Phoenix Derivatives Group and Eight Brokers Ordered To Pay $4.3 Million By FINRA for Allegedly Engaging In Improper Communications About Customers’ Interdealer Brokerage Rate Negotiations in the Wholesale Credit Default Swap (CDS) Market.
The Financial Industry Regulatory Authority (FINRA) has issued an order imposing fines on Phoenix Derivatives Group, LLC of New York and eight brokers – three employed at Phoenix and five at four other interdealer brokerage firms – for improper communications about customers’ proposed brokerage rate reductions in the wholesale credit default swap (CDS) market, according to a June 24, 2010 FINRA securities & investment regulatory press release.
FINRA reportedly found that the brokers engaged in communications with personnel at other interdealer brokerage firms that improperly attempted to influence those firms and individuals, including communications regarding reactions to customers’ proposed rate reductions and statements concerning actual or contemplated interdealer broker responses or counter-positions to the customers’ proposed rate reductions and/or discussions about creating identical, or similar, individual counter-proposals to rate reduction requests.
Phoenix Derivatives Group was fined $3 million (of which $900,000 is a joint and several fine apportioned among the three CDS desk co-heads). In addition to Phoenix and its desk co-heads, five brokers at other interdealer firms in the CDS market were reportedly fined a total of $1.3 million and issued suspensions by FINRA:
- Thomas J. Lewis and Matthew A. Somers, former brokers and co-managers for the CDS desk at Chapdelaine Corporate Securities & Co., of New York, were each fined $350,000 and suspended from working in the securities industry in all capacities for six months and three months, respectively.
- John P. Tompkins, a former broker and manager of the CDS desk at CreditTrade (US) Corp., of New York, was fined $100,000 and suspended in all capacities for four months.
- Michael B. Jessop, a former broker and co-manager of the CDS desk at Tullett Liberty Inc., of New York, was fined $250,000 and suspended in all capacities for two months.
- Eric Ridder, a former broker for Creditex Group, Inc., of New York, was fined $250,000 and suspended in all capacities for two months.
In settling this matter, Phoenix Derivatives Group and the eight brokers neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
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