Hitesh Mittal, the head of trading at AQR Capital Management, is voluntarily taking a leave of absence amid a regulatory investigation of his former employer, Investment Technology Group Inc.
ITG revealed Wednesday that it was in talks to settle a U.S. Securities and Exchange Commission investigation into possible wrongdoing at its dark pool. Although ITG didn’t identify anyone involved by name, Mittal is a key figure in that inquiry, according to two people familiar with the matter, who asked not to be named because the investigation is private.
“This investigation relates to alleged misconduct that occurred in 2010 and 2011 while Mr. Mittal was employed at his former employer, ITG,” according to a statement from Edelman’s Mike Geller, a spokesman for AQR, which oversees about $136 billion of assets. “Mr. Mittal subsequently joined AQR in 2012 and we had no knowledge of the issues in question. Mr. Mittal is taking a temporary paid leave from AQR while the firm diligently reviews the issues.”
During Mittal’s leave, AQR principal Brian Hurst “will assume the management of the firm’s trading operations,” Geller said. “AQR has an exceptional trading team with a deep bench of talent.”
Mittal didn’t respond to requests for comment.
He left ITG by July 2011, when a Traders Magazine article reported that he was one of six managing directors leaving the firm in a cost-cutting measure. Mittal had been a managing director and head of liquidity management and algorithmic trading at the firm, the magazine said.
ITG disclosed Wednesday that a market-making unit run by a subsidiary in 2010 and 2011 traded using information not available to other customers of its dark pool. ITG said it’s in talks with the agency to settle the case for $20.3 million, which would be a record fine for a private stock-trading platform in the U.S.
The company’s share price slipped 0.7 percent to $18.23 at 9:41 a.m. New York time on Friday. The stock tumbled 24 percent on Thursday, its largest slump since at least 1985.
ITG Chief Executive Officer Bob Gasser made several references Thursday to a former employee he didn’t identify who was purportedly involved in the case. While apologizing during the conference call with analysts, the CEO highlighted the actions of the former employee, who Gasser said was “ultimately severed from the company.”
J.T. Farley, an ITG spokesman, declined to comment, as did the SEC’s Judy Burns.
The SEC’s case against ITG is focused on customer disclosures, regulatory filings for the dark pool and customer information controls, the company said in a statement late Wednesday. It is negotiating a settlement with the agency, saying it will probably eclipse the previous record fine paid by a dark-pool operator.
The problematic behavior was led by a senior employee who operated in a manner that violated ITG policy, Gasser said Thursday, without identifying the former worker.
For several months in 2010, the employee improperly accessed information regarding orders flowing into ITG’s trading algorithms and improperly accessed information about executions by all customers in markets away from its dark pool that was not otherwise available to ITG clients, Gasser said.