Trillium Brokerage Services, LLC

Trillium Brokerage Services, LLC (defendant), formerly known as Trillium Trading LLC (Trillium) (defendant), was a member firm of the Financial Industry Regulatory Authority (FINRA) (plaintiff). Trillium, Chief Compliance Officer Rosemarie Johnson, Trading Director Daniel Balber, Senior Vice President of Trading Frank Raffaele, Vice President of Trading James Hochleutner, and traders Brian Gutbrod, Bradley Jaffe, Tal Plotkin, John Raffaele, Michael Raffaele, Tal Sharon, and Samuel Yoon (collectively, the settling employees) (defendants) submitted a letter of acceptance, waiver, and consent to FINRA in order to settle alleged violations of NASD conduct rules. Trillium and the settling employees consented to the entry of the following findings by FINRA: from November 1, 2006, though January 31, 2007, Trillium, by and through nine proprietary traders, engaged in layering conduct to take advantage of other firms’ algorithmic trading; entered into NASDAQ’s quotation and trading system and the New York Stock Exchange’s marketplace system limit orders that were at or improved the NASDAQ best bid or offer; obtained execution of the orders at favorable prices by entering numerous non-bona fide orders on the side of the market opposite the limit orders at prices outside the NASDAQ best bid or offer to create the appearance of substantial selling or buying interest; after obtaining execution of the limit orders, canceled the non-bona fide orders; repeated the trading activity on the other side of the market; and bought and sold securities using this strategy more than 46,000 times, obtaining profits of over $575,000, and retaining over $173,000; and, as a result, violated NASD Rule 2110 (requiring members to observe high standards of commercial honor and just and equitable principles of trade), Rule 2120 (prohibiting members from effecting transactions in, or inducing the purchase or sale of, any security by means of any manipulative, deceptive, or fraudulent device), Rule 3310 (prohibiting members from publishing or circulating any communication that purported to quote the bid or ask price for any security unless the member believed the quotation represented a bona fide bid for, or offer of, the security), and IM-3310 (providing that it would be inconsistent with Rules 2110, 2120, and 3310 for a member to publish or circulate any quotation for a security without having reasonable cause to believe that the quotation was bona fide, not fictitious, and not published or circulated for any fraudulent, deceptive, or manipulative purpose).