaluate G-Trade’s and CES’s policies, practices and 

procedures related to best execution and the provision of information to customers concerning 

order handling and compensation for trade execution, including but not limited to related written 

disclosures, advertising materials and other communications with customers and prospective 

customers; 

c. evaluate the structure and functioning of the Legal and Compliance 

Department, including a review of the corporate culture of compliance; and

d. report to the Commission staff and G-Trade’s and CES’s General 

Counsel and Chief Compliance Officer, as described below, regarding the Consultant’s findings 

and recommendations;

49. Provide a copy of the engagement letter detailing the Consultant’s 

responsibilities to Jennifer S. Leete, Assistant Director, Division of Enforcement, U.S. Securities 

and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549-5546;

50. Cooperate fully with the Consultant, including providing the Consultant 

with access to its files, books, records and personnel as reasonably requested for the abovedescribed review;

51. Require the Consultant to report to the Commission staff on his/her 

activities as the staff shall request;
13

52. Permit the Consultant to engage such assistance, clerical, legal or expert, as 

necessary and at reasonable cost, to carry out his/her activities, and the cost, if any, of such 

assistance shall be borne exclusively by G-Trade and CES;

53. Within one hundred and fifty (150) days of the issuance of this Order, 

unless otherwise extended by the Commission staff for good cause, G-Trade and CES shall require 

the Consultant to complete the review and report to the Commission staff and G-Trade’s and 

CES’s General Counsel and Chief Compliance Officer concerning:

a. the scope and methodologies used by the Consultant in order to 

complete the review; 

b. G-Trade’s and CES’s compliance with the review; 

c. the adequacy of G-Trade’s and CES’s existing policies, practices 

and procedures regarding the matters assessed; and 

d. the Consultant’s recommendations, if necessary, regarding 

modification or supplementation of G-Trade’s and CES’s policies, practices and procedures related 

to the matters assessed (the “Recommendations”);

54. Within one hundred and twenty (120) days of G-Trade’s and CES’s receipt 

of the Recommendations, G-Trade and CES shall adopt and implement all of the 

Recommendations; provided, however, that as to any Recommendation that G-Trade and CES

consider to be, in whole or in part, unduly burdensome or impractical, G-Trade and CES may 

submit in writing to the Consultant and the Commission staff (at the address set forth above), 

within sixty (60) days of receiving the Recommendations, an alternative policy, practice or 

procedure designed to achieve the same objective or purpose. G-Trade and CES shall then attempt 

in good faith to reach an agreement with the Consultant relating to each Recommendation that GTrade and CES consider to be unduly burdensome or impractical and G-Trade and CES shall cause 

the Consultant to reasonably evaluate any alternative policy, practice or procedure proposed by GTrade and CES. Such discussion and evaluation by G-Trade, CES and the Consultant shall 

conclude within ninety (90) days after G-Trade’s and CES’s receipt of the Recommendations, 

whether or not G-Trade, CES and the Consultant have reached an agreement. Within fourteen (14) 

days after the conclusion of the discussion and evaluation by G-Trade, CES and the Consultant, 

G-Trade and CES shall require that the Consultant inform G-Trade, CES and the staff (at the 

address set forth above) of his/her final determination concerning any Recommendation that GTrade and CES consider to be unduly burdensome or impractical. G-Trade and CES shall abide by 

the determinations of the Consultant and, within sixty (60) days after final agreement between GTrade, CES and the Consultant or final determination by the Consultant, whichever occurs first, GTrade and CES shall adopt and implement all of the Recommendations that the Consultant deems 

appropriate;
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55. Within fourteen (14) days of G-Trade’s and CES’s adoption of all of the 

Recommendations that the Consultant deems appropriate, G-Trade’s and CES’s General Counsel 

and Chief Compliance Officer shall certify in writing to the staff (at the address set forth above) 

that G-Trade and CES have adopted and implemented all of the Consultant’s Recommendations 

and that G-Trade and CES have established policies, practices and procedures that are consistent 

with the findings of this Order;

56. G-Trade and CES may apply to the Commission staff for an extension of 

the deadlines described above before their expiration, and upon a showing of good cause by GTrade and CES, the Commission staff may, in its sole discretion, grant such extensions for 

whatever time period it deems appropriate;

57. To ensure the independence of the Consultant, G-Trade and CES shall not 

have the authority to terminate the Consultant without prior written approval of the Commission’s 

staff and shall compensate the Consultant and persons engaged to assist the Consultant for services 

rendered pursuant to this Order at their reasonable and customary rates;

58. G-Trade and CES shall require the Consultant to enter into an agreement 

that provides that, for the period of engagement and for a period of two years from completion of 

the engagement, the Consultant shall not enter into any employment, consultant, attorney-client, 

auditing or other professional relationship with G-Trade and CES or any of their present or former 

affiliates, directors, officers, employees or agents acting in their capacity as such. The agreement 

will also provide that the Consultant will require that any firm with which he/she is affiliated or of 

which he/she is a member, and any person engaged to assist the Consultant in the performance of 

his/her duties under this Order shall not, without the prior written consent of the Commission staff, 

enter into any employment, consultant, attorney-client, auditing or other professional relationship 

with G-Trade and CES, or any of their present or former affiliates, directors, officers, employees or 

agents acting in their capacity as such, for the period of the engagement and for a period of two 

years after the engagement;

59. G-Trade and CES agree to certify in writing to the Commission staff (at the 

address set forth above), in the second year following the issuance of this Order, that G-Trade and 

CES have established and continue to maintain policies, practices and procedures consistent with 

the findings of this Order;

60. The Commission’s acceptance of G-Trade’s and CES’s offer of settlement 

and entry of this Order shall not be construed as its approval of any policy or practice reviewed by 

the Consultant and/or implemented based on the Consultant’s Recommendation.

IV.

In view of the foregoing, the Commission deems it appropriate and in the public interest to 

impose the sanctions agreed to in Respondents’ Offer.
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Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act and Section 203(e) 

of the Advisers Act, it is hereby ORDERED that:

A. Respondents cease and desist from committing or causing any violations and any 

future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

B. CES and G-Trade cease and desist from committing or causing any violations and 

any future violations of Section 15(c) of the Exchange Act.

C. CES and G-Trade are censured. 

D. Respondents shall, within 10 days of the entry of this Order, pay, jointly and 

severally, disgorgement of $79,802,448, prejudgment interest of $7,621,981 and a civil money 

penalty of $20,000,000, into an escrow account acceptable to the Commission’s staff and provide 

evidence of such deposit in a form acceptable to the Commission’s staff. If timely payment is not 

made, additional interest shall accrue pursuant to SEC Rule of Practice 600. If timely deposit of 

the civil penalty is not made by the required payment date, additional interest shall accrue pursuant 

to 31 U.S.C. § 3717.

E. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, as amended, a Fair 

Fund is created for the disgorgement, interest and penalties referenced in Section IV.D. above. 

Regardless of whether any such Fair Fund distribution is made, amounts ordered to be paid as civil 

money penalties pursuant to this Order shall be treated as penalties paid to the government for all 

purposes, including all tax purposes. To preserve the deterrent effect of the civil penalty, 

Respondents agree that in any Related Investor Action, they shall not argue that they are entitled 

to, nor shall they benefit by, offset or reduction of any award of compensatory damages by the 

amount of any part of Respondents’ payment of a civil penalty in this action (“Penalty Offset”). If 

the court in any Related Investor Action grants such a Penalty Offset, Respondents agree that they 

shall, within 30 days after entry of a final order granting the Penalty Offset, notify the 

Commission’s counsel in this action and pay the amount of the Penalty Offset to the United States 

Treasury or to a Fair Fund, as the Commission directs. Such a payment shall not be deemed an 

additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 

in this proceeding. For purposes of this Section, a “Related Investor Action” means a private 

damages action brought against Respondents by or on behalf of one or more customers based on 

substantially the same facts as alleged in the Order instituted by the Commission in this 

proceeding.

F. The disgorgement, interest, civil penalties and any other funds which may be paid 

to the Fair Fund through this action, or as the result of any related Commission actions, shall be 

aggregated in the Fair Fund in accordance with any orders issued in those other actions. The 

Commission will appoint a Fund Administrator who will develop a distribution plan (the “Plan”) 

with the assistance and cooperation of Respondents. The Plan will include a methodology to 

identify and compensate affected current and former customers of Respondents from whom TP 

was taken between October 2, 2006, and December 31, 2011. The Fund Administrator will 
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administer the Plan in accordance with the Commission Rules on Fair Fund and Disgorgement 

Plans. Respondents shall be responsible for any and all costs associated with developing and 

administering the Plan. Respondents shall also be responsible for any and all tax compliance 

responsibilities associated with the Fair Fund and may retain any professional services necessary or 

appropriate. The costs and expenses of any such tax compliance responsibilities and professional 

services, including the payment of any taxes, penalties, and interest due, shall be borne by 

Respondents and shall not be paid out of the Fair Fund. The Respondents have informed the 

Commission staff that the Fair Fund will constitute a Qualified Settlement Fund (“QSF”) under 

Section 468B(g) of the Internal Revenue Code, 26 U.S.C. §468B(g), and related regulations, 26 

C.F.R. §§1.468B-1 through 1.468B-5. Respondents shall be the “administrators” of the QSF 

identified in 26 C.F.R. §1.468B-2(k)(3) for tax reporting and compliance purposes. Any amount 

remaining in the Fair Fund after all distributions have been made and costs have been paid shall be 

transmitted to the Commission for transfer to the U.S. Treasury. Under no circumstances shall any 

part of the Fair Fund be returned to Respondents.

G. Respondents acknowledge that the Commission is not imposing a civil penalty in 

excess of $20 million based upon their cooperation in the Commission investigation and their 

agreement to cooperate in related enforcement actions. If at any time following the entry of the 

Order, the Division of Enforcement (“Division”) obtains information indicating that Respondents

knowingly failed to provide full, truthful and continuing cooperation, the Division may, at its sole 

discretion and with prior notice to the Respondents, petition the Commission to reopen this matter 

and seek an order directing that the Respondents pay an additional civil penalty. Respondents may 

contest by way of defense in any resulting administrative proceeding whether it knowingly failed 

to provide full, truthful and continuing cooperation, but may not: (1) contest the findings in the 

Order; or (2) assert any defense to liability or remedy, including, but not limited to, any statute of 

limitations defense.

H. G-Trade and CES shall comply with the Undertakings enumerated in Section 

III.F. above.

By the Commission.

Elizabeth M. Murphy

Secretary