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Securities Broker GTS Agrees To Injunction In $13M Suit

Securities Broker GTS Agrees To Injunction In $13M Suit

Securities Broker GTS Agrees To Injunction In $13M Suit

Securities Broker GTS Agrees To Injunction In $13M Suit

By Martin O’Sullivan of Law360.com

Law360, New York (April 21, 2017, 1:48 PM EDT) — Global Transition Solutions Inc. agreed to an injunction Thursday to settle U.S. Securities and Exchange Commission claims that the transition management brokerage bilked customers out of $13 million by coordinating with routing brokers to impose markups on the transactions and splitting the proceeds.

Between 2006 and 2014 GTS, a consulting business that helped customers execute large securities transactions when shifting a large portfolio to a new investment manager or when liquidating a large securities position altogether, placed customers’ orders with a routing broker who would impose markups on the trades and split the proceeds with GTS, the SEC alleged in an August suit. On Thursday, GTS agreed to a final judgment order barring it from any further violations of securities law.

GTS did not admit or deny the allegations of the complaint in the agreement.

The company, which had numerous retirement funds for municipal employees as its clients, directed routing brokers to impose markups on an “ad hoc and opportunistic basis” and made a majority of its revenues from these markups, the SEC said.

GTS CEO John Place, COO Paul Kirk and President John Kirk, all of whom had securities licenses, repeatedly touted their company’s “limited and supposedly transparent fee structure,” the SEC said in the complaint. The three men are also defendants in the suit.

“Place, John Kirk and Paul Kirk jointly orchestrated the scheme by approving and communicating false and misleading statements to GTS’s customers as to GTS’s revenue and business model,” the complaint said.

One of the routing brokerages used by GTS, Bermuda-based ConvergEx Global Markets Ltd., surrendered its securities license in 2012 and settled SEC claims in an administrative hearing in 2013, the complaint said.  The company also pled guilty to one count of conspiracy to commit wire and securities fraud and one count of wire fraud in New Jersey federal court.

Two other routing brokers, one in New York City and one in Winter Park, Florida, were not identified in the complaint.

The SEC is represented by Daniel J. Maher and Stephan J. Schlegelmilch.

GTS is represented by Regina Murphy and Vincent Schmeltz III of Barnes & Thornburg LLP.

Counsel information for the GTS executives was not immediately available.

The case is SEC v. Place et al., case number 2:16-cv-04291, in the U.S. District Court for the Eastern District of Pennsylvania.

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The team of investment fraud lawyers at Starr Austen & Miller LLP fights for the protection of investors and handles cases involving securities arbitration misrepresentation, overconcentration, broker fraud, negligence and breach of trust.