David Miller, a former institutional sales trader at Connecticut-based Rochdale Securities LLC, agreed April 15 in the U.S. District Court for Connecticut to settle the Securities and Exchange Commission's allegations that he placed unauthorized purchase orders for almost $1 billion worth of Apple Inc.(AAPL) stock--a move that ultimately caused Rochdale to cease operations (SEC v. Miller, D. Conn., No. 3:13-cv-00522, 4/15/13).
The same day, Miller also pleaded guilty to criminal wire fraud and conspiracy charges based on related alleged misconduct, the SEC said. He will be sentenced July 8.
In the SEC settlement, Miller agreed to an industry bar and a penny stock bar, and to be enjoined from future violations, the commission said in a release. Financial penalties will be determined later by the court, the SEC added.
Daniel M. Hawke, chief of the SEC Enforcement Division's Market Abuse Unit, said in the release, “Miller's scheme was deliberate, brazen, and ultimately ill-conceived.” “This is a wake-up call to the brokerage industry that the unchecked conduct of even a single individual in a position of trust can pose grave risks to a firm and potentially to the markets and investors,” Hawke added.
According to the SEC's complaint, Miller misrepresented to Rochdale that a customer placed an order to purchase 1.625 million shares of Apple stock worth nearly $1 billion and that the customer would assume the risk of loss on any resulting trades. In reality, however, the customer's order was only for 1,625 Apple shares, the SEC said. Allegedly, Miller planned to share the customer's profit if Apple stock price went up, and alternatively, to claim that he erred on the size of the order if the stock price went down, planning to force Rochdale to take responsibility for the losses.
After Apple's earnings were released, its stock price decreased, the SEC said. After the customer denied buying all but 1,625 Apple shares, Rochdale was forced to take responsibility for the unauthorized purchases, causing the firm approximately $5.3 million in losses, the commission said. Due to the losses, the SEC continued, Rochdale's available liquid assets fell below the regulatory limits required for broker-dealers, causing the firm to cease operations shortly thereafter.
An attorney for the SEC told BNA that Miller was represented in the commission's lawsuit by Kenneth C. Murphy of Simon & Partners LLP, New York.
By Jimmy H. Koo
To see the SEC's complaint, go to http://www.bloomberglaw.com/public/document/Securities_and_Exchange_Commission_v_Miller_Docket_No_313cv00522_/1.
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