Jefferies & Co. and two of its executives settled with the Securities and Exchange Commission on Monday over providing Fidelity mutual fund traders with $2 million worth of illegal gifts and entertainment to secure their trading business.
The firm, its director of equities, Scott Jones, and Kevin Quinn, a former senior vice president and equity sales trader, agreed to the settlement proceedings. Quinn agreed to pay $1 in disgorgement and a civil penalty of $468,000, Jones is paying $50,000, and Jefferies is paying $4.2 million in disgorgement to the SEC and $5.5 million to the NASD.
The SEC found that Jefferies hired Quinn in 2002 to increase Jefferies’ brokerage business with Fidelity, with which Quinn had a pre-existing relationship. The firm provided Quinn with an annual $1.5 million travel and entertainment budget, which he used to lavish gifts on the advisor’s most successful equity traders and its head of equity trading between May 2002 and October 2004. The SEC also found that the firm and Jones failed to supervise Quinn’s misconduct.
The SEC found that Quinn provided the traders with golf trips that included lodging at expensive hotels and transportation via private jets. He also showered them with golf merchandise and other presents, and gave them tickets to major sporting events, Broadway shows and concerts. On one occasion, he even paid for one of the trader’s bachelor party in Miami.
“It is illegal for brokers to compensate mutual fund traders for brokerage business,” said Walter G. Ricciardi, deputy director of the SEC’s enforcement division. “The traders’ loyalty and allegiance are owed solely to investors, and such compensation may harm investors by impairing the traders’ objective judgment.