Former ITG sec lending trader banned for ADR misuse
23 June 2017 Washington DC
Image: Shutterstock
The US Securities and Exchange Commission (SEC) has banned a former ITG securities lending senior trader from the market for improper handling of American depositary receipts (ADRs).
Former managing director and head of operations at broker-dealer ITG, Anthony Portelli, has agreed to settle the charges and pay a $100,000 penalty.
He also is prohibited from acting in a supervisory capacity for at least 18 months.
Portelli supervised ITG’s securities lending operations and was responsible for the firm’s compliance with pre-release agreements for ADRs.
Under Portelli’s watch, personnel on ITG’s securities lending desk failed to take reasonable steps to determine whether the proper amounts of foreign shares were owned and held by ITG’s customers, according to the SEC. This failure opened up the possibility that the ADRs could be used improperly for short selling or dividend arbitrage.
Before obtaining a pre-released ADR to lend to a customer, broker-dealers such as ITG must own, or determine that a customer owns, the number of foreign shares that corresponds to the number of shares the ADR represents.
The charges against Portelli follow ITG’s settlement in January when the broker-dealer agreed to pay more than $24.4 million over allegations of securities lending violations relating to the facilitation of naked short selling.
Sanjay Wadhwa, senior associate director of the SEC’s New York regional office and supervisor of the ongoing case against ITG, said: “Supervisors at broker-dealers have a responsibility to act reasonably to prevent and detect violations of the securities laws. Portelli routinely signed off on transactions involving ADRs that were not backed by actual shares and should never have been issued.”
Portelli agreed to the settlement without admitting or denying that under Section 15(b)(6) of the Securities Exchange Act of 1934, he failed reasonably to supervise members of ITG’s securities lending desk with a view to preventing violations of Section 17(a)(3) of the Securities Act of 1933.
ITG declined to comment on the case
Former managing director and head of operations at broker-dealer ITG, Anthony Portelli, has agreed to settle the charges and pay a $100,000 penalty.
He also is prohibited from acting in a supervisory capacity for at least 18 months.
Portelli supervised ITG’s securities lending operations and was responsible for the firm’s compliance with pre-release agreements for ADRs.
Under Portelli’s watch, personnel on ITG’s securities lending desk failed to take reasonable steps to determine whether the proper amounts of foreign shares were owned and held by ITG’s customers, according to the SEC. This failure opened up the possibility that the ADRs could be used improperly for short selling or dividend arbitrage.
Before obtaining a pre-released ADR to lend to a customer, broker-dealers such as ITG must own, or determine that a customer owns, the number of foreign shares that corresponds to the number of shares the ADR represents.
The charges against Portelli follow ITG’s settlement in January when the broker-dealer agreed to pay more than $24.4 million over allegations of securities lending violations relating to the facilitation of naked short selling.
Sanjay Wadhwa, senior associate director of the SEC’s New York regional office and supervisor of the ongoing case against ITG, said: “Supervisors at broker-dealers have a responsibility to act reasonably to prevent and detect violations of the securities laws. Portelli routinely signed off on transactions involving ADRs that were not backed by actual shares and should never have been issued.”
Portelli agreed to the settlement without admitting or denying that under Section 15(b)(6) of the Securities Exchange Act of 1934, he failed reasonably to supervise members of ITG’s securities lending desk with a view to preventing violations of Section 17(a)(3) of the Securities Act of 1933.
ITG declined to comment on the case
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