SEC dismiss lawsuits against EXANTE, correcting ‘hedge fund’ allegation
Top execution-only broker EXANTE was the subject of a gross mischaracterisation by the SEC in 2015, an oversight that continues to have repercussions for the broker’s reputation. Since August 2015, the SEC have carried out a series of formal claims against a group of hedge funds – some of which were EXANTE clients – who are alleged to have involved themselves in an insider dealing scandal. Despite immediate cooperation by EXANTE, and multiple clarifications over their lack of involvement, or even the possibility of involvement, the resolved case continues to dog the globally regulated broker courtesy of the financial press.
Background – EXANTE as a broker
As background: EXANTE was founded in the early 2010s by a team of experienced derivatives traders, looking to develop a broker built around the specific requirements of internationally-minded traders. The eventual result was EXANTE, first listed in Malta, then expanding to Cyprus, Hong Kong, and London in the following years. Since its conception, EXANTE has focused on providing vast numbers of global assets on a single, easy-to-use platform. As of 2023, EXANTE has over $2 billion in client assets in dedicated accounts, with clients benefiting from a choice of over 600,000 different tradeable securities worldwide. Always remember to read broker reviews before deciding which is right for you.
EXANTE’s business model is highly relevant to the 2015 filings: the company operates as an execution-only broker, meaning they do not advise clients on how to manage their money or propose specific trade ideas, as advisory brokers do, nor hold their own positions, as prop traders or investment management firms do. Instead, clients trade a selection of bonds, options, futures, and other derivatives on an EXANTE account, making their own investment decisions and taking on risk in the market. EXANTE’s role is to provide a functional platform, execute trades, and offer a product range that their clients can benefit from. EXANTE works closely with multiple regulators to prevent financial crime or malpractice and complies with all relevant client money and reporting restrictions.
The SEC’s allegations against EXANTE
You might be forgiven for wondering how a well-regulated broker with a focus on client service could end up accused of insider trading. The full details of what went wrong at the SEC are not clear, but in 2015, they initiated legal proceedings against a group of hedge funds, including several that were clients of EXANTE. Mistakenly, EXANTE was also listed as a hedge fund, and accused of profiting off trades where they had acted only as a broker. These allegations of insider dealing sent shockwaves through the local financial industry and caught EXANTE completely off guard since no prior warning had been given to the company.
The SEC filings contained very basic errors about the company: listing the broker as a hedge fund was a significant misstep, since EXANTE’s license clearly specifies they operate on an execution-only mandate. Execution only brokers may work with hedge funds, allowing them to make trades through their platform, but they are never involved in advising or planning trades, nor trading speculatively on their own account. It is not possible for a broker to ‘profit’ from insider dealing except in the way they profit from all trades – according to clearly defined spreads or commissions. These profits are not affected by the type or direction of the trade, leaving no incentive for a broker to knowingly accept insider dealers as clients. Indeed, brokers such as EXANTE take considerable steps to avoid attracting such clients, and spokesmen for EXANTE were quick to respond that they report all illicit activity and discourage such traders from using the platform.
EXANTE’s swift response to the SEC’s allegations
Whatever the reasons, EXANTE had to respond quickly. Upon learning about the SEC’s claims, EXANTE took prompt action to address the situation. The broker fully cooperated with the regulatory authorities, providing them with all the necessary information and documents to prove their innocence, beginning with an explanation of the actual business activities of EXANTE. EXANTE’s management team conducted internal investigations to ensure that there were no breaches of regulations within their operations. Because of errors in the original filing, it was fairly obvious that EXANTE was not guilty of the alleged charges, but a thorough review and full cooperation with the investigation helped the SEC with their work, leading to a February 2016 correction from the US authorities about the nature and scope of EXANTE, removing them from all filings concerning the suspicious trades.
Throughout the ordeal, EXANTE maintained a transparent approach, repeatedly clarifying their lack of involvement in the alleged insider dealing scandal. The broker’s commitment to compliance and ethical practices was evident in their interactions with the SEC and other regulatory bodies, as evidenced by their listings with demanding regulators such as the SFC and FCA. Despite these efforts, the negative perception created by the initial mischaracterisation continued to haunt EXANTE, with financial media quicker to pick up on the original filings than the SEC’s later corrections.
Concerned that the mistaken filing was overshadowing EXANTE’s track record of excellence with clients, the broker has redoubled their original mission of providing a technologically advanced and secure trading platform to global clients. EXANTE has made significant investments in cutting-edge technology and infrastructure to ensure seamless execution and reliable services, winning financial awards and most importantly the continued trust of important clients. Their dedication to innovation and client-centric solutions has earned them a strong reputation in the industry, bringing in new business whilst continuing to nurture old relationships. Even so, the entire case is instructive in terms of the damage that can be incurred when regulators rush to file without carrying out proper research, with EXANTE in this case the victim.
Some final words on the incident
Fortunately, EXANTE continues to go from strength to strength, and insiders hope the SEC’s mischaracterisation of EXANTE will soon be old news. Nonetheless, the blatant mischaracterisation, and understandable frustration the broker was not contacted before the mistaken filing rather than after, have proved a challenging trial. For now, the future looks bright: alongside rapid client and company growth, the dropping of lawsuits against the broker solidified their innocence. At last, EXANTE is able to focus on its core mission of providing advanced trading solutions to traders around the world.
