The Securities and Exchange Commission has charged four brokers and a day trader for improperly using a squawk box.
According to federal regulators, John J. Amore, a day trader at Watley Group, has been charged with paying off brokers from Lehman Brothers and Merrill Lynch to allow him to eavesdrop on institutional orders to buy and sell large blocks of securities. Amore, 42, of Manhasset, N.Y., would trade ahead of the large orders and profit from the price movements.
Ralph D. Casbarro, 43, of Bayside, N.Y., and Citigroup Global Markets; David G. Ghysels, 47, of West Palm Beach, Fla. and Lehman Brothers; and Merrill Lynch's Kenneth E. Mahaffy, 50, of Huntington N.Y., and Timothy O'Connell, 43, of Carle, N.Y., are charged with providing live audio access to Amore.
The SEC claims that the squawk boxes were used for those purposes at least 400 times between February of 2002 and September of 2003, making a gross profit of approximately $650,000.
The brokers were compensated with commission-generating trades, and Casbarro and Mahaffy were given secret cash payments for their services, the SEC said.
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