(Bloomberg) — Former top Cantor Fitzgerald LP equities trader Adam Mattessich said his boss approved a deal for him to split commissions with other traders via personal check by kicking him out of his office.
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“He largely sort of snapped at me and said I don’t have time for this,” Mattessich testified on the third day of his trial in a Securities and Exchange Commission lawsuit accusing him of aiding and abetting Cantor’s violations of rules requiring firms to keep records of commissions on trades.
Mattessich said he went to former Cantor equities chief Phil Marber in late 2001 or early 2002 to discuss receiving commissions on trades for a client who had asked him to take over its account from a colleague who died on 9/11. Because he was an execution trader who didn’t normally get commissions, Mattessich’s request had previously been denied by his direct supervisor. But Marber said it would be fine, he testified.
Marber grew impatient, however, when he tried to explain technical issues with his internal code for tracking commissions, Mattessich said. The division head cut him off and told him to service the account with another trader and use that person’s code, he testified.
Mattessich said that was why, over the next decade or so, he received personal checks from two Cantor sales traders for half their commissions on certain accounts. According to the SEC, his “off the books” arrangement led Cantor to violate its records rules.
Marber had been expected to testify in the case, but neither party decided to call him. The SEC could rest its case as early as Monday and the case could go to the jury by Wednesday.
Cantor paid a $1.25 million fine in 2018 to resolve an SEC probe without admitting or denying wrongdoing. Joseph Ludovico, one of the sales traders who split commissions with Mattessich, agreed in 2019 to pay $25,000 to resolve SEC claims against him, also without admitting or denying wrongdoing.
But Ludovico and Jake Schrader, the other sales trader who split commissions, both defended the arrangement when they testified on Thursday and also backed up Mattessich’s contention that such deals weren’t specifically prohibited at Cantor before 2014. That year, then-Chief Compliance Officer Gary Distell issued a memo saying employees couldn’t pay each other directly for firm activity.
SEC’s ‘Hard Stance’
“Adam didn’t receive commissions,” Ludovico said on the stand. “He was doing the same work I was. He was very busy. It seemed like the right thing to do.” Ludovico paid Mattessich at least $58,000 in split commissions in 2013 alone.
Even after the SEC began investigating his commission-splitting around 2017, Mattessich said he was reassured by Pascal Bandelier, the global head of equities at the time, that he had done nothing wrong.
“He had discussed internally the situation and he didn’t understand why the SEC was taking such a hard stance on this subject,” Mattessich said. “He said that he was going to stand behind us.”
Mattessich, who served as a desk head, co-head of equities and eventually group chief operating officer, resigned from Cantor in 2018.
The case is SEC v Mattessich, 18-cv-5884, U.S. District Court, Southern District of New York (Manhattan).
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