SEC sues former ConvergEx head of transition management

Khaled Bassily, former head of transition management at ConvergEx Execution Solutions, was charged by the SEC with concealing from customers that they were paying higher execution costs than were disclosed.

The civil suit, filed in U.S. District Court in New York, claims 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, according to court documents. The clients included pension funds and charities, according to the lawsuit.

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 CGM and CES, is not named as a defendant in the Securities and Exchange Commission lawsuit against Mr. Bassily.

In a statement, ConvergEx said it had no comment on the latest SEC complaint. “ConvergEx is not a party to this action and resolved its SEC case almost two and a half years ago,” according to the statement.

Mr. Bassily left ConvergEx in 2013 and currently is a director at Cushman & Wakefield. In a company statement, the firm said, “The SEC’s allegations relate to the individual’s securities activities at a prior employer, do not involve Cushman & Wakefield, and are unrelated to the individual’s current employment at Cushman & Wakefield as a real estate broker. … We are reviewing the issues and, given the seriousness of the charges, are monitoring the situation closely.”

ConvergEx Group 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.

Also, in August 2014, Anthony G. Blumberg, former CEO of ConvergEx Global Markets, and Craig Marshall, CGM’s former senior vice president, were 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.; and Mr. Marshall pleaded guilty to the charges.

The charges against Mr. Bassily come less than two weeks after a lawsuit was filed by the SEC and the Justice Department on April 5 against former State Street executives Ross McLellan and Edward Pennings, charging them with scheming to defraud at least six of the bank’s clients through secret commissions applied to billions of dollars of securities trades.