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Securities finance regulation news | SEC charges US-broker TradeZero with misleading customers over meme stock trading

SEC charges US-broker TradeZero with misleading customers over meme stock trading

The Securities and Exchange Commission (SEC) has charged TradeZero America, a US-based broker-dealer, and Daniel Pipitone, the company’s co-founder, with providing false information to customers.

The US securities market regulator alleges that the accused parties misled customers by stating that they did not restrict customer purchases of meme stocks when, in reality, they did restrict purchases in these securities.

According to the charge statement, the SEC alleges that on 28 January 2021, TradeZero was instructed by its clearing broker not to allow its customers to buy three meme stocks. TradeZero later suspended purchases in these three lines of stock for approximately 10 minutes.

In subsequent statements in a press release, interviews and social media posts, TradeZero attempted to mislead the public by suggesting that it had not restricted trading in these securities. Daniel Pipitone said in a Reddit post: “That some trading firms are blocking these symbols is disgusting, unprecedented … Our clearing firm tried to make us block you and we refused.”

TradeZero and Pipitone consented to the entry of the SEC’s order that they had committed a breach of Sections 17(a)(2) and (3) of the 1933 Securities Act. They agreed to a cease-and-desist order, to a US$100,000 fine for TradeZero and a US$25,000 fine for Pipitone, but without admitting or denying any of the charges. TradeZero and Pipitone will retain an independent compliance consultant to ensure future compliance with federal securities laws.

Melissa Hodgman, associate director of the SEC’s Division of Enforcement, says: “This case sends a powerful message that participants in our capital markets cannot exploit market turbulence to deceive customers. The SEC has committed to ensuring that our capital markets continue to function in times of uncertainty, and today’s action highlights this commitment.”

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