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Former ConvergEx transition management head settles with SEC over high execution costs

Khaled Bassily, former head of transition management at ConvergEx Execution Solutions, will pay just less than $1 million to settle SEC charges that he concealed from customers that they were paying higher execution costs than were disclosed.

The Securities and Exchange Commission in a lawsuit filed in April 2016 in U.S. District Court in New York claimed that Mr. Bassily "participated in a fraudulent scheme to hide from charities, religious organizations and retirement funds that they paid substantially higher amounts than disclosed for the execution of trading orders," according to a news release from the Securities and Exchange Commission.

Mr. Bassily, who did not admit or deny wrongdoing as part of the settlement, will pay a total of $988,414 in disgorgement, prejudgment interest and a civil penalty, and will be barred from the securities industry, the SEC said.

The settlement was entered in U.S. District Court on Dec. 21; the industry ban was imposed Wednesday.

According to the lawsuit, Mr. Bassily hid from ConvergEx's transition management clients that the firm routed their brokerage accounts to an offshore affiliate, ConvergEx Global Markets, to embed charges, known as trading profits, in the overall order execution price.

One customer paid $600,000 in commissions for certain trades placed through ConvergEx but also unknowingly paid a total of $9.6 million in hidden trading profits on those same trades, the lawsuit said.

ConvergEx Group, parent of ConvergEx Global Markets and ConvergEx Execution Solutions, in December 2013 agreed to pay a total of $107 million in criminal penalties and restitution to settle earlier fraud charges from the SEC and the Justice Department. ConvergEx was not a defendant in the SEC lawsuit against Mr. Bassily.

Also, in August 2014, Anthony G. Blumberg, former CEO of ConvergEx Global Markets, was charged by the Justice Department and the SEC with concealing fees to buy and sell securities. Mr. Blumberg's case is still pending in U.S. District Court in Newark, N.J.