US authorities have fined a New York-based brokerage firm more than $800,000 for ignoring red flags and making improper soft dollar payments to an investment firm.

US authorities have fined a New York-based brokerage firm more than $800,000 for ignoring red flags and making improper soft dollar payments to an investment firm.

The Securities and Exchange Commission said that Instinet approved more than $400,000 in soft dollar payments to San Diego-based investment advisory firm JS Oliver Capital Management, despite clear signs that JS Oliver and its president Ian Mausner were improperly using client funds for their benefit.

Soft dollars are credits or rebates from a brokerage firm on commissions that clients pay for trades and an investment advisor may use them to pay for expenses such as brokerage and research services that benefit clients, if they are appropriately disclosed.

According to the SEC, between January 2009 to July 2010, Instinet made a number of soft dollar payments to JS Oliver, including more than $329,000 to Mausner’s ex-wife under the guise of employee compensation.

Mausner also made claims for a 50 per cent increase in rent and a real estate and a timeshare in Midtown Manhattan.

In order to settle with the SEC, Instinet agreed to pay a penalty of $375,000, disgorgement of $378,673, and prejudgment interest of $59,607.

The firm must also engage an independent compliance consultant to review its policies, procedures and practices related to soft dollar payments.

Instinet did not confirm or deny the SEC's findings.

The SEC has separately charged JS Oliver and its president Ian Mausner for their alleged wrongdoing.