The

Securities and Exchange Commission

said that for five years in the 1990s, Datek Securities scored tens of millions of dollars of illegal trading profits by dummying up accounts and abusing a

Nasdaq

platform meant for small investors.

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The commission settled the charges for $6.3 million with Datek's successor, iCapital Markets, which it said had moved to clean up the firm's practices since taking it over. Datek sold the daytrading operations in 1998.

According to the SEC, Datek did illegal trading for its own account via the Nasdaq's small-order execution system, which at the time was reserved for small public customers and off-limits to broker-dealers. For three years, from 1995 through 1998, Datek accounted for 30% of the system's trades, the SEC said.

"By hiding its use of the SOES system for proprietary trading, DatekSecurities obtained SOES automatic execution which, combined with DatekSecurities' daytrading software, gave it a significant advantage," the SEC said.

The commission charged that Datek paid surrogates for the use of their identity to set up accounts that were actually controlled by the company. After originally letting such "nominees" use their own funds to open the accounts, unnamed principals of Datek spent $50 million -- much of it the profits or the illegal trading -- to fund more than 125 such accounts.

"In 1995 and 1996, Datek Securities distributed over $200 million to undisclosed principals of the firm," the SEC said. "Datek falsely recorded and reported the distribution of trading profits, which were made to companies owned by the principals, as expenses for 'computer services.' "

iCapital neither admitted nor denied guilt in agreeing to the fine and a censure.