Ex-ConvergEx Group Executive Accused of Defrauding Charities and Retirement Funds Settles Fraud Charges for $975K

The US Securities and Exchange Group announced that Khaled Bassily, the ex-head of ConvergEx Groups’ transition management business, has settled institutional investor fraud charges accusing him of taking part in a scam to hide from certain clients, which included religious organizations, retirement funds, and charities, that they were paying substantially more than they thought for trading orders. Bassily, who agreed to pay more than $988K in disgorgement, prejudgment interest, plus a civil penalty, settled the case without denying or admitting to the charges.

The regulator brought the case against him in 2016. According to its complaint, over five years, Basily hid from transition management customers that their brokerage orders were being directed to an offshore affiliate where concealed charges were put into the price that they paid for selling and purchasing securities. These secret charges were an add on and frequently much higher than the commissions that customers paid for their orders. For example, stated the SEC’s complaint, one customer who paid $699K in commissions also paid $9.6M in these hidden fees.

Meantime, Bassily allegedly engaged in deceptive practices, including “false and misleading statements” to customers, working with traders to maximize theses hidden charges, and taking steps to hide these unauthorized charges from customers.

As part of the SEC’s case against him, Bassily is now barred from the securities industry.

In 2013, three ConvergEx Group subsidiaries consented to pay over $107M and admitted that they engaged in wrongdoing that involved compelling a number of institutional clients to pay much higher fees than what was disclosed to them. The DOJ also filed criminal charges against brokerage firm and subsidiary ConvergEx Group, which consented to pay $43.8M in restitution and criminal penalties.

Institutional Investor Fraud
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Former Transition Management Executive Agrees to Securities Industry Bar and is Ordered to Pay Over $975,000 to Settle Fraud Charges, SEC, January 3, 2018

Read the SEC Complaint (PDF)

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SEC Orders Wells Fargo Advisors to Pay $3.5M Penalty, Institutional Investor Securities Blog, November 13, 2017

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