Execution Broker ITG Ousts CEO Gasser After Probe
Investment Technology Group’s investigation found Robert Gasser failed to disclose some details of alleged improprieties to board
The announcement of ITG was saying that the company has replaced Bob Gasser as its chief executive officer with Jarrett Lilien, a member of the ITG board and the former president and chief operating officer of E*TRADE Financial, effective immediately.
Maureen O’Hara, chairman of the board of ITG, said “We are very pleased that Jarrett has agreed to serve as interim CEO while we consider our options for a permanent CEO. With Jarrett and the remainder of the executive team we are in capable hands as we seek to ensure a smooth management transition.”
The chief executive of Investment Technology Group Inc. was ousted Saturday after an investigation by an outside law firm found that he hadn’t disclosed to the board some details of alleged improprieties related to the firm’s “dark pool,” according to people familiar with the matter.
Robert Gasser, who had been president and CEO of the New York brokerage firm since 2006, was informed of the board’s decision three days after the firm announced it had set aside $20.3 million to settle allegations from the Securities and Exchange Commission of wrongdoing in its dark pool, the people said. Mr. Gasser declined to comment.
ITG’s general counsel Mats Goebels has also left the firm in a move related to the dark pool case, the people said. He was succeeded by Angélique DeSanto, the firm’s associate general counsel. Mr. Goebels didn’t immediately respond to a request for comment.
ITG said Monday that a member of its board, Jarrett Lilien, would serve as interim CEO. Mr. Lilien, who previously served as president and chief operating officer of E*Trade Financial Corp., will remain CEO until a successor is decided in the coming weeks or months.
A $20.3 million settlement would be the largest U.S. penalty ever paid by a firm over issues with a dark pool, which is a privately run venue that helps buyers and sellers trade anonymously. The SEC declined to comment. The regulator, as well as the Financial Industry Regulatory Authority and the New York Attorney General, has been examining the use of dark pools across Wall Street since last year as part of a broad effort to increase oversight of off-exchange trading.
At ITG, the SEC is investigating alleged violations of customer-information controls and disclosures rules that took place during a pilot program run by a subsidiary called AlterNet Securities in 2010 and 2011. ITG said last Wednesday that it had set aside money for a settlement but said it was unclear when negotiations would be completed.
The SEC informed ITG’s board in May that it was considering serious penalties for the alleged infractions, according to the people familiar with the matter. The board then initiated a review by the law firm Cahill Gordon & Reindel LLP, which concluded Friday, the people said. A spokeswoman for the law firm referred inquiries to ITG.
Among the areas of concern identified by the review was that Mr. Gasser didn’t inform the board that Hitesh Mittal, ITG’s former head of algorithmic trading, had accessed private client-trading information during the pilot program, the people said. The information, which wasn’t available to others, was then allegedly used during the program to trade against clients’ order flow, according to ITG.
Mr. Mittal, who now works for hedge fund AQR Capital Management LLC as its head of trading, declined to comment through the AQR spokesman. The spokesman for AQR said Mr. Mittal is taking “temporary paid leave from AQR while the firm diligently reviews the issues” related to the alleged misconduct at ITG.
AQR said Mr. Mittal left ITG “by July 2011 as part of a publicly announced cost-cutting measure that involved approximately 100 individuals” and that it was “made clear to us by Mr. Mittal and ITG that this was the reason for his dismissal.” ITG declined to comment on why Mr. Mittal left.
News of the SEC’s investigation has weighed on ITG’s shares, which fell 24% on Thursday following the disclosure before partially rebounding Friday. The firm’s stock closed down 4% Monday. Shares are now down 6% this year and 39% from their April high.
During an all-staff meeting held Monday in a sixth-floor conference room of ITG’s Manhattan headquarters, interim CEO Mr. Lilien told employees that the management changes were about “accountability,” according to people who attended the meeting.
Soon after, ITG chair Maureen O’Hara told clients in an email that it was a “confidential internal review of the underlying events that gave rise to this matter” and that it was “the right time for ITG to seek new leadership.”
“We know that we have work to do to re-earn your confidence,” said the note from Ms. O’Hara, who is a professor of finance at Cornell University, adding later that “mistakes were made and we should have done better.”
