Among recent enforcement actions, the Financial Industry Regulatory Authority went after short sale violations, anti-money laundering failures, and reporting failures related to short interest positions.
Also, the Securities and Exchage Commission busted an alleged insider trading ring and fined an alternative energy company for hiding bad financial news from investors.
SEC Charges Former Barclays Capital Analyst, 3 Others in Insider Trading Ring
The SEC charged a stock research analyst at Barclays Capital, a corporate insider and two others involved in a California-based insider trading ring that generated nearly $750,000 in illegal profits by trading in advance of four corporate news announcements.
The SEC alleges that John Gray, then an analyst at Barclays Capital, and his friend Christian Keller traded on confidential merger information that Keller learned while working in finance at two Silicon Valley-based public companies.
Gray and Keller attempted to conceal the trades by placing them in a brokerage account held in the name of Gray’s friend Kyle Martin. Gray also tipped a fourth participant, Aaron Shepard, with nonpublic information so he could trade in advance of some of the corporate announcements.
Without admitting or denying the allegations, Gray, Keller, Martin and Shepard have agreed to settle the SEC’s charges by paying more than $1.6 million combined. The settlements are subject to court approval.
“Gray and Keller tried to evade detection by trading in another person’s name, using prepaid disposable phones, and making structured cash withdrawals to share profits,” said Jina Choi, director of the SEC’s San Francisco Regional Office, in a statement. “Despite their careful planning, we were able to detect the suspicious trading and effectively use our cooperation program to expose their nefarious scheme.”
According to the SEC’s complaint filed in federal court in the Northern District of California, Gray was primarily responsible for placing the trades in Martin’s account. Gray and Martin also placed additional trades in other accounts based on Keller’s confidential information that Gray shared with Martin. Gray provided Keller kickbacks in cash from the trading profits.
The SEC alleges that Gray and Keller first traded on confidential merger information that Keller learned while employed as a financial analyst at Applied Materials Inc. They illegally traded ahead of the company’s acquisitions of Semitool Inc. in 2009 and Varian Semiconductor Equipment Associates in 2011. Keller left Applied Materials and joined Rovi Corporation in 2012 as a vice president for investor relations and finance.
The scheme continued as they used confidential information that Keller learned as an insider to profitably trade Rovi securities ahead of negative news announcements by the company about its 2012 first and second quarter financial results.
FINRA Fines Bloomberg Tradebook on Short Sale Violations
Bloomberg Tradebook LLC, Bloomberg’s agency broker, was censured by FINRA and fined $140,000 on failures to report the execution of short sale and short sale exempt transactions to to the FINRA/NASDAQ Trade Reporting Facility (FNTRF) with a short sale or short sale exempt modifier, as appropriate.
The firm was also required to revise its written supervisory procedures (WSPs), which were inadequate to ensure the accurate reporting of short sales and short exempt sales to the FNTRF.
The firm neither admitted nor denied FINRA’s findings, but consented to the sanctions.
FINRA Fines, Censures BMA Securities on AML Failures
FINRA censured BMA Securities, aka Burt Martin Arnold Securities Inc., and fined the firm $325,000 over anti-money laundering compliance and monitoring failures.
In addition, the agency required the firm to bring in an independent consultant to review its policies, systems and procedures and training related to anti-money laundering (AML) compliance and monitoring.