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Regulatory Sanctions

Lek Securities, CEO Samuel Lek Charged in Securities Fraud – FINRA, Exchanges

March 28, 2017

[Inset Photo:  Samuel Lek /]


FINRA and several exchanges have initiated a formal proceeding against Lek Securities Corporation and its CEO Samuel Lek, for aiding and abetting manipulative trading by one of its ‘direct market access’ clients. Joining the disciplinary complaint are: NYSE; NYSE Arca; NYSE MKT; 4 BATS Exchanges; Nasdaq; Nasdaq BX; and, the Intl Securities Exchange.


It’s alleged that the Lek customer account known as “Avalon” conducted extensive manipulative trading from October 2010 through June 2015 - impacting both equities and options markets – and operated as an unregistered broker-dealer. Avalon’s manipulative trading activities involved practices known as “layering,” “spoofing” and “cross-product manipulation.”


>  Layering can involve a pattern in which multiple, non-bona fide limit orders are entered on one side of the market at various price levels to create the appearance of a change in the supply and demand of the security so that the manipulator can obtain better-priced executions on orders entered on the opposite side of the market; the non-bona fide orders are then cancelled.


>  Spoofing is a form of manipulation that can involve entering non-bona fide orders with the intention of cancelling those orders once they trigger some type of market movement or response from other market participants from which the manipulator can profit.


>  Cross-Product Manipulation engaged the manipulation of option prices through trading in the underlying equity securities.


Lek Securities was charged with failing to comply with the SEC’s “Market Access” rule – SEC Rule 15c3-5 – by failing to have adequate risk-management controls and supervision over Avalon (its direct market access client), while Samuel Lek is charged with causing the violations.


Lek Securities was also charged with violating KYC rules, and rules regarding the preservation and supervision of electronic communications, the maintenance of CRD information, supervision of employee outside business activities, payments to individuals not associated with a broker-dealer, and failing to fully and timely comply with information requests from FINRA in connection with the investigation.


And be sure to read this accompanying article on Lek Securities:  At Home With Lek Securities - Wealth and Refined Luxury