A former managing director and head of operations at ITG has been charged over allegations of mishandling American depository receipts (ADRs).
Anthony Portelli was responsible for ITG’s securities lending operations and the compliance around pre-release agreements for ADR transactions.
The Securities and Exchange Commission (SEC) found under Portelli’s supervision, ITG’s securities lending desk failed to determine whether proper amounts of foreign shares were owned and held by ITG.
The failure allowed the possibility for the ADRs to be used for short selling or dividend arbitrage, the SEC said.
Sanjay Wadhwa, senior associate director of the SEC’s New York regional office, explained 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,” he said.
Portelli settled the charges with a $100,000 fine and an 18-month ban from acting in a supervisory role, although he did not admit or deny the SEC’s claims.
In January, ITG agreed to pay $24 million for its failures in handling ADRs between 2011 and 2014, which violated federal securities laws.
The SEC found many of the ADRs obtained by ITG were used to engage in short selling and dividend arbitrage even though they may not have been backed by foreign shares.