Pacific Growth settles double-charging claim

San Francisco brokerage firm Pacific Growth Equities, its co-chief executive and its head trader have agreed to pay a combined $520,000 to settle allegations involving double-charging customers hundreds of thousands of dollars for stock trades, the Securities and Exchange Commission said.

Stephen Massocca, the co-CEO, agreed to pay a $75,000 penalty, and Robert Katz, the head of trading, agreed to pay a $20,000 penalty on allegations that they had aided the fraud. Pacific Growth agreed to pay $425,000 and reform some of its compliance programs.

“It seems like that is not the sort of thing many customers would have tolerated had they known about it,” said Marc Fagel, associate district administrator in the SEC’s San Francisco office.

An attorney for Pacific Growth and its executives couldn’t immediately be reached for comment.

Brokerage firms earn money either by charging a commission on stock trades or by selling stock from their inventory.

The SEC said that by early 2002, certain big, institutional Pacific Growth customers had asked to be charged commissions for their trades instead of markups or markdowns.

The SEC said that the brokerage firm accommodated these requests, but unbeknownst to some customers, continued to apply markups or markdowns in addition to commissions.

Massocca was aware of this practice but still permitted double-charging of customers without adequate disclosure, the SEC said.

The practice was facilitated through improper time-stamping procedures, which appeared to show that the firm filled customer orders out of its own inventory, the SEC said. Instead, Pacific Growth had purchased or sold shares only in response to a specific order and had received a commission for its services, the SEC said.

As head trader, Katz time-stamped or authorized the stamping of some order tickets with inaccurate time stamps, the SEC said.